Costs and Prices in the Liner Shipping industry

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Costs and Pricesin the Liner Shipping industry
Massimiliano Cozzani 9 Marzo 2006
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Todays topics can be recapped as follows
BUDGET SCHEMES
SCHEDULE With comments on cargo allocations
CONTAINER COSTS With particular emphasis on MR
(Maintenance Repair) Details on container
leasing market and its rules
VESSEL COSTS Details on features of a contract
with a Terminal Operator

• VOYAGE REVENUES
• Well detail items such as
• Ocean freight and commercial policies
• Demurrages
• Terminal Handling Charges

ADMINISTRATIVE COSTS Starting point to discuss
organizational issues (organigrams)
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In the terms of our initial division, we could
name this section as PURE SOFTWARE
We want to show how a Shipping Line can elaborate
cost and revenue elements for internal
purposes. This can be done showing a typical
provisional budget, prepared in two ways, both
having an economic/financial meaning.
Our aim, anyhow, is to keep on elaborating on
our picture of Liner Shipping industry and its
management.
This industry has been long regarded as a poor
one in terms of management accounting the most
common cliché was that even big groups were
dealing with their business thinking to move
cargo around, and opening the cost drawer at
the end of the year, to check where they
were. In fact, the number of bankruptcies in the
industry the very low (by other
industries standards) R.O.I., return on
investment the almost unknown management
techniques, could only prove that the industry
was driven by events, more than controlling
them. In recent years the picture has slightly
changed, if only due to the consolidation process
which has cut some inefficient companies from the
market, and left in service only those with
straight accounts and procedures. From another
point of view, the length of recent negative
cycles makes survival possible to the fittest
only. The fittest not necessarily the biggest.
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REVENUES
BUDGET SCHEME A
Freight
Terminal Charges (Thc)
Demurrages
Slot Hire
Total Voyage Revenues
A
COSTS
Commissions
Brokerage
Rebates
Goods-related port costs
On-carriages
Total Voyage Costs
B
C
1st contribution margin
A - B
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1st contribution margin
C
Land logistics
Load/Discharge empties
Hired containers cost
Owned ctrs equivalent
Total Container costs
D
2nd contribution margin
E
C - D
Ships hire costs
Bunker costs
Ship-related port costs
Damages
Insurances
F
Total Ship Costs
Gross operational margin
G
E - F
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Gross operational margin
G
Contributions
H
Gross Margin net of contributions
General expenses
Net Margin
I
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Total Gross Freight
BUDGET SCHEME B
1
Teus
/teu

Thc
(Carriage /Feeder)
(Rebates)
(Commissions)
(Brokerage)
Net Freight
2
Stevedoring
Shiftings
(Total Stevedoring)
3
Dry Logistics
Reefer Logistics
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(Total Logistics)
F I O
A
8
F I O
A
Vessel/cell cost
5
(Total Ship cost)
Dry Containers
Reefer Containers
(Total Container costs)
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GROSS PROFIT
B
Demurrages
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Gross Margin
C

• Charter Hire Days
• Off Hire
• Fuel Oil
• Diesel Oil
• Port Costs
• Voyage Sundries
• Claims

Vessel/cell cost
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The FIO (Free in Out) is an important indicator
for Lines decisions, as it gives us
the rentability of the company (but, more
importantly, of any traffic) before ship
and container costs, which, in themselves are a
given data. Through a specific software, we can
arrange the FIO to be calculated at a much
lower and detailed level, building a Fio x
port-pair, in practice obtaining the rentability
of any combination of our traffics. This figure
can be used to discriminate among traffics to
have a guideline when building a new service to
fix targets or priorities for agencies.
The NET FREIGHT is widely regarded to monitor how
the revenues are faring. It gives us the feeling
of the impact of commercial costs allowing us to
win that freight. It is also an indicator to
monitor the respect of Lines logistic
indications in our agents commercial activity.
For Instance, the month following a G.R.I.
(General rate increase) wed expect the net
freight to be higher. If that doesnt happen,
this might be the result of a particular cargo
composition (20/40), especially on those trades
where the freight for a 40 is not exactly the
double than the one of a 20.

• LOGISTICS include
• the cost for land and rail movements of empties
• handlings / Lift on-off / Gate in-out at
  terminals
• - storage costs at terminals
• As we remember, there are constant shifts of
  empties from one Plus areas to Minus
• ones. Among these, the movements from port depots
  to inland platforms to support
• intermodal activities.

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SCHEDULE
The main factors on which it is built are
Service idea, or VISION. This is the first step,
and really it is where the main features of a
successful company can be traced.
Analysis of FLOWS of cargo from main intended
areas of origin to main destinations.
Consequently, a decision on the number of PORTS,
expecially when more than one is present in a
determined area/country. The ideal target is to
utilize the slot more than once during the round
voyage.
Preparation of MILEAGE details pertaining to the
involved ports averages for STAY AT PORT
averages for BUNKERING stop(s)
A good schedule should always allow for some
SPARE / BUFFER time especially if the service is
meant to be with a weekly / fixed day sailing. A
too-rigid schedule has some negative
consequences, for any problem that might arise,
from weather conditions, to engine/crane
breakdowns to port congestions.
So, the decision on the FREQUENCY
(weekly-fortnightly), is the key one, with
implication on the number of ships to be
utilized. Then, it is a matter of picking the
SIZE apt to your market share targets the SPEED
is closely linked to the latter, too.
The schedule is the our face on the market and
a point of reference for agents, customers, port
operators, competitors (). Personally, I tend to
monitor mine, and the one of my competition,
checking the DEVIATION between declared and
actual sailing dates. References for both can
be found on specialized press.
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Having set the schedule, Lines then build CARGO
ALLOCATIONS for all areas ports therein
included. For organizational / accounting
reasons, it is a common procedure to split the
round voyage in W/B E/B or S/B N/B legs, but
allocations are specifically created per p.o.l. /
Agent.
Allocations are normally two-fold, distributed by
VOLUME (teu) and WEIGHT (tons). In some cases,
where this can be done, a split per CTR TYPE
(20/40) is provided as a target, or a limitation
on heavy 20s is attached to the allotment.
In order not to penalize the last ports of
loading, the respect of allocations by previous
ones is a must, especially in tight commercial
peaks. The same ports, viceversa, have to
release space as soon as possible, when they
feel they cannot use theirs in total. It is
evident that the above can be source of daily
negotiations, in which the Line has the final
word. We are helped in this excercise by the
provision of bi-weekly (at least) FORECASTS per
volume / weight / destination, the accuracy of
which, of course, increases as long as we
approach to the loading date.
With reference to the previous breakdowns, it is
evident that Lines are in a position to modify
the allocations during time, having as a
discriminant the relative FIO per port-pair. When
the occupation factor is high, it is worthwhile
entering even the minor details of each single
port-pair.
Maximisation of cargo mix per cntr / weight /
revenue / origin increases in its dimensions as
the size of vessels grows, and it leads to the
creation of YIELD MANAGEMENT tools which try to
work out the best scenario / configuration given
input conditions.
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Container Maintenance and Repair (MR)
A key function in container management
containers need caring, and break down quite
frequently. This is a typical function
centralized at Head Office level, with direct
contacts with Depots performing the job. The
action process is
authorization
Pictures requested
Surveyors called
Inspection
Estimate
Ctr IN
refusal
The basic rule is to repair the unit WHERE THE
CARGO IS. In fact, it is useless to have it
repaired, say, in Genova, when the empty has to
then shipped to Egypt for loading. It is not only
a matter of tariff (repair cost vary considerably
around the world) the risk is to bear the cost
of a double repair.

• Outsourcing this function can happen, but it can
  be considered a proper measure for
• small SLs only. In this event, the contract can
  be fixed as
• an insurance for all types of damages. In this
  case we pay a premium x ctr / day, and
• the SL is not receiving any damage invoice
• - Fleet management fee.There is a fixed fee x
  ctr, but the Line is billed for the damages.

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Generic damages on containers can be described as
CLEANING
VOYAGE (Impact damages)
I.R. (Improper Repairs)
W.T. (Wear and Tear)
One general comment only is that in the vast
majority of cases, we see many of those costs
absorbed by the Line. In other words, we try to
minimize costs, but do not try to recover at
least part of them from the market. On the
contrary, we should try to make this a
cost-recovery item you break, you
pay, regardless of side commercial implications,
which we judge to be minimal ones. Strangely
enough, the bad habits on recoverying these costs
are inversely related to the standards of the
receiving country it is much more common to get
paid, say, in Venezuela, than in Europe.
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Container Leasing
As we discussed before, the BUY vs. HIRE option
is much a subjective one in the cntr. market the
fact is that even big groups (owners or even
direct box builders) rely heavily on the leasing
companies.
The contract is structured around some standard
items
1) Rate per container / day
2) Minimum length of contract
3) Replacement value (in case of total loss)
4) Yearly depreciation rate () from CSC plate
date
5) Build Down period (if the contract is not
renewed, period to re-deliver the unit at the
same contractual rate)
6) Post Build Down rate (higher, of course)
7) Redelivery schedule Proportioned to Lines
flows / interests
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Container Leasing (typical contracts)
MASTER LEASE In simple words, it allows us take
delivery of the unit from the leasing co.when we
want, and to re-deliver it when we want, at a
FIXED rate, no matter if it has been held for
30 days or 3 years. This great flexibility is
granted at the price of a higher rate x day.
LONG TERM We commit for x years, say five. We
can insert in the contract an Early out
option, with retroactive penalty, but in fact we
choose this contract to have a stable stock for a
certain number of years. In fact, it is most
typical on new-built units, which we intend to
maintain for some time.
FLEXI-LEASE In-between solution much proposed by
Italian leasing companies, not much diffused. We
can commit for 3 years and get a long term rate,
then we are allowed to re-deliver before, and a
retroactive rate is applied. It gives the
opportunity to escape, should our strategy be
changed in the meantime.
PURCHASE LEASE Long term deal with a Redemption
(riscatto) Option. Lets say that we hire the
unit for eight years, and eventually can buy the
unit for a symbolic Usd 1.
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A much common case DIRECT INTERCHANGE It may
happen that a container of ours is loaded by
another Line (mistake at empty depot), or that
our customer asks for some reason (we cancelled a
port, and arrival date cannot be maintained) to
load our full unit with another Line. A direct
interchange can be arranged, after an agreement
among the three involved Parties (2 Lines
Leasing Co.). The Leasing could in fact declare
that the contracts are not compatible. There is a
fee for that, but the major drawback is that as
Shipping Line we take in a unit which did not
choose / inspect at conditions we did not
want. Therefore, much more frequently the
decision is turned towards the SUB-LEASE among
Lines, where the Leasing Co. is not
involved. This is allowed in most contracts (i.e.
the no-sub lease clause is not so common).
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Contract with a container terminal a case
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OCEAN FREIGHT
It is important to have this concept well in
mind. Quite often, it is diluted in
freights all-inclusive, together with other
additionals. The risk is to mix too many
different items (fixed/variable) creating
confusion, if not at an accounting level (it is
always possible to re-build it), at a commercial
one. The ocean freight as a REFERENCE should be
always maintained. It should always be split at
manifest level, also considering the implications
this has on commissions of all kinds.
Historically, when the Conference system was
prevailing, and door-door concepts were not that
developed, the ocean freight was highly
protected, and a rate division per COMMODITY was
in place. The filing of rates was much
bureaucratic, and the same item could have a huge
number of sub-items the target was
Diversification.
Today the tendency is to F.A.K. (freight all
kind) rates, valid for any commodity. Some
notable exceptions exist, quoted at a discount
TILES-FURNITURE-COFFEE -PAPER-LUMBER-NICKEL, but
this is more the result of the volumes moving
on those trades than a unilateral decision of
Lines. REEFER cargo, still remains at a high
premium, given the relative scarcity of the offer.
Lets then look at some typical ADDITIONALS which
are usually attached to the ocean freight, and
are, from a Lines perspective, assimilable to it
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Main ADDITIONALS to freight
Bunker Surcharge (Baf)
Congestion Surcharge
Currency Adjustment Factor (Caf)
War Risk Surcharge
Special Equipment Additional
Canal Surcharge
Over Dimension Add. (Dead Slots)
Overweight additional
Dangerous Cargo Addl. (IMO)
ISPS Surcharges Carrier and Terminal
Equipment Imbalance Surcharge (E.I.S.)
Service Charges (Customs/bl fees)
Feeder Additionals Ex/To base ports
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• Ocean freight is the weapon through which
  commercial activity is carried out.
• PRICE DISCRIMINATION is what Shipping Lines
  ordinarily are active in, sometimes
• in an informal way. Lets imagine two scenarios
• Conference
• Free Market

Being that a cartel, which by definition should
control, at least, 70 (seventy) of the market
it covers to have any sense whatsoever, it FIXES
prices. As we said, the big commodity tariffs
have disappeared as are the Service Contract with
direct customers they arranged, which then were
available for utilization by Member Lines. Today
it is the single Lines arranging those for their
own account. Conference can today be defined as a
Stability Forum, where Lines can more or less
control each other and exchange information on
the market trends. These groups try and increase
rates (G.R.I. General Rate Increases) and
additionals at regular intervals, pre-planning
the increases in their yearly budget. In
practice, except in those cases where the demand
is bigger than the offer, this system proves to
be inefficient, as the economic theory of cartels
also indicates. Surely, members of a Conference
are there to stay for some time, and this is one
of the key original reasons for conferences
existence that remain regular service offer to
specific named areas, maintained for a reasonably
long period of time.
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On the real market

• We have PRICE DISCRIMINATION in three basic
  forms
• By Product
• As we mentioned, the typical huge
  conference-style commodity tariffs have gone,
• replaced by F.A.K. rates still some efforts to
  differentiate are tried out (see above)
• By Area
• A strong willingness exists to offer different
  rates according to the features of the
• specific market in which it is applied. The ship
  is the same, but we tend to resist to
• equalize rates originating, say, from Italian and
  Spanish ports, called on the same
• route
• By Customer
• In the first place identifying big, medium and
  small accounts
• Secondly, dividing freight forwarders from direct
  shippers/receivers
• Thirdly, size and scope of the company
  permitting, trying to approach customers who
• only work through Tender Offers, giving us the
  chance to establish strict logistic links.
• By Quantity

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DEMURRAGES
It is worthwhile reminding the phases of the
discharge of a container
Consignees premises
Vessel
Terminal

• Each movement implies different concepts as as
  far container cost accrual is
• concerned
• Full discharged unit at the terminal
• A STORAGES on terminals side
• B DEMURRAGES on Shipping Lines side
• 2) Full unit moving out of the terminal up to the
  moment when the empty unit is
• delivered back to Lines depot by Consignee
• A DETENTIONS on Shipping Lines side.
• Many Shipping Lines tend to unify their side
  summing up demurrage and detentions
• In a unique demurrage concept, covering the
  UTILIZATION time of the container.

It is a common procedure for Lines to grant a
FREE TIME for demurrages, usually in calendar or
running days, after which period a TARIFF per day
(and ctr type) is levied. In many countries, the
cashing in is in the hands of government bodies
to whom a commission is paid (in a way, revenue
almost guaranteed).
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Demurrages represent a good income for any
shipping line, and rigid policies to try and
avoid too many special deals on free time, or
discount / cancellation of the total demurrage
amount are put in place. In many a country,
customs clearance operations are slow, to say the
least, so that, theorically, a good ground for
free time extension exists. Even so, it is a good
policy to try and separate the various concepts
in a negotiation, trying maybe to work more on
ocean freight value, rather than
demurrages. What we already discussed, i.e. the
LONGSTANDING procedure, is one typical sign Of
the tight control on such an item.
Briefly, then
FAC This is the customary commission paid in
some countries to the party booking the cargo
with a SL. It is a of the ocean freight only
(ranging from 2.5 to 4). Only in some particular
cases (tender offers) it can be cancelled, being
the Shipper the one appointing and negotiating
with its forwarder.

• COMMISSION This is the reward to Lines agents,
  again calculated in of the
• ocean freight.
• In all contracts, due to the different type of
  agencys involvement, it is normally
• higher on export rather than import cargo, and
• higher on direct rather than transhipment cargo.

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• REBATE This is only one name to define the
  reward, most likely unofficial, to the
• booking party, as a way of differentiating it
  from other customers. It can be
• Immediate, payable on a vessel per vessel basis
  
• Deferred, payable after a certain fixed period
  of time (quarterly / yearly).
• The latter can also be used to build particular
  volume incentive schemes (V.I.P.), for
• which payments are different according to the
  final volume range achieved, say
• 0-200 teus x
• 201-500 teus y

The rebate system, as it appears evident, to make
some sense, implies the existence of a tariff
shared among Lines, and in fact it is most
typical of within Conference environments. For
an outsider working on the free market, it is
simpler, for both its commercial and accounting
departments to have a NET tariff, without any
rebate to be deducted.
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Terminal Handling Charges (THC)
They are the corrispective charged by SLs to
cover the discharge cost of the units
and terminal cycle (usually up to free-on-truck /
rail) as charged by Terminal operators. The
charge takes place in those ports where the
market allows for that. In those cases, it is the
SL absorbing those costs.
The basic terminal cycle
Truck
Stack area
Quay
Vessel
Rail
1st movement
2nd movement
3rd movement
Movements are important to understand how
differently the cycle is split, in terms
of charges, between the various logistic parties
involved. Different procedures in various ports
mean different local interests towards the
port activity different (higher or lower) status
of shipping lines compared to the local shipping
community.
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In many countries, only the 1st Movement is
charged by the port to the Line, and has some
possibilities to be recovered by the Lines. In
the case of Mexico, for instance, the 1st
Maniobra is surely charged to the Line, but just
a few are in a position to levy a THC. The
remaining two Maniobras are directly handled by
the port authority and billed directly to the
receivers. The local power is so strong and
established, that the receiver pays also in case
of door-door moves, where the Line acts as final
carrier.
In others, for instance East Mediterranean ones,
trade conditions are by definition on a FREE
IN/OUT basis, so that the Shipping Line is not
involved in the loading and discharge process,
respectively, i.e. it is not billed for
stevedoring costs, and of course cannot charge
any THC.

• This implies a clear LOSS OF CONTROL
• of the land logistic process, both trucking and
  rail (it is not a coincidence that in
• Mexico almost 90 of the traffic is on a
  port/port basis, with land transportation in the
• hands of local companies, on a merchant haulage
  basis)
• - of the negotiation with terminals, as they are
  dealt directly by terminal and customers.

This also implies, lets not hide it, FEWER
MARGINS for SLs, as THC represent a good revenue
for any Line wise enough in keeping this concept
as a separate one and not including it in
all-inclusive rates, subject to global
negotiations.
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Differential analysis

• An application of make-versus-buy analysis to
  Liner Shipping decisions

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Wed like to propose an application of the make
vs.buy decision making,which is commonly
utilized in shipping activity.In fact, S.Lines
are regularly faced with proposals regarding
Marginal traffics, and the risk of making
mistakes, accepting or rejecting them, is huge.
Obviously, we are entering a very dangerous
path of analysis,in the sense that commercial
attitudes of SLs vary considerably among
them. The point is, though, to be able to know
why a decision is being taken I know why Im
taking on board this apparently unattractive
cargo, and Im supporting my opinion with
numbers.
It is not a subject to be examined closely here,
but it is worth remembering that this type of
cost comparisons should better cover a multi-year
period. In fact, a multy-year analysis is more
likely to reveal whether outsourcing will
generate long term savings (much of the cost
savings should be experienced in later years, as,
for instance, leases and contracts expire, and
fixed costs become variable costs). In this
multi-year scenario, future cash flows should be
then discounted to their present value this
ensures that proper weight is given to future
costs and benefits. In our case, well
consider, more simply, SPOT decisions, as here
comes the main utilization of this way of looking
at shipping costs.
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DESCRIPTION OF DIFFERENTIAL ANALYSIS
It is crucial to look at the differential cost
instead of merely comparing the total cost, which
may include fixed costs that cannot be avoided,
and which will remain the same regardless of
what decision is made. In a way, it can be
linked to all the discussions on margin of
contribution or direct costing, where a clear
pre-division of fixed and variable costs is
mandatory. Probably, within shipping, this is a
relatively easier task compared to other
industries.
This analysis is frequently utilized, for
instance, to evaluate the outsourcing of
a service/activity, both in private and public
sectors.
In a nutshell, it leads to determine the costs
that should be IGNORED, when comparing two
alternatives, and should therefore not influence
the decision. SUNK costs, for instance, have
already occurred, and will not vary whichever
decision is taken.
Another important cost concept in this respect is
OPPORTUNITY COST, i.e. the lost opportunity of
using an asset or resource in a way other than
the chosen alternative
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In an industry like Shipping where, as we saw
elsewhere, the fixed costs tend to be the
prevalent ones, at least paramount in size, it is
important to have in mind the cost dicotomy,
fixed-variable, at all levels of Line Management,
as a kind of permanent attitude. This, of course,
can vary in terms of importance, according to the
difference strategies followed by the specific
SL. Rejoining briefly the contents of the first
part of my lectures, should we have
A COST ADVANTAGE strategy where the company is
looking, by definition, for a cost leadership
or cost reduction. This implies that also tools
such as this marginal analysis are considered in
every moment of the companys activities
A DIFFERENTIATION strategy where the company is
willing to be unique in some aspect which might
be valuable by its customer base, and which
allows to charge a premium price, if compared
to direct competitors. Here, the focus spread
within the organization is more on the analysis
of the supply chain of the firm, in order to
identify possible unicities in every single
step of it. Consequently, the marginal analysis
has a lower operational profile.
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CASE STUDY We came across this situation on the
Med to Canada trade, and I think it can be
useful to exemplify some of the above concepts.
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Description of the service Mediterranean to
Canada via Halifax gateway
This implied the need of utilizing a Raiway
service to reach main commercial areas of the
country, such as Ontario and Quebec. The railway
service became then a STRUCTURAL COST of the
line, meaning a cost to be compared to the one of
serving the same areas via their natural gateway,
i.e. the S.Lawrence Seaway ending up in
Montreal, with its deviation days, bunker,
stevedoring arrangements, and so on.
Initially, the trade was for us mainly a
West-bound one, as it took more time to
develop an east-bound expertise, and also the
ratio euro/usd/can, was not favourable to a
growth of Canadian exports. This meant that a
lot of empty repositioning ex MTL/TOR to Halifax
took place, say 40 out of 100, especially 40s,
while 20s were more balanced.
A typical source of initial commercial
indecision, derived then from how to judge the
bottomline traffics such as paper, waste paper,
ALTRI. We had to split available data as follows
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FULL COST Freight Usd 500 Discharging THC Usd
155 Rail cost Mtl-Hfx full (Usd 400) Loading
full Hfx (Usd 150) Discharging full dest (Usd
120) Commissions (5) (Usd 40) F.A.C. (2.5)
(Usd 12,5) Balance (67,5)
DIFFERENTIAL COST Freight Usd 500 Discharging
THCUsd 155 Rail cost Mtl-Hfx empty (Usd
200) Loading full Hfx (Usd 150) Discharging
empty dest (Usd 90) Commissions (5) nil F.A.C.
(2.5) nil Balance 215
ACCEPT
REJECT
In other words, the consideration lies on those
costs I would suffer in any event, so that they
must not be considered as a discriminatory
item. It can be sufficient that revenues can
cover those costs to justify the green light.
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Personal comment never push the differential
analysis to its limits (especially if
the strategy of the company is not consistent
with it), as you would indirectly develop
a break-even mentality, a kind of survival kit,
which does not enable you to sell your product
appropriately, adding the value your organization
brings. It should be considered (cum grano salis)
for those marginal situations such as

• Highly imbalanced trades, the ones where one leg
  is by nature stronger than the
• other and a lot of empty repositioning takes
  place.
• This approach should apply to the weakest leg,
  while on the strongest, the main
• considerations among traffics are related to the
  specific FIO we can get.

• Trades of which we know all the basic features
  performing that in situations where
• we are newcomers, could lead us to decisions from
  which it will be difficult to come
• out (read to increase rates again) in the short
  term.

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END
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Planning
Planners make part of the Marine Operations
department, in which operate with a high degree
of autonomy and delegation of responsibilities. Th
eir scope of activity relates to the proper
handling of cargo on board of ships, both from a
technical (marine safety) and commercial (volume
maximization) point of views. We can recap the
main tasks and procedures in which they are
involved
1) SCHEDULE On the basis of the Lines Long Term
Schedule (Master Schedule), which is the
official Document for allinvolved parties, and
after analysing the provisional
loading/discharge Date for each p.o.l., they
prepare the COASTAL schedule, important
operational docu- Ment, which is utilized by
Agents to establish closing dates for
commercial cargo.

• 2) BOOKINGS
• They must consolidate all loading and discharge
  data, and to this purpose they request
• Proper and timely info to pol agents in the form
  of CBR (Consolidated Booking Report),
• Which contains figures on ctr type / weight /
  origin / destination.
• In addition, they require specific formats for
• Dangerous Cargo (IMO)
• Ackward Cargo (Out of gauge)
• Reefer Cargo
• Given the particular status of this cargo on
  board of any ship.

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Imo Cargo This cargo, in particular, deserves lot
of attention in terms of SEGREGATION rules,
of two kinds A Allowable UN classes within a
single container B Segregation among
containers on board of ship. In the former case,
planners can reject the request for that type of
unit, unless changed. In the latter, they can
similarly stop the acquisition of Imo cargo
overall, in order to have safety rules
respected. We show hereunder two tables with
details on segregation.
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3) CONSOLIDATION They consolidate all figures and
coordinate with Line Managers best possible way
to optimize cargo mix, trying to minimize the
number of RESTOWS. Maximising implies also a
coordination with Container Management for the
loading of EMPTIES, up to the maximum allowed,
after loading of full cargo (first
priority). Maximising means of course to load
the ship down to her marks, i.e. to her
maximum permissible draught, either winter,
summer or tropical loadline as the case may be
(see graph), but in the containerized trade this
is not enough, as the cargo mix combination is a
bigger priority. Full and down is a better
jargon to explain this concept. As a matter of
fact, my experience with different planners makes
me think that this job is, true, a much technical
and software-driven one, but 50 of it belongs to
art, as one ship is never preparde the same
way, or with the same degree of efficiency, by
two different persons
4) OTHER DOCUMENTS They give authorization for
C.O.D. (Change of destination) after sailing,
underlying the number of shiftings (1 shifting
two movements) necessary for the operation. They
produce the final BREAKDOWN of vessel, a recap
with all final data, used for both operational
scopes at p.o.d. and for accounting purposes.
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5) TERMINAL OPS. They are entitled to call the
SHIFTS and GANGS on each port of call. This
naturally Implies to have a clear picture of wich
type of volumes we are going to have in that
port, Based on the forecasts we discussed.
Note TRANSHIPMENTS Extensive t/s operations can
only increase the number of variables above
described. First of all, the need arises to
de-centralize the planning functions overseas. In
our case for instance, we decided to install
aplanner in the Caribbean area, in order to cope
with local port needs with a bigger
efficiency. Tasks between two planning offices
involved on the same line are clearly defined,
ports being assigned to one or the other,
according to geographical /accounting
criteria. A typical case of coordination among
planners is when two or more vessels are
on schedule for being at a named port on the same
day. A decision has to be taken on which one is
going to work first (Berthing sequences), in this
case involving also Line Management and
Operations.

• Note BASIC STOWAGE RULES
• - Farthest destinations first
• 20 /heavy units under deck
• 2x20 not stowable over 1x40 (viceversa is
  possible)
• empties on top

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GENERAL BAY PLAN
It will become much easier looking at one of
those, but it is the main document deriving from
the planners activity. It shows a transversal
view of all BAYS (same vision for cargo loaded on
deck) with indication of all details for the
whole of its CELLS. There is a preparation phase,
starting well above the port of call, where
planners can make some loading test it has to be
noted that booking data are still much imprecise
at this stage, especially on the weight side, so
the calculation is rough. STEPS Data are
inserted in a Software, which calculates all the
main necessary technical items such as Stability,
Bending, Draft, Trim, Torsions, Stress, Stacking
and so on. The system also gives the intermediate
steps or simulations of movements as a graph.
The file is sent to the planning office of the
terminal, and loaded for their puposes. The
terminal loads its loading figures, with actual
weights, and give it back. This file is
utilized as a starting condition for the
following port.
Note It is important to remember that it is the
MASTER of the Ship to have the last word on the
acceptance of the plan as proposed by planners.
In fact, considering that software of which ships
are provided is similar to the one in the hands
of planners, counterchecks Have lost a lot of
importance. Still some data can result different,
DRAFT for instance, the thing deriving from
wrong customers weight informations.
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ORGANIGRAMS
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Organigrams Detail 1
Lines Director
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Organigrams Detail 2
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Organigrams Detail 3
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Organigrams Detail 4
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Organigrams Detail 5
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Organigrams Detail 6
Each REGION (or Regional Center) has more or less
the same functions described Above, but with
lower budgeting target. Some big Lines apply the
rule to maximise the CM2 (2nd Margin of
contribution) in Their Regions, i.e. the margin
before ship costs, the latter controlled at Head
Office Level. There we find additional Commercial
Divisions, with a Managing Director,
who Supervises a few Trade Directors, and
corrispondent Trade Managers
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The first container
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What we would not like to see again
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Another side of it
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