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Maritime Logistics

A complete guide to effective shipping and port management

Dong-Wook Song and Photis M. Panayides


Kogan Page 2012
344 pages

Focus
Leadership & Management
Strategy
Sales & Marketing
Finance
Human Resources
IT, Production & Logistics
Career & Self-Development
Small Business
Economics & Politics
Industries
Global Business
Concepts & Trends

Take-Aways
The world economy depends on maritime transport, which relies on maritime logistics.
The process of planning, implementing and managing the movement of goods and
information involved in ocean carriage is maritime logistics.
The growth in global commerce has changed seaborne shipping, which handles 85% of
international trade.
Vertically integrated shippers offer complementary services, such as inland
transportation, documentation preparation and customs clearance assistance.
Maritime transport operations must fully integrate into clients global logistics systems.
Cargo ships continue to increase in size so shippers can leverage economies of scale.
Containers revolutionized global freight transport by sea, making it cost-effective.
Greater demand has driven a rise in dry bulk shipments of commodities.
Inland dry ports work with seaports to relieve traffic congestion and to offer a seamless
intermodal transport system.
To move goods efficiently, shippers use the hub-and-spoke distribution model that the
aviation industry perfected.

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What You Will Learn
In this summary, you will learn:r1) Why maritime logistics are vital to seaborne
shipping; 2) How containers, ship size and safety issues affect the industry; and 3) How
growth in international trade has changed marine transportation.
Review
Without maritime transport, the global economy would be dead in the water. And without
maritime logistics, maritime transport would be grossly inefficient. The cost of all goods
shipped by seaborne transportation which is just about everything would skyrocket.
Distinguished maritime logistics scholars Dong-Wook Song and Photis M. Panayides
have compiled essays by expert academics covering transport and shipping economics,
maritime business administration, transport research, international logistics, supply chains
and related fields. While this is a specialized book for scholars and those who understand
the mathematical mechanisms behind maritime logistics like discriminant validity,
structural equation modeling multivariate non-normality and squared interconstruct
correlations readers who cant decipher these dry, relatively rarefied concepts can skip
them and still come away with a workable, in-depth understanding of maritime logistics.
The text, while academic and sometimes a bit repetitive, is a true insiders manual.
getAbstract recommends these astute essays to logistics managers and anyone who needs
to learn about maritime transport.

Summary

Logistics has been


embedded into every
type of business
from the largest
corporations down
to the smallest
corner shops on your
street.

Adventure and
a will to engage
in foreign trade
have stimulated
and advanced
development,
building and
utility of ships and
ports since time
immemorial.

The Logistics of Maritime Transport


A quiet revolution is taking place in oceangoing cargo services, thanks to the development
of worldwide maritime logistics and the expansion of the international shipping industry.
Growth in global trade has resulted in notable restructuring of seaborne transportation,
leading to increased deregulation, competition and supply-chain integration.
In the face of these changes, value-added logistics services are in great demand. Many
prominent global transport operators now include logistics as an essential component
of their strategies, so they can reduce costs and improve services. Because the freight
transportation industry depends on tight linkages among disparate firms, it needs a
sophisticated level of logistics.
The 1990s saw the rise of integrators: companies that offer logistics and contracting
services, including total logistics solutions and seamless origin-destination capabilities.
According to one survey, eight out of ten shipping lines say they plan to ally themselves
more strategically with logistics firms and to enhance their internal logistics capabilities
and services. However, whether internal logistics operations earn profits or not is
uncertain, given current evidence.

The Importance of Maritime Logistics


Maritime logistics is the process of planning, implementing and managing the movement
of goods and information involved in ocean carriage. These operations encompass
maritime transport (ports plus shipping) and management (cost-cutting, performance
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enhancement, tracked results and customer satisfaction). In the field of maritime logistics,
as well as in ocean liner shipping, development moves at a rapid pace.
Seaports are
uniquely structured
social and technical
organizations.

Global production,
transport,
distribution and
logistics require the
setting of freight
management
strategies.

Maritime logistics promotes several strategic objectives of the marine shipping industry,
including efficient operations through improved customer service, trimmed costs and
shorter lead times. Logistics helps the industry in the areas of contracting, shipping,
sea voyage, moving cargo and loading/unloading, as well as storage, warehousing,
inventory management, offering a distribution center, quality control, testing, assembly,
packaging, repacking, repairing, inland connection and re-use. The three primary areas
that maritime logistics focuses on are moving cargo, managing ports and terminals, and
freight forwarding.

Customers Needs
Maritime logistics provides value by satisfying customer needs. To meet that goal,
maritime transport operations must fully integrate their work into a global logistics
system. A lack of integration means higher costs, greater delays, more accidents and lost
customer satisfaction.
Maritime transportation through ocean transport, seaways and inland waterways
handles 85% of international trade shipments. Its essential task is integrating cargo
handling with all the other components of a logistics system. Maritime transport is a
crucially important link in global supply-chain management for firms around the world.
Maritime transport activity increases or decreases depending on the global economy. It
slowed considerably during the 2008-2009 financial downturn, dropping by 4.5% in 2009,
when the worlds gross domestic product fell by 1.9%. But global GDP rebounded by
3.5% in 2010, and total container trade for world seaborne trade picked up by 11.5%.

The demand for


container shipments
moves parallel to the
global GDP.

Containers Have Changed Everything


Containers have revolutionized the global freight transport system. In 1956, Malcolm
McLean, the president of Sea-Land Inc., made container shipping a reality with the launch
of his Ideal X container ship. It transported 58 containers on its maiden voyage, moving
them efficiently from Newark to Houston. In 1966, the first real transatlantic container
service kicked off, linking the East Coast of the United States with Northern Europe.
Container ships are specifically designed for cost-effective loading and unloading. The
International Organization for Standardization (ISO) sets strict criteria that apply to all
containers: They must be 10-, 20-, 30- or 40-feet long; 8 feet wide; and 8- or 8.5-feet high.
Some 20 firms dominate container shipping; the largest fleets belong to the Mediterranean
Shipping Company (MSC) and to Maersk Line. They each have more than 400 ships.

For the shipper, the


greatest advantage
of intermodal
transport is the
possibility of
seamless door-todoor transport.

Today, container shipping is a key factor in the health of global trade and maritime
transport. Container-shipping networks are the jewels of the global supply-chain system.
Overall, globalization requires container-shipping networks to provide more reliable
schedules, better freight rates and worldwide coverage. Additional ports and shipping
systems have developed in recent years to meet increased demand.

Intermodal Transport
Intermodal transport (integrating various forms of conveyance specifically, by water
and land) is a direct function of containerization, which makes seamless door-to-door
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As technological
systems increase
in complexity, the
gap between the
human operator and
the system tends to
increase as well.

Cargo handling in
ports is considered
one of the most
dangerous
tasks...and workrelated mortality for
seafarers remains
among the highest
of all occupations.

The world dry


bulk trade grows
faster than the world
economy.

Hinterland logistics
and hinterland
transport systems
have become an
important and
integrated part
of global supply
chains.

transport fully viable and notably efficient. For example, North Americas Double Stack
Train (DST) networks enable the economical and timely movement of cargo from West
Coast ports to the interior and the East Coast.
Intermodal transport facilitates the integration of shipping companies logistics. Many
of these organizations now combine with other transportation companies, including rail
lines, to convey goods smoothly. Shippers will be able to achieve even better results
when additional intermodal transport routes become available. International logistics
organizations employ the same hub-and-spoke distribution model that the airline
industry established and uses. In this system, the freight companies consolidate their
shipments at major ports (known as hubs) and then use radial links (known as spokes) to
redistribute goods to widespread destinations.
Many of the worlds leading shipping companies also offer inland transport, document
preparation and customs clearance services to their clients. Several of the major carriers
provide warehousing and supply-chain planning, as well as logistics services at suppliers
or customers business locations.
Most fleet operators provide comprehensive transportation services for cargo, liquid and
solid bulks, and reefer cargo. For such firms, vertical integration is the prevailing trend
that makes supply-chain optimization possible. This strategy can include land, sea and
air transportation, in-transport inventories and optimized warehousing. Shippers realize
several advantages with vertical integration, including increased resiliency during slow
economic periods.

The Human Element


Shipping efficiency and superior customer service depend on workers capabilities and
professional knowledge. Todays high-tech maritime industry incorporates numerous
sophisticated man-machine systems. In 1997, in recognition of these man-machine
methods, the International Maritime Organization (IMO) formally recognized that the
human element is a vital issue that affects the well-being of shipping operators as well
as the marine environment.
To avoid accidents, workers must fully understand and operate complex mechanisms.
Such safety concerns are a serious problem in an industry that already suffers from a
too-high percentage of occupational accidents. To illustrate what can go wrong, consider
an incident in 2005, when the container ship Savannah Express crashed into a linkspan
(cargo-loading drawbridge) at Southampton Docks. The accident occurred because the
ship engines complicated electronic controls flummoxed its operators. While no one was
hurt in the mishap, it seriously interrupted port operations.
To prevent such problems, shipping authorities conduct routine inspections to ensure that
handlers and operators know what to do and how to do it, and that all functions are in
order and have the correct certifications. These authorities may cite vessels that fail to
pass inspection or that do not meet IMO conventions. Penalties include the detention of
[a] ship...or a ban on entering certain ports.

Tankers
In 2009, almost a quarter of all maritime cargo shipped worldwide consisted of crude oil
and petroleum products...requiring 35% of the world fleet. Shippers once transported oil
in wooden barrels, but that changed in 1878, with the advent of a ship called the Zoroaster
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Ports have become


the most important
logistic link in
the production,
distribution and
consumption chains
of economies
worldwide.

Seaports should be
regarded as logistic
centers, industrial
zones and centers of
trade.

Todays maritime
operators...should
be in search of a
new strategic option
that enables them
to develop their
capability to realize
a more efficient
operation and more
effective service.

The higher the


level of integration
among the actors
of a supply and
logistics chain,
the higher the
effectiveness for the
entire chain...and
for the port.

that stored oil in a specially designed hull. In 1886, the designers of the Gluckauf the
prototype for the modern tanker added new features, such as pressure relief valves,
cofferdams and cargo valves that workers could operate from the deck. Modern tankers
still employ such features.
Economies of scale allow larger tankers to move oil and petroleum more inexpensively
than smaller ships can. Thus, many major shippers now commission supertankers. The
biggest to date was the Seawise Giant with a capacity of more than 560,000 deadweight
tons (dwt). Smaller tankers are better suited to certain trade routes and specific cargoes.
Quality and timing issues can lead to potential losses, so shippers must be fully aware
of all their risks.

Dry Bulk
The shipment of dry bulk commodities for example, iron ore, coal, grains, bauxite/
aluminum and rock phosphate has soared in conjunction with the increase in worldwide
demand for these items; dry bulk transport now accounts for 25% of global maritime
trade. Ships in the bulk carrier fleet range from 28,500 dwt to 365,000 dwt in size. The
economies of scale that affect so many other areas of marine transport also logically factor
into dry bulk shipping. Thus, fewer companies are ordering smaller carriers (up to 40,000
dwt), and orders are increasing for Supramax bulk carriers (40,000 dwt to 60,000 dwt).
The dry bulk trade is vital to the global economy, and its volume is a prime determinant of
world trade activity. Disruptions to dry bulk shipping can have expensive consequences
for national economies.
Seaports and Dry Ports
As cargo ships increase in size, seaports must adapt and expand to accommodate bigger
vessels and greater amounts of freight. Growth in international trade means seaports are
increasingly congested, as are their access routes. However, expanding seaport terminals
and facilities is costly and takes time.
To enable efficient cargo transport, seaports must offer good connections with
hinterland destinations, that is, the geo-economic space that a seaport serves. The
primary goal of a hinterland transportation system is to maximize cost efficiency and
support smooth logistics. Hinterland logistics, another key component of the global supply
chain, requires dry ports the inland terminals that use rail to link directly to seaports. Dry
ports cut down on seaport congestion while promoting environmental benefits. Customers
can deliver or pick up their goods at dry ports, just like at seaports. Dry ports make their
connected seaports far more competitive. Overall, port capabilities are more important to
logistics chains today than ever before.
A supply chain integration strategy is essential to optimal seaport performance and, thus,
to effective maritime logistics, and dry ports are a pivotal part of that integration. They
enable seaports to offer a seamless intermodal transport system.

About the Authors


Dong-Wook Song is a lecturer in maritime logistics at the Logistics Research Center at
Heriot-Watt University in Scotland. Photis M. Panayides is an associate professor in
shipping economics at the Cyprus University of Technology in Cyprus.
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