Sea Transport

1
Sea Transport

• Business Logistics Management, Vogt/Pienaar/de
  Witt

2
Operational overview

• Ocean carriage is the most cost-effective way of
  transporting high-bulk commodities over long
  distances and is therefore the most widely used
  international shipment method.
• It is used for both inbound and outbound
  shipments, although there is usually an
  unbalanced flow of freight.
• The development of large bulk carriers has
  enabled sea transport to assume a vital role in
  the transportation of bulk materials such as ores
  and minerals, grains, and timber products and
  especially coal, crude oil, and petroleum
  products between energy-producing and
  energy-importing countries

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Operational overview cont

• Water transport is often limited to international
  deep-sea transport and coastal shipping between
  local ports.
• Inland water carriers are dependent on the
  availability of navigable lakes, rivers, and
  canals. I
• n North America, Europe, and Asia, for example, a
  significant portion of the total intercity
  freight tonnage is transported on inland
  waterways by river barges and small vessels.

4
Operational overview cont

• Shipping has become highly specialised since the
  1960s, each type of specialist ship being
  designed to be more productive than the ship it
  replaces.
• Specialisation has resulted in ships becoming
  complementary to other modes of transport in the
  Logistics chain.
• They are therefore often designed for a specific
  trade route and commodity type, with little
  prospect of employment on other trade mutes.

5
Operational overview cont

• Bulk carriers carry cargoes with low
  value-to-weight ratios, such as ores, grain,
  coal, and scrap metal.
• Tankers (mostly crude oil vessels) carry the
  largest amount of cargo by tonnage.
• Roll-on/roll-off (Ro-Ro) ships carry cargo that
  is driven directly onto the ship, and allow for
  standard road vehicle trailers to load and unload
  cargo.

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Operational overview cont

• Oil-bulk-ore (OBO) vessels are multi-purpose bulk
  carriers able to carry both liquid and dry bulk
  products.
• Container ships have greatly expanded the use of
  sea transport for many commodities. Most
  international shipments involve the use of
  internationally standardised containers suitable
  for intermodal carriage.

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Typical strengths of Sea Transport

• A low-cost service can be supplied.
• Large volumes of high-density freight can be
  conveyed over long distances.
• Standard intermodal containers can be utilised to
  facilitate freight handling and transhipment.
• Traffic congestion is virtually non-existent on
  the open sea.
• Sea transport offers a very safe and secure
  service.

8
Typical limitations of Sea Transport

• Service can only be rendered to and from
  sea-ports that have the facilities to receive the
  ship and conduct the required transhipment. A
  door-to-door service is therefore not possible.
• Because transhipment is unavoidable at both ends
  of a voyage, more freight handling takes place
  than with other surface transport modes.

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Typical limitations of Sea Transport cont

• Ships are vulnerable to inclement weather and
  stormy sea conditions. This can delay delivery
  and in some cases prevent it altogether.
• Sea transport offers a slow and low-frequency
  service.

10
Freight characteristics

• Almost any kind of freight can be conveyed by
  ship at a relatively low cost.
• Short delivery times are not of critical
  importance as far as the vast majority of
  commodities that are transported by ship are
  concerned.
• Clients make a trade-off between long transport
  times and the relatively low tariffs offered by
  sea transport.

11
Competition within Sea Transport

• Ocean shipping competition range from open
  competition, as in the case of tramp shipping
  (individual ships seeking cargo), to
  oligopolistic cartels, as in the case of liner
  shipping conferences.
• A liner shipping conference is a number of ships
  from various shipping lines working on a route in
  conference, or sharing the loads on the route.

12
Competition within Sea Transport cont

• As is the case with air transport, economies of
  scale are possible with large individual vessels
  and not necessarily with large fleet operations.
• Single-ship operators, for example owners of
  tramp ships, are therefore able to compete with
  larger scheduled conference liners.

13
Sea Transport Cost Structure

• The cost structure of sea transport is similar to
  that of air transport.
• It is characterised by a high proportion of
  variable costs due to the fact that the way the
  means of transport involved (the sea) does not
  require investment and seaports are not owned or
  supplied by shipping firms.
• Expenses in ports can be as high as forty per
  cent of sea transport costs.
• However, these obligations only arise when a port
  is visited.

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Fixed costs

• Overhead costs
• general overheads (management, administration,
  and office commitments)
• marketing costs (advertising, sales costs, and
  agents commission) and
• marine costs (land administration directly
  involved in shipping activities).

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• Standing costs
• maintenance and repairs
• vessel inspection and check-ups (usually every
  four years)
• insurance
• depreciation
• fixed crew costs (unless contracted for
  individual voyages)
• radio and communication dues and
• auxiliary stores aboard.

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Variable costs

• Variable costs of shipping are voyage-specific
  and include
• fuel
• crew costs (when contracted for individual
  voyages)
• port and other terminal costs
• insurance to cover risks on the water,
• maintenance relating to motion
• freight (all costs associated with freight
  storage, loading, stowing, and unloading) and
• miscellaneous sailing costs.
• END