International Series in Operations Research& Management Science

Volume 220

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Associate Series EditorJoe ZhuWorcester Polytechnic Institute, MA, USA

Founding Series EditorFrederick S. HillierStanford University, CA, USA

For further volumes

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Chung-Yee Lee • Qiang MengEditors

Handbook of OceanContainer Transport Logistics

Making Global Supply Chains Effective

2123

EditorsChung-Yee Lee Qiang MengDept. of Industrial Engineering & Logistics Mgmt Dept. of CivilThe Hong Kong University of Science and Technology & Environmental EngineeringClear Water Bay, Kowloon National University of SingaporeHong Kong SAR Singapore

Singapore

ISSN 0884-8289 ISSN 2214-7934 (electronic)ISBN 978-3-319-11890-1 ISBN 978-3-319-11891-8 (eBook)DOI 10.1007/978-3-319-11891-8Springer Cham Heidelberg New York Dordrecht London

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Preface

As international trade continues to grow rapidly and supply chains become moreglobalized, many operations have been outsourced and moved offshore. About 90 %of the international trade volume was facilitated by ocean transportation. If we assumethat half of China’s exports by value in 2013 were moved by ocean transport andon average it takes one month for the goods to reach the consignee, then about85B$1 worth of goods would have been caught up during the transportation. Dueto environmental and bunker cost considerations, international air cargo transporthas been reduced from 3.1 % in 2010 to 1.7 % in 20132, with a shift towards moreeconomic transportation modes, especially ocean transport. Hence, ocean transportlogistics has played a very significant role in global supply chains.

Although ocean transport logistics has been well studied in maritime economicsand operations research/management science, many important issues have yet toreceive the attention they deserve. In this book, we reveal the interaction amongparties along the chain, including shippers, terminal operators and line carriers. Weexamine the impact of ocean transport logistics on global supply chains and addressmany important topics to shed new light on the subject.

This book is organized into three parts. The first part talks about the innovativedevelopment of terminal operators and the competition they face. The second partdelves into the many tactical and operational aspects of managing shipping liners,including empty container repositioning, disruption management, slow steaming,bunker purchasing, ship route schedule, and transport network design, and evaluatestheir corresponding challenges and opportunities. The third part studies the impactof ocean logistics transport on global supply chains. The 18 chapters of the book allhighlight the immediate effect of ocean transport logistics on global supply chains.

1 http://www.funggroup.com/eng/knowledge/research/ChinaTradeQuarterly1Q13.pdf.2 International Air Transport Association.

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vi Preface

Part I: Container Terminal Operation: Innovations, Trends,Competition and Business Models

According to a survey by Notteboom3, about 65 % of delay in ocean shipping isdue to port congestion. Clearly, terminal operation efficiency is crucial to improvingocean shipping reliability. Due to bunker and emission cost reduction considerations,carriers tend to use huge vessels (capacity up to 18,000 TEU) and also adopt slowstreaming. On the other hand, the strong demand for on time and/or fast deliveryfrom shippers forces the carrier to cut the turn-around time in the terminal to allowtime for slow steaming. All these have put huge pressure on terminal operators toimprove their efficiency and have also made terminal competition fiercer than everbefore. Hence, in Part I, we have five chapters that examine the innovations, trends,competition and business models of container terminal operations.

In the first chapter, Jiang, Chew and Lee study innovative container terminaldesigns. They first examine the issue of how to measure the port connectivity byproposing a new connectivity framework from a network perspective that can beused to generate a quantifiable measure of port connectivity. They also discuss themanagement of storage yards in transshipment ports. They further discuss innovativeterminal designs that can serve as potential solutions for transshipment ports. Insteadof using AGVs or ALVs to transport the containers in automated container terminals(ACTs), they introduce two innovative ACT systems: the “frame bridge system”designed by Shanghai Zhenhua Heavy Industries Co. Ltd., and the “GRID system”designed by BEC Industries. These revolutionary ideas aim to achieve a quantum leapin handling efficiency and productivity to support future shipping in an economicallyand environmentally sustainable manner.

In Chap. 2, Kim and Lee study the current trends and future challenges of con-tainer terminal operations. They review various planning and control activities incontainer terminals and define decision-making problems for operation planningand control. They also discuss new trends in the technological development foreach decision-making process. They then describe the functions of terminal opera-tion systems (TOS), the software used to implement the decision-making processes.Commercial TOS, including Navis SPARCS N4, CATOS, MainsailVanguard, TOPS,and OPUS, plus two famous noncommercial TOS, PortNet for PSA and nGen forHIT, are introduced and compared. Finally, they highlight recent trends of TOSresponding to changes in the technological and market environment.

In Chap. 3, Notteboom and de Langen report an up-to-date and detailed analysisof the dynamics of the European container port system—the second most importantcontainer port system in the world. Their discussion and conclusion section sum-marizes very nicely their findings and also provides clear insights into the currentdrivers of the container port competition in Europe. They identify a number of key

3 Notteboom, T.E. 2006. The time factor in liner shipping services. Maritime Economics &Logistics, 8 (1), 19–39.

Preface vii

success factors, including capacity, proximity to a hinterland with strong cargo gen-erating and receiving capacities, access to sea and hinterland, strong sea and landconnectivity, port and terminal efficiency, right pricing and a supply chain approach.

In Chap. 4, Lee and Lam examine whether major Asian ports have evolved intofifth generation ports (5GP) or if they remain fourth generation ports (4GP) to this day.They use the revised concept of 5GP to evaluate inter-port competition among fourAsian ports—Shanghai, Singapore, Hong Kong and Busan—in a comprehensiveway to reflect the cross-sectional, longitudinal and horizontal aspects of the portevolution. A novel approach with an empirical test combining a description methodand a quantitative method is employed to study port competition and competitiveness.

In Chap. 5, Lu and Chang study the selection of a business model for containerterminal operations. Recently, the Taiwan International Ports Corporation (TIPC)was set up to replace the former port authority of Kaohsiung, Keelung, Taichungand Haulin in Taiwan. They use TIPC as a case study to empirically identify thecrucial criteria for choosing a business model for container terminal operations. Ananalytical hierarchy process approach was adopted to assess the relative importanceof these criteria. Their results show that benefit and operational capability are thetwo most important criteria.

Part II: Shipping Liners: Tactical and Operational Management

According to a survey by Merge Global4, the biggest portion (around 50 %) of therevenue in the whole ocean transport logistics service provider chain goes to carri-ers. There are many important issues in the shipping liner industry that are worthstudying. In Part II, we report some studies on tactical and operational managementissues, including empty container repositioning, disruption management, bunkerpurchasing, ship route schedule, slow steaming, and transport network design.

In Chap. 6, Song and Dong provide a comprehensive and critical survey on emptycontainer repositioning for container shipping liners. After analyzing the main rea-sons for empty container repositioning operations, they provide a literature reviewwith an emphasis on modeling empty container reposition problems from the networkperspective. They then discuss possible solutions to the empty container repositioningproblems from the logistics channel perspective followed by solutions from the me-thodical modeling technique perspective. Finally, they present two specific modelsaiming to tackle the empty container repositioning problems in stochastic dynamicenvironments considering both laden and empty container management.

In Chap. 7, Tsang and Mak further formulate the empty container repositioningproblem for liner shipping as a multistage stochastic programming problem. Theirmodel specifically handles the stochastic nature of demand and long transportationlead time. As they are able to reformulate the computationally intractable stochastic

4 Merge Global. 2008. Insomnia: Why challenges facing the world container industry make formore nightmares than they should. American Shipper, July, 68–85.

viii Preface

program into a tractable cone program, a commercial solver can be used to finda solution. They also demonstrate that the robust model outperforms other simplepolicies.

In the shipping liner business, the route schedule is usually planned, fixed andannounced either three or six months in advance, and then at the operational level, thevessel will stick to the schedule as closely as possible. But vessels will often encounterunexpected disruptions, such as port congestion, severe weather conditions, or evenport closure. In Chap. 8, Qi studies the problem of how to dynamically revise theoperation plan at the execution stage when a disruption occurs. Problem modellingand formulation are provided and a few key results of the solution scheme andmanagerial insights are derived. This is a rather new research area in ocean transportlogistics, though it has been well studied in the airline industry. The chapter concludesby suggesting a few interesting topics for future research.

In Chap. 9, Plum, Pisinger and Jensen investigate an important optimal bunkerpurchasing problem in container shipping lines because the bunker cost constitutesa major component of the daily operating cost of a liner container ship. They firstexplain the bunkering issue in the liner container shipping industry. A base modelfor a single-containership bunker pursing is built taking into account the practicaloperational constraints. They further present a mixed-integer programming modelwith a novel solution approach for the bunker purchasing with contracts and discusspossible extensions of the model. Numerical experiments are carried out, and furtherresearch directions are highlighted.

In Chap. 10, Wang, Alharbi and Davy address the tactical-level interactionsbetween container port operators and container shipping lines. They examine, inparticular, a practical route schedule design for tactical liner ships that involves theinteraction between container shipping lines and port operators on the availabilityof port time windows at each port of call. With some mild assumptions, they for-mulate the problem as a nonlinear non-convex optimization model and design anefficient dynamic-programming-based solution algorithm. A case study based on atrans-pacific ship route is conducted to assess the efficiency of the designed solutionalgorithm. Four specific future research directions are discussed.

In Chap. 11, Psaratis and Kontovas comprehensively examine the slow steamingstrategies adopted by shipping lines. They present taxonomy of sailing speed modelsand analyze the main trade-offs. A decision model combining sailing speed androute choice is developed. Some examples are presented to introduce the main issuesrelated to slow steaming. They point out that solutions for optimal environmentalperformance are not necessarily the same as those for optimal economic performance.A private operator of shipping lines would most certainly choose optimal economicperformance as a criterion if policy-makers intend to influence the operator’s decisionto achieve a social optimum.

In Chap. 12, Wang and Liu contribute a comprehensive overview of existingstudies on global container transport network design. After introducing the funda-mentals and unique features of a container liner shipping network, a framework forcontainer transport network design is proposed. They discuss the four special net-work design problems examined in the literature—ship route design with or without

Preface ix

container transshipment operations, feeder shipping network design, hub-and-spokeshipping network design and general shipping network design. Five model formu-lations for the general shipping network design are presented. They end the chapterwith suggestions for future research.

Part III: Shippers and Global Supply Chain Management

In Part III, we study the impact of ocean transport logistics on global supply chains.We shed light on this issue by investigating several related topics. These topics arepurchasing transportation services from the shipper’s viewpoint, ocean transport andthe facilitation of trade, modelling global container transport demand, cooperationand competition in logistics operation, hinterland transportation as well as greencorridors in the supply chain.

Shippers are the major service users in ocean transport logistics. Clearly, mini-mizing transportation costs is very important for global shippers who need to movetheir cargo containers all over the world. In Chap. 13, Xu and Lai introduce a gen-eral optimization model for the transportation service procurement problem (TSPP).After reviewing various existing solution methods for different variants and theirextensions, they formulate a new general optimization model and discuss extensionsto the existing results. Further research topics are also discussed, such as stochas-tic setting of the problem, trade-offs between transit time and freight cost, contractcoordination and mechanism design.

In Chap. 14, Veenstra investigates the ocean transport part of international tradetransaction. In particular, he highlights a number of processes related to ocean trans-port that generate uncertainty and costs in logistics chains. He concludes that certainocean transport processes incur time loss and uncertainty and affect the efficiencyof logistics and supply chains. He predicts that “if such frictions exist, there will bea tendency to move from a market relationship to a more hierarchical relationshipbetween parties involved in the transaction.” Examples from the Port of Rotterdamand its European hinterland are also provided.

In Chap. 15, Tavasszy, Ivanova and Halim examine the methods and techniquesused in the analysis of the global container transport demand. Although the modelingof the global container transport demand can follow the generic architecture availablefor freight transport modeling, they find that few studies in the literature focus onglobal container transport modeling. They first model the global container demandbetween regions as the outcome of the process of production, consumption and trade.Based on the region-to-region demand, they proceed to model container demand fortransport services by mode and route, including the container demand for maritimeand inland port services.

In Chap. 16, Lee and Song examine the environmental challenges recently facedby maritime logistics operators, and investigate ways in which these operators caneffectively manage competition and co-operation with their rivals to better respondto those challenges and thus achieve their strategic goals. They establish a theoretical

x Preface

framework to show the positive relationship between co-operative networks, knowl-edge acquisition and the value of maritime logistics. A comprehensive survey ofexisting literature reveals that a high level of co-operation in a co-operative networkfacilitates knowledge acquisition, and competition promotes the positive impact ofco-operation on knowledge acquisition. The acquired knowledge helps to increasethe value of maritime logistics. They conclude that this outcome will certainly pro-vide maritime operators with strategic insights into the identification of determinantsand/or sources of competitive advantage and greater organizational performance frominter-organizational coordination and knowledge-based perspectives.

Hinterland transportation is increasingly important for ocean transport logistics,especially in the European container port system. In Chap. 17, Bouchery, Fazi andFransoo analyze the most important features of such container transportation sys-tems for the hinterland supply chain. In addition to reviewing the current state ofthe art and identifying avenues for future research at the network design level, theyalso characterize those important factors influencing the trade-off between inter-modal transportation and truck-only deliveries. A case study of coordination at anintermodal barge terminal in the Netherlands is also provided. A better informationsystem has been identified as a crucial component of efficient hinterland intermodaltransportation. This is an interesting area worth further investigation by the operationsmanagement community.

Finally, in Chap. 18, Panagakos, Psaraftis and Holte present the concept of greencorridors and analyse their possible impact on the supply chain. A green corridor wasintroduced by the European Commission in 2007 aiming at reducing the environmen-tal and climate impact of freight logistics. This chapter mainly focuses on surfacefright transport, including maritime transport. It is well known that consolidation oflarge volumes of freight transport over long distances can reduce transport cost andemission and hence rail and waterborne transport have certain advantages if arrangedeffectively. They report the analysis performed under the SuperGreen project. Theyalso provide an example that compares the deep sea service linking China to Europe(Shanghai – Le-Havre – Hamburg range) and the trans-Siberian rail link betweenBeijing and Duisburg/EU. They conclude that in terms of costs and CO2 emissions(on a per tonne-km basis), deep sea shipping has significant advantages over railtransport although the latter is faster.

Acknowledgements

We would like to thank many colleagues for contributing chapters to this book.We are also grateful to the Research Grants Council of Hong Kong SAR, China,for their funding support (T32-620/11) Cheong Ying Chan Professorship, and NOLFellowship Programme of Singapore.

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Contents

Part I Container Terminal Operation: Innovations, Trends, Competitionand Business Models

1 Innovative Container Terminals to Improve Global ContainerTransport Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Xinjia Jiang, Ek Peng Chew and Loo Hay Lee

2 Container Terminal Operation: Current Trends and FutureChallenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Kap Hwan Kim and Hoon Lee

3 Container Port Competition in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . 75Theo E. Notteboom and Peter W. de Langen

4 Container Port Competition and Competitiveness Analysis: AsianMajor Ports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Paul Tae-Woo Lee and Jasmine Siu Lee Lam

5 Choosing a Business Model of Container Terminal Operations . . . . . 137Chin-Shan Lu and Pei-Hsuan Chang

Part II Shipping Liners: Tactical and Operational Management

6 Empty Container Repositioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163Dong-Ping Song and Jing-Xin Dong

7 Robust Optimization Approach to Empty Container Repositioningin Liner Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209Ho-Tak Tsang and Ho-Yin Mak

8 Disruption Management for Liner Shipping . . . . . . . . . . . . . . . . . . . . . . 231Xiangtong Qi

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9 Bunker Purchasing in Liner Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . 251Christian E. M. Plum, David Pisinger and Peter N. Jensen

10 Ship Route Schedule Based Interactions Between ContainerShipping Lines and Port Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279Shuaian Wang, Abdurahim Alharbi and Pam Davy

11 Slow Steaming in Maritime Transportation: Fundamentals,Trade-offs, and Decision Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315Harilaos N. Psaraftis and Christos A. Kontovas

12 Efficient Global Container Transport Network Design . . . . . . . . . . . . . 359Shuaian Wang and Zhiyuan Liu

Part III Shippers and Global Supply Chain Management

13 Purchasing Transportation Services from Ocean Carriers . . . . . . . . . 399Zhou Xu and Xiaofan Lai

14 Ocean Transport and the Facilitation of Trade . . . . . . . . . . . . . . . . . . . . 429Albert Veenstra

15 Modelling Global Container Freight Transport Demand . . . . . . . . . . . 451Lóránt A. Tavasszy, Olga Ivanova and Ronald Aprilyanto Halim

16 Competition and Co-operation in Maritime Logistics Operations . . . 477Eon-Seong Lee and Dong-Wook Song

17 Hinterland Transportation in Container Supply Chains . . . . . . . . . . . 497Yann Bouchery, Stefano Fazi and Jan C. Fransoo

18 Green Corridors and Their Possible Impact on the EuropeanSupply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521George Panagakos, Harilaos N. Psaraftis and Even Ambros Holte

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551

Contributors

Abdurahim Alharbi School of Mathematics and Applied Statistics, University ofWollongong, Wollongong, NSW, Australia

Ronald Aprilyanto Halim TNO and Delft University of Technology, Delft, TheNetherlands

Yann Bouchery School of Industrial Engineering, Technische Universiteit Eind-hoven, Eindhoven, The Netherlands

Pei-Hsuan Chang Department of Logistics and Maritime Studies, C.Y. Tung Inter-national Centre for Maritime Studies, The Hong Kong Polytechnic University, HungHom, Hong Kong

Ek Peng Chew Department of Industrial and Systems Engineering, NationalUniversity of Singapore, Singapore, Singapore

Pam Davy School of Mathematics and Applied Statistics, University of Wollon-gong, Wollongong, NSW, Australia

Peter W. de Langen Port and Logistics Advisory (PLA), Eindhoven University ofTechnology, Eindhoven, The Netherlands

Jing-Xin Dong Business School, Newcastle University, Newcastle upon Tyne, UK

Stefano Fazi School of Industrial Engineering, Technische Universiteit Eindhoven,Eindhoven, The Netherlands

Jan C. Fransoo School of Industrial Engineering, Technische Universiteit Eind-hoven, Eindhoven, The Netherlands

Even Ambros Holte Marintek, Trondheim, Norway

Olga Ivanova TNO and Delft University of Technology, Delft, The Netherlands

Peter N. Jensen Maersk Oil Trading, København K., Denmark

Xinjia Jiang College of Economics and Management, Nanjing University ofAeronautics and Astronautics, Nanjing, China

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xvi Contributors

Kap Hwan Kim Department of Industrial Engineering, Pusan National University,Gumjeong-gu, Busan, Republic of Korea

Christos A. Kontovas Department of Transport, Technical University of Denmark,Kgs. Lyngby, Denmark

Xiaofan Lai Department of Logistics and Maritime Studies, The Hong KongPolytechnic University, Kowloon, Hong Kong

Jasmine Siu Lee Lam Division of Infrastructure Systems and Maritime Studies,School of Civil and Environmental Engineering, Nanyang Technological University,Singapore, Singapore

Eon-Seong Lee Department of Maritime Logistics and Management, AustralianMaritime College, Univerisity of Tasmania, Launceston, Australia

Hoon Lee Institute of Logistics Systems, Total Soft Bank Ltd, Haeundae-gu, Busan,Republic of Korea

Loo Hay Lee Department of Industrial and Systems Engineering, National Univer-sity of Singapore, Singapore, Singapore

Paul Tae-Woo Lee Department of Business Administration, Soochow University,Taipei, Taiwan

Zhiyuan Liu Institute of Transport Studies, Department of Civil Engineering,Monash University, Clayton, VIC, Australia

Chin-Shan Lu Department of Logistics and Maritime Studies, C.Y. Tung Interna-tional Centre for Maritime Studies, The Hong Kong Polytechnic University, HungHom, Hong Kong

Ho-Yin Mak Department of Industrial Engineering and Logistics Management,The Hong Kong University of Science and Technology, Hong Kong, China

Theo E. Notteboom Transportation Management College - Dalian Maritime Uni-versity, China and ITMMA - University ofAntwerp, Belgium andAntwerp MaritimeAcademy, Belgium

George Panagakos Department of Transport, Technical University of Denmark,Kgs. Lyngby, Denmark

David Pisinger DTU Management Engineering, Technical University of Denmark,Lyngby, Denmark

Christian E. M. Plum DTU Management Engineering, Technical University ofDenmark, Lyngby, Denmark

Maersk Line, København K., Denmark

Harilaos N. Psaraftis Department of Transport, Technical University of Denmark,Kgs. Lyngby, Denmark

Contributors xvii

Xiangtong Qi Department of Industrial Engineering and Logistics Management,The Hong Kong University of Science and Technology, Clearwater Bay, Kowloon,Hong Kong

Dong-Ping Song School of Management, University of Liverpool, Liverpool, UK

Dong-Wook Song Transport Research Institute, Edinburgh Napier University,Edinburgh, UK

Lóránt A. Tavasszy TNO and Delft University of Technology, Delft, TheNetherlands

Ho-Tak Tsang Department of Industrial Engineering and Logistics Management,The Hong Kong University of Science and Technology, Hong Kong, China

Albert Veenstra School of Industrial Engineering and Innovation Sciences, De-partment of Operations, Planning, Accounting and Control, Eindhoven Universityof Technology, Eindhoven, The Netherlands

Shuaian Wang School of Mathematics and Applied Statistics, University ofWollongong, Wollongong, NSW, Australia

Strome College of Business, Old Dominion University, Norfolk, Virginia, USA

Zhou Xu Department of Logistics and Maritime Studies, The Hong Kong Poly-technic University, Kowloon, Hong Kong