The need for cargo unitization, in order to increase the speed and the efficiency of the loading and unloading procedures and in general, to achieve a greater capability of the whole transport chain in the logistics era, has been expressed through the extensive use of containers (Twenty Equivalent Units or TEUs). According to statistic data, the usage of these steel boxes is rapidly on the increase year by year, ultimately, making liner shipping companies responsible for the command of a ‘second fleet’, made up not from ships, but from gigantic numbers of TEUs.
However, there are several financial, storage, environmental and other serious issues occurring, as a result of the worldwide use of this innovative way of transport and stem from the intense imbalance of trade between exporting and importing regions.
Taking a closer look on this issue, we could realize that once the container is unloaded in its destination, a new transport chain is needed, in order to move the box in a new place where it could be easily and effectively reused for its next trip. This is the so called Empty Container Repositioning or ECR and it is a vital and deeply complicated issue shipping and logistic companies have to overcome and optimize, since there is no difference between the handling cost of a full and an empty box and a company only earns a profit on loaded trips. Given the harsh economic crisis testing the liner shipping companies during the last years, there is an extremely high need for an effective plan that maximizes the period that TEU fleets travel loaded and alongside, finds the best place to reposition them, minimizing time and distance the container is on an ‘unpaid’ trip.
There are several causes, with the structure of the world trade, which is characterized by exclusively importing and exporting regions, being the main one. Since the majority of TEU flows is west bound, there is a constant accumulation of empty boxes on destination ports. On the other hand, eastern ports in Asia might face the exact opposite phenomenon, the one of container shortage. For instance, according to table 1, the rapidly expanding Chinese production in the years 2007-2012 created almost double numbers of TEUs leaving these ports, compared to those imported, deteriorating further the situation. This situation is also expressed through the price difference between head- and back- haul trips, where deviations of even 50% could be observed between these equal distance routes.
Moreover, further factors contributing to the accumulation of empty boxes are considered the leasing fees of a box and steel prices which could make the choice of building a new box from scratch in Asia, cheaper than trying to retrieve an old one. Consequently, more than a fifth of the total number of containers a port handles, is empty.
Taking into consideration that the economic life of a box is around ten to fifteen years and that ports and yards face ,in general space scarcity and congestion issues, combined with the need to minimize both financial and environmental costs, it is necessary to find an efficient and certain way to optimize the problem and limit the redundant movements that harm both the environment and the financial viability of liner companies.
The process of repositioning takes places in four different levels that are distinguished by the geographical scale. So, there are:
1. Global level: this level concerns the repositioning that occurs between different countries or continents and it is perceived as the most costly and time consuming level.
2. Interregional: this level refers to the repositioning at extensive areas, for example Europe, Asia etc. while using rail transportation or shipping feeder services.
3. Regional: this levels includes industrial and consumption areas where the trade imbalances occur.
4. Local: this level concerns the transportation between areas that fill the containers and areas that empty them, mainly port terminals and empty depots. This level is characterized by minimum time and space requirements. The transportation is conducted by rail and trucks.
The costs of repositioning are multiple (handling, transshipment, storage, chassis of road transport) and account for 5%-8% of the operational cost of a transportation company. The procedure that the container management companies follow to tackle this problem relies on the type of the flow, whether it is an import or an export flow.
As far as the import flows are concerned, the management companies have the following solutions:
1. Repositioning of containers to areas with high demand for boxes while bearing all the costs.
2. Termination of the leasing contract while at the same time transferring the problem to the lessors.
3. Temporary storage in the existent location.
4. Sale to the secondary market, especially if their age approaches the maximum age of use.
5. Cooperation with other shipping companies for needs’ matching. This case is rare since the majority of companies have a container excess in the same areas.
On the other hand, when the exports exceed the imports, then we refer to an export area and the shipping companies have the following ways of tackling the problem:
1. Container imports from areas with oversupply with the least expensive way.
2. Container leasing from lessors.
3. Buying new containers, especially in areas where the manufacturing cost is low (e.g. Asia)
4. Needs pairing with other transportation companies
There are many points of view that we can distinct the strategies that the companies choose to counter this problem such as the sorting according to their geographical scale. We decided to classify the solutions based on their distinction in the logistic supply chain.
1. Resolution in company level: the container fleet is the largest asset of a liner shipping company after its vessels. Their repositioning is affected by a number of factors such as the container fleet sizing, the leasing in/off of extra containers and the full containers routing. The container fleet sizing refers to the number of containers that a shipping company owns and it is a part of the company’s strategic planning whereas the container leasing leads to reduced cost of repositioning but the lessors impose extra charges due to them having the same trade imbalances in the same areas.
2. Resolution in the vertical logistics chain: there is the ability to address the problem while cooperating with the other parts of the supply chain. This requires proper coordination.
A proposed solution is the Street Turns which refers to the immediate transportation of the box from the importer to the exporter without the intervention of a port or inland terminal. This solution results in reduction of the truck routes, profit maximization and minimization of the delivery time of empty containers. In addition to the above, we can place emphasis on the Inland Depots choice that it is based on the temporary storage of the empty containers in inland terminal instead of their return to the port. This boils down to the reduction of empty kilometers nevertheless there are legal and cost restrictions for the construction of these terminals close to the port.
3. Resolution in the horizontal supple chain: This solution refers to the cooperation of different shipping companies in order to cope with the ECR and has multiple benefits. On this level, we observe the creation of information systems that are used for the ECR such as the SynchroNet, a platform that allows the shipping companies to exchange containers with each other or like the International Asset System that gives the ability to the shipping companies, the container lessors and the NVOCC to exchange boxes. Additionally, at the horizontal level, shipping companies can find ways to cope with the ECR problem depending on coordination of their routes and on container fleet sharing. So, we have four different combinations of actions: (a) Route coordination and container fleet sharing, (b) route coordination without sharing, (c) Container fleet sharing without route coordination and finally (d) neither route coordination nor container sharing. From the above mentioned actions, the most efficient was the route coordination than the containers sharing.
4. Technological solutions: the main technological tool that it is used for the mitigation of the problem is the Virtual Container Yard. It is a neutral platform that it is used for the reporting of the availability of empty boxes at an importer or exporter and it is responsible for matching the needs for specific containers between the importers and the exporters.
Last but not least, we have to mention the technical choice of foldable/collapsiblecontainers. It is a technical innovation that leads to the reduction of the transportation cost of an empty box rather than the minimization of empty kilometers. However, they have increased time and space requirements to be folded, also their price is high, so it is considered as the least efficient way to cope with the ECR problem.
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This study/analysis was transmitted by Ms. Kyveli Manta and Mr. Andreas Katsikostas, Student at University of Piraeus-Maritime Studies
Aerial photo of cargo crates / Photo by chuttersnap on Unsplash
Graph provided by the authors
Stack of cargo trailer / Photo by Guillaume Bolduc on Unsplash
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