Vision of a Service Value Network in Maritime Container Logistics

Böse, Jürgen W.; Jahn, Carlos; Sarin, Raman Conference Paper Vision of a Service Value Network in Maritime Container Logistics Provided in Cooperation with: Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management Suggested Citation: Böse, Jürgen W.; Jahn, Carlos; Sarin, Raman (2014) : Vision of a Service Value Network in Maritime Container Logistics, In: Kersten, Wolfgang Blecker, Thorsten Ringle, Christian M. (Ed.): Next Generation Supply Chains: Trends and Opportunities. Proceedings of the Hamburg International Conference of Logistics (HICL), Vol. 18, ISBN 978-3-7375-0339-6, epubli GmbH, Berlin, pp. 87-110 This Version is available at: https://hdl.handle.net/10419/209202 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-sa/4.0/  87 Vision of a Service Value Network in Maritime Container Logistics Jürgen W. Böse, Carlos Jahn and Raman Sarin Abstract Against the backdrop of stagnant or slow volume growth in the international container transport, liner shipping companies make considerable efforts to reduce costs and provide better service quality. Due to the strategic character of decisions associated with the implementation and reorganization of liner services, solution approaches that enable a substantial reduction of total roundtrip time without appreciable extra costs are regarded as promising. For this purpose, the authors develop the idea of a Maritime Service Value Network representing cooperation among container terminals as well as at least one ship routing company and one meteorological service provider. The network aims at acceleration of container liner services with (ideally) cost-neutral operations measures. The proposed concept can provide the container terminals with considerable competitive advantages and simultaneously put the liner shipping companies in a strong position for successful integration in global supply chain networks. The full paper gives an estimate of the magnitude of existing time saving potential and the associated economic and operational impact. Additionally, a rough description of the network idea is presented and obstacles for network coordination are highlighted. Keywords: container liner service, service value network, time savings, weather routing  Jürgen W. Böse, Carlos Jahn and Raman Sarin 88 1. Introduction Stagnant or slow volume growth in many parts of the word leads to overcapacities in the maritime container transport and is associated with fierce competition among shipping companies. As a result, the companies make considerable efforts to reduce their costs and provide services differentiating them from the products offered by competitors (Asteris et al., 2012). Against this background, quality criteria of transport services are becoming more and more significant. Recent studies show that beside the meaningful criteria "freight rate", the importance of criteria like "transport punctuality and time" or "port call frequency" has increased in container shipping (e.g. Gailus and Jahn, 2013). For container terminals functioning as major service providers for shipping companies at ports, a change in vessel handling requirements arises from this development noting that the time-related service aspects are of high relevance (Lu et al., 2011). In this regard, measures taken by a container terminal individually have a small chance to succeed due to limited controllability of factors that are relevant to the competition. Considering that the round-trip times of global liner services can amount to two months (or more) and the number of port calls partly is binary, the share of handling time of one port in the total time is just as modest as its importance for the competitiveness of the liner service. Additionally, the acceleration of vessel handling processes is not necessarily beneficial in all the cases, e.g., the dependency of a port on tides can promptly “destroy” the newly gained time advantage. In other words, isolated efforts of single terminals to improve their ability to compete by means of process acceleration might cause limited benefits in particular situations, yet this approach is far from being termed as a good or effective solution. Due to the strategic character of decisions associated with the implementation and reorganization of liner services, solution approaches that lead to substantial reduction of total roundtrip time of liner vessels and induce additional costs (not relevant for competitiveness) seem to be promising. Vision of a Service Value Network in Maritime Container Logistics 89 In the light of the foregoing discussion and inspired by emerging global terminal networks of large shipping companies (Notteboom and Rodrigue, 2012), the authors develop the vision of a MARITIME SERVICE VALUE NETWORK (MSVN) consisting of container terminals, a ship routing company and a globally active meteorological service provider. The objective of the cooperation is to accelerate both vessel handling at ports and the sea voyage between them through highly cost-efficient measures. By time-related integration of accelerated processes at ports and on sea, the achievement of appreciable composite effect of time savings is ensured for the round-trip of liner vessels. 2. Loops and liner services under investigation 2.1 Structure of interregional loops and choice made In container shipping, the origin port of a voyage ordinarily corresponds to the destination port, i.e., the vessel paths take the form of vast loops connecting specific ports in the same region (feeder or regional services) or in different regions of the world (global or interregional services). A container vessel usually calls the ports of a loop in a defined sequence being termed as "string". Tab. 1: Characteristics of loops from and to Northern Europe (CC, 2014; HL, 2014; ML, 2014) For analyzing the effects of acceleration measures in container shipping, the focus is on loops with ports located in Northern Europe (NE) as well as in other regions of the world. Due to the kind and volume of foreign trade of Central European countries, most and largest loops exist on the routes to Asia, North Jürgen W. Böse, Carlos Jahn and Raman Sarin 90 America and South America. Table 1 shows characteristics of such loops operated by major shipping companies. The paper composes appropriate study design based on Maersk Line loops as the shipping company provides comparatively comprehensive information about its liner service network and the underlying loop structure via internet (ML, 2014). Table 2 shows the loops under investigation with few important characteristics. For each route, two loops are considered except for the Intra-European route. Always a loop with comparatively many ports and a loop with comparatively few ports are considered for each route. So the related loops primarily differ in their string length (number of loop ports) and loop length (total travel distance). Tab. 2: Characteristic of loops under investigation1  1 AE10short: Gdansk, Aarhus, Gothenburg, Bremerhaven, Rotterdam, Port Tangier, Suez Canal, Tanjung Pelepas, Yantian, Tanjung Pelepas, Suez Canal, Port Tangier, Bremerhaven, Gdansk. LEVANTshort: Hamburg, Alexandria, Port Said East, Salerno, Felixstowe, Antwerp, Hamburg. SAMBAshort: Tilbury, Rotterdam, Bremerhaven, Antwerp, Algeciras, Santos, Algeciras, Tilbury.  Vision of a Service Value Network in Maritime Container Logistics 91 If the Maersk Line service network does not provide an appropriate loop, the required string of ports is synthetically generated by adaptation of an existing one (ordinarily by shortening). It should be noted that the loops "SAMBAshort" and "LEVANTshort" include only one South American or Near East port respectively and as a consequence, it possesses no local travel distance in the region of destination. 2.2 Characteristics of liner services Loops considered as sequence of ports and sea sections form the basis for establishing liner services. Due to liner shipping's nature, the vessels call the loop ports according to a given timetable associated with a certain inter-arrival time for ports (e.g. weekly or biweekly) and port call frequency. For guaranteeing a specific call frequency or aligning the throughput capacity of a liner service to regional demand, frequently several vessels operate in a loop at the same time. Furthermore, a change in vessel size is a typical measure for systematically adjusting the throughput capacity of a service to the demand. Table 3 shows main characteristics of liner services considered for analysis. It shall be pointed out that the smaller loop of each route is operated by vessels of capacity lower than those of the larger loop. This is due to the lower interregional transport demand or number of loop ports, respectively. Tab. 3: Characteristics of liner services under investigation Considering real world conditions, shipping companies usually use vessels of different sizes while offering liner services. For instance, the Maersk AE10 service is based on three 15.500 TEU and nine 18.270 TEU vessels. Jürgen W. Böse, Carlos Jahn and Raman Sarin 92 3. Analysis of vessel acceleration measures 3.1 Liner services - status quo and assumptions made The round-trip time of a liner vessel, i.e., the time between leaving the origin and reaching the destination port, is primarily determined by the number of ports, the travel distance between the ports, the handling performance of involved container terminals (i.e. boxes per hour and vessel), the number of containers to be handled at the ports and the travel speed of the vessel. Basically, the round-trip time is composed of three different time components: 1.) travel times (between ports), 2.) (un-)mooring times (at ports) associated with necessary times for pre-/post-processing of handling operations and 3.) the actual handling times. Regarding the travel times of liner services detailed information is presented on the Maersk Line's homepage (ML, 2014). The other two components of vessel round-trip time are not available without further ado and so some assumptions have to be made. Table 4 shows the assumptions for (un-)mooring & pre-/post-processing times of different vessel sizes being part of the analysis. They are based on both scientific findings (e.g. Chen and Huang, 1999) and practical experiences of the authors. Moreover, the actual vessel handling time is primarily determined by the terminal performance capability at quayside as well as the amount of containers to be discharged and loaded at the container terminal. Assumptions concerning the former are deduced from many years of experience authors collected in practice. Tab. 4: Time and productivity assumptions for processes at quay wall With regard to the handling volume, it is assumed that the vessel capacity is always fully used and that the vessels are completely discharged and loaded in the region of origin and in the region of destination. Vision of a Service Value Network in Maritime Container Logistics 93 Tab. 5: Assumptions about the port handling volume For reasons of simplification, the containers are to be uniformly distributed among the ports in both regions and all ports are characterized by the same TEU factor (see Table 5). Analogously, a uniform distribution of handling volume between the stopover ports is assumed. However, a certain percentage of vessel slots shall only be occupied by transshipment containers (varying between services) and reused at stopover ports. For the Intra-European service, the assumptions made are that the vessel capacity is fully used and between 20% and 60% of loaded containers are replaced by new boxes at each port. Figure 1 shows the vessel round-trip time with its inherent time components (status quo). It can be seen that the component "travel time" represents the dominant time share for all analyzed services. Additionally, the figure shows that the services on the same route with appreciably fewer ports are not characterized by a correspondingly lower share of handling time. Regarding the throughput capacity of a vessel's round-trip (sum of container loaded at all loop ports), the above mentioned assumptions lead to three determinants: the vessel size, the number of stopover ports and the transshipment volume being handled at these ports.  Jürgen W. Böse, Carlos Jahn and Raman Sarin 94 Fig. 1: Round-trip time of liner service vessels and its time shares 3.2 Cost-efficient measures for acceleration of liner services Due to the high competition pressure in maritime container transport, both the involved liner shipping companies and the container terminals have spent a lot of effort in the recent years to improve the economic viability of their operations processes. Following, solution approaches are highlighted that are effective in achieving objectives but induce no or comparatively low extra (unit) costs. That is, the same or a similar factor input enables a noticeably higher output. Usually, organizational innovation or improvements in combination with sophisticated IT systems fulfill this requirement. With regard to acceleration of terminal processes at quay wall, a distinction is made between approaches being associated with changes in the organizational concept and algorithm-based approaches for resource control as well as innovations measures concerning the IT systems in use. The former deals with determining the operations modes of production factors in shortand mediumterm view by appropriate organizational rules or strategies, respectively. The algorithm-based approaches, in particular, are related to the use of quantitative Vision of a Service Value Network in Maritime Container Logistics 101 tons of fuel by applying the acceleration measures suggested in this paper.  Reaction b4) Finally, it should be noted that reaction a2) and a3) can also be applied in CASE b). To what extent the related approaches make sense or are beneficial has to be evaluated on a case by case basis. 4. MSVN - a cooperation of container terminals together with at least one ship routing company and one meteorological service provider Considering the promising results presented in section 3, the systematic acceleration of liner vessels appears highly attractive from economic and operational point of view of liner shipping companies. A basic prerequisite for applying POM.RTS and WRM.RTS in a coordinated manner is a close cooperation among all associated parties, i.e., the container terminals located at the loop ports together with at least one ship routing company and one globally active meteorological service provider as well as eventually the liner shipping company as vessel operator and customer. Only the mutual understanding as (network) partners and the strong integration of customer enables an effective time-related integration of accelerated operations processes being necessary for achieving the maximum possible composite effect of time savings. In this regard, it should be mentioned that the cooperation partners possess a comparatively diversified character. Nevertheless their range of services is complementary from the perspective of container liner shipping. Usually, there are no productionand competition-related interdependencies between them - if at all, container terminals located in the same region might be competitors for the handling volume arising in their hinterland. With respect to the joint value added to customer, the tremendous complexity of logistics service as well as its generation in a modular fashion by Jürgen W. Böse, Carlos Jahn and Raman Sarin 102 purposefully combining complementary core competencies of autonomously acting service providers is to be emphasized. Such characteristics are typical for service value networks already practiced by IT and Web service providers as business model (Basole and Rouse, 2008; Hamilton, 2004; Momm and Schulz, 2010) as well as existing in scientific work which includes recent publications and conference tracks in the field of information systems and technology (Chan and Hsu, 2012; Gordijn et al., 2012; Schulz et al., 2012). Against this background, the authors consider the form of cooperation among container terminals, ship routing company and meteorological service provider as logistic SVN in the maritime sector. Noting that there are differences existing between the related MSVN and the known (IT-based) SVN in the field of eservices, e.g., the missing "network's ability to orchestrate a complex service ad-hoc" or the necessity that MSVN "must be run on and by ubiquitously accessible information technology" (Blau et al., 2009-a). Due to the potentially achievable collaboration benefit (illustrated in section 3), the basic advantages of SVN (Blau et al., 2009-b) and the successful SVN operations examples especially in the e-service industry (Blau et al., 2009-a), the idea of the maritime SVN is considered by the authors as a promising approach for improving the competitiveness of container terminals operating intercontinental liner services in a highly competitive market environment. In concrete terms, the constitutive MSVN partners (see Figure 3) perform the following care tasks: CONTAINER TERMINAL: The terminals involved provide for the MSVN customers (i.e. shipping companies with contractual MSVN agreements) a premium handling service at dedicated berths which is based on highly sophisticated POM.RTS (see section 3.2). To stay competitive, it is of great importance that additional costs of premium vessel handling are compensated (more or less) by adequate productivity increase so as to keep the costs per container on the same level. SHIP ROUTING COMPANY: A promising approach for cost-efficient reduction of travel time on sea is an advanced navigational concept which systematically Vision of a Service Value Network in Maritime Container Logistics 103 Fig. 3: MSVN partners and main information flows between them considers weather and sea conditions for decision-making (see section 3.2). Nowadays, there are several companies worldwide which are specialized in providing WR-based navigational services to an outstandingly effective degree. To ensure best possible navigation decisions for vessel control with high travel time savings, it makes sense to consider a ship routing company as a further constitutive partner of the MSVN. METEOROLOGICAL SERVICE PROVIDER: An absolute prerequisite for achieving high navigation quality is the availability of comprehensive weather data for all relevant sea areas and the ability to aggregate this data to build valid weather forecasts. For this reason, a globally active meteorological service provider is to be incorporated in the network as well. Such companies have at their disposal many years of experience in collecting, processing and providing forward projection of weather data. Therefore, they are equipped with the necessary competence to provide weather data as well as forecast information in the quality and quantity needed for highly effective vessel navigation. LOOP MANGEMENT: For ensuring quality of MSVN service, a loop management is to be established as central instance. Prior to and during a vessel round-trip, the loop management is supplied with a wide range of information: comprehensive planning and operations information about the production processes are made available by the container terminals and the Jürgen W. Böse, Carlos Jahn and Raman Sarin 104 shipping company in-charge, WR-based navigation recommendations are given by the ship routing company and present or forecasted weather information, respectively, is provided by the meteorological service provider. The loop management collects and aggregates this information and makes it available for the process owners to support decision-making. Moreover, the loop management triggers acceleration measures at ports and on sea, in case of time-related deviations from the timetable based on the expected operational impact of POM.RTS and WRM.RTS. Basically, the loop management has the function of a rather moderating network instance with limited decision-making and instruction authority. For the latter, the responsibility ultimately lies with the process owners, i.e., with the container terminals and the liner shipping companies as MSVN customers. Against this background, the loop management aims to reach a consensus on the control measures required for keeping the accelerated timetable. The management activities are primarily based on the internal agreements between the MSVN partners as well as the agreements between the MSVN and the liner shipping companies. In case of doubt, i.e., if related agreements do not cover the arising problem and hence define no organizational framework for deducing appropriate solution approaches, the loop management does not decide autonomously but initiate countermeasure(s) in accordance with the parties involved who would bear the probable additional expenditure incurred by these activities. 5. Summary and outlook on future research The case-related analysis of POM and WRM for cost-efficient process acceleration in container liner shipping shows that their composite effect on round-trip times can be appreciable if particular pre-conditions are met. Furthermore, the examples of economic and operational impact resulting from these time savings reveal the large benefit of applied acceleration measures for liner shipping companies. In other words, the improvements in liner service operations can provide the shipping companies with noteworthy advantages Vision of a Service Value Network in Maritime Container Logistics 105 against their competitors, simultaneously putting the involved container terminals - functioning as core service providers - in a strong market position. The basis for implementing such (advanced) services forms a close cooperation among all the parties involved in the acceleration processes at ports and on sea. Because of the many advantages of SVN concept (e.g. flexibility regarding changing market requirements, enabler for innovative/outstanding service offers or multiple troubleshooting options), from the author's point of view, related networks represent an effective approach for resolving the collaboration task mentioned above. The constitutive partners of the maritime SVN are container terminals in various regions of the world as well as at least one ship routing company and one globally active meteorological service provider, while liner shipping companies function as customers of the network. The MSVN is fitted with a central instance, the loop management, which coordinates the internal network activities as well as matches the elaborated control measures to the requirements of customers. Due to generally non-existing relationships among the network partners (if at all, then container terminals of the same region might be competitors) and the extensive integration of the MSVN customers in the actual production process, the decision-making and instruction authority of the loop management is very limited. With regard to this challenging coordination task, only contractual agreements and the hope for willingness of involved parties to collaborate will not be enough in order to ensure sustainable savings in round-trip time and push the network to a highly competitive market position. The competitiveness of MSVN is mainly determined by the effectiveness of its network management and the resulting quality of service. Thus, the management holds a key function for the network’s success. Considering the peculiarities of container liner shipping business as well as the characteristics of MSVN, further research work is required to identify or (if necessary) develop appropriate mechanisms for purposeful coordination of network partners. Furthermore, the design and operations of MSVN also raise Jürgen W. Böse, Carlos Jahn and Raman Sarin 106 other questions, for example, in terms of network service composition, like the interpretation of "modular service components" from the logistics point of view or the possibilities of useful "implementation" of related components in respect of real-world requirements. In this context, it should be noted that relatively large amount of research work about SVN is already done in the field of e-services (e.g. Blau, 2009; Conte, 2010; van Dinther, 2010). Thus, a comparison of similarities and differences between the nature of SVN in e-service and (maritime) logistics can provide valuable insights about the alienability of already developed solution approaches. An essential prerequisite for making the vision of MSVN real is the availability of design and coordination instruments that are (also) highly effective under actual conditions of application. This forms the basis for successful achievement of MSVN objectives in practice. 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Table of Contents How to Cope with Uncertainty in Supply Chains? - Conceptual Framework for Agility, Robustness, Resilience, Continuity and Anti-Fragility in Supply Chains ....................................................................................................................... 361 Immanuel Zitzmann Flexible Supply Chain Design under Stochastic Catastrophic Risks .............. 379 Yingjie Fan, Frank Schwartz and Stefan Voß A Risk Management Approach for the Pre-Series Logistics in Production Ramp-Up ........................................................................................................ 407 Patrick Filla and Katja Klingebiel The Imbalance of Supply Risk and Risk Management Activities in Supply Chains: Developing Metrics to Enable Network Analysis in the Context of Supply Chain Risk Management .................................................................... 423 Christian Zuber, Hans-Christian Pfohl and Ulrich Berbner Risk Assessment in Managing the Blood Supply Chain ................................. 447 Phongchai Jittamai and Wijai Boonyanusith Supply Chain Risk Management in International Trade Operations Between Germany and Brazil ........................................................................................ 469 Meike Schroeder and Renato Barata Gomes The Forest Supply Chain Management: An Entropic Perspective .................. 487 Tarik Saikouk, Ismail Badraoui and Alain Spalanzani A Multi-Agent Based Approach for Risk Management in a Port Container Terminal ......................................................................................................... 515 Lorena Bearzotti and Rosa Gonzalez Authors ............................................................................................................ XI IX Next Generation Supply Chains Innovation is increasingly considered as an enabler of business competitive advantage.More and more organizations focus on satisfying their consumer’s demand of innovative and qualitative products and services by applying both technologysupported and non technology-supported innovative methods in their supply chain practices.Due to its very characteristic i.e. novelty, innovation is double-edged sword;capturing value from innovative methods in supply chain practices has been one of the important topics among practitioners as well as researchers of the field. This volume, edited by Thorsten Blecker, Wolfgang Kersten and Christian Ringle, provides valuable insights into: Innovative and technology-based solutions Supply chain security management Cooperation and performance practices in supply chain management About HICL Since 2006 the annual conference Hamburg International Conference of Logistics (HICL) at Hamburg University of Technology (TUHH) is dedicated to facilitate the exchange of ideas and contribute to the improved understanding and practice of Logistics and SCM.HICL creates acreative environment which attracts researchers, practitioners, and industry thinkers from all around the world. ISBN: 978-3-7375-0339-6