Maritime Supply Chains

By Thierry Vanelslander

Maritime Supply Chains breaks the maritime chain into components, consistently relating them to the overall integrated supply chain. The book not only analyzes and provides solutions to frequently encountered problems and key operational issues, it also applies cutting-edge scientific techniques on the maritime supply chain. Sections consider shipping, ports and terminals, hinterland and the issues that intersect different parts of the chain. Readers will find discussions of the various actors at play and how they relate to the overall function of the supply chain. Finally, the book offers solutions to the most pressing problems, thus providing a unique, well-balanced account.

• Provides a comprehensive and integrative account of the maritime supply chain, from shipping, to port, to hinterland
• Cuts through the maritime supply chain to offer a transversal picture on how the chain functions
• Applies rigorous analytical techniques to give solutions to the most frequent and pressing challenges facing maritime supply chains
• Considers advances, such as blockchain, that are set to transform maritime supply chains

• Language: English
• Publisher: Elsevier Science
• Release date: Mar 24, 2020
• ISBN: 9780128189320

Book preview

Belgium

Chapter 1

Integration of the maritime supply chain: Evolving from collaboration process to maritime supply chain network

Christa Sys; Thierry Vanelslander    Department of Transport and Regional Economics, University of Antwerp, Antwerp, Belgium

Abstract

The main theme of the book focuses on the integration of the maritime supply chain. This book provides an analysis of the most-frequently encountered problems in maritime supply chains hampering the move toward network. It furthermore provides solutions for handling those problems. Those are of interest to scientists, as the chapters are at the forefront of methodological developments in their respective fields. Also, the chapters are of immediate relevance to business practitioners at the managerial level and policy makers, as they provide answers to key operational issues. Finally, the book is useful for any supply chain course all over the world. Students, minimally at the master's level or higher, can take useful lessons from the book. The book tackles problems and challenges throughout maritime supply chains. The parts of the book are also built up in that way. The first part deals with the maritime section. Those chapters are of interest to shipping companies, market analysts, and shipbuilders, but indirectly also to port authorities and terminal operators. The second part deals with the port. Again, market analysts can draw useful insights from the provided chapters, just like port authorities and terminal operators. Indirectly, also shipping companies, as customers of the port, can benefit. The third part touches upon the hinterland. Land transport (road, rail, and inland waterway) operators can directly profit from the findings of the research carried out. But due to the increased involvement from other chain players (shipping companies, (inland) terminals, shippers) in land haulage, also those can enjoy useful lessons and recommendations. The final part consists of a transversal chain analysis. Here, the focus is on digital innovation gradually changing the maritime chain.

Keywords

Scene; Aim; Features; Contents

Acknowledgments

As editors, we would like to thank both the authors and the reviewers who contributed to the creation of this book. Next, we would want to thank Patsy Geurts for her organizational support in preparing and hosting the conference. Finally, we also would like to thank Aleksandra Packowska & Selvaraj Raviraj, Elsevier, for their much appreciated assistance.

1 Setting the scene

The main theme of the book focuses on the integration of the maritime supply chain. The maritime supply chain (MarSC) is understood as the connected series of activities pertaining to shipping services which is concerned with planning, coordinating and controlling (containerized) cargoes from the point of origin to the point of destination (Lam and Van De Voorde, 2011, pp. 366–367). Next to cargo and financial flows, liner carriers need to coordinate information and communication flows along the maritime supply chain, interfacing with stakeholders such as port operators, terminal operators, shipping agents, logistic service providers, freight forwarders, customs authorities, and shippers. Based on La Londe and Masters (1994), here, the integration of the maritime supply chain refers to all stakeholders along the maritime supply chain entering into a long-term agreement and connecting, including the sharing of relevant data. As opposed to general supply chain integration (a.o. Bowersox et al., 1999; Christopher, 1992; Mentzer et al., 2001; Rai et al., 2006), the literature regarding maritime supply chain integration is rather limited.

Globalization, deregulation, liberalization, and increased competition highlighted that supply chain integration is an important research topic in the maritime and port economies. First, leading logistics companies understood the importance of supply chain orientation, driven by cost reduction, customer value, and competitive advantage (Christopher, 1992; Mentzer et al., 2001). Second, in the maritime business, the ship management and shipbuilding industries soon recognized supply chain partnerships in their corporate strategy (Kumar and Hoffmann, 2002). Last, regarding the maritime supply chain, Heaver (2001) and De Souza et al. (2003) explored managing maritime transport and logistics as an integrated chain. These authors reviewed the strategy of shipping lines in relation to terminal operating companies, intermodal services, and logistics services. Robinson (2002) and Mangan et al. (2008) focused on the effective integration of ports and terminals when delivering value to shippers and third-party logistics service providers. Carbone and De Martino (2003) employed an analytical model to study the actors’ behavior in the supply-chain relationship between a port (Le Havre) and a shipper (Renault automotive). Panayides (2006) discussed the evolution of the maritime logistics concept. Song and Panayides (2008) focused on the impact of the integration of ports in the supply chain on port competitiveness. Their model shows a positive relationship between parameters of supply chain integration such as use of technology, value added, and user's relationships and parameters of port competitiveness such as cost, quality, reliability, responsiveness, and customization.

Since the global financial-economic crisis of 2009, particularly in the container shipping industry, overcapacity resulting in low freight rates has put pressure on market players elsewhere along the maritime supply chain. The literature shifts its focus from (backward or forward) integration between two stakeholders (e.g., liner carriers and terminal operators, liner operators and shippers, etc.), which might lead to suboptimization (Lin et al., 2014) toward covering an entire supply chain.

In general, there are different levels of supply chain integration; the highest level is vertical integration.a Here, vertical integration refers to collaboration agreements between subsequent stakeholders of the same MarSC. In this way, the competition changes from an individual firm-to-firm level toward competition between entire supply chains. Vertical integration is governed by stakeholders who aim to have control over a supply chain by increasing their market power (Lipczynski et al., 2005; Besanko and Braeutigam, 2010). In shipping, Meersman et al. (2010) analyzed the role of the various chain actors toward ports applying a regional input-output approach. The authors conclude that all parties belonging to a given maritime logistics chain have one interest in common: to ensure that their chain is the most attractive, i.e. that it is the most efficient and the cheapest.

Lam and Van De Voorde (2011) presented a scenario analysis for examining the nature and level of supply chain integration in container shipping. Woo et al. (2012) assessed the integration of ports into the supply chain using a structural equation model. Lam (2013) found that individualism is a major obstacle to supply chain integration. Van de Voorde and Vanelslander (2014) stated that cooperation is a trend in the development of future maritime supply chains. Horizontal but especially vertical integration happens to a large extent, originating from shipping companies, but more recently also by terminal operators. Attention thereby shifts to the hinterland, as connections to the hinterland have become the crucial cost determinant in maritime supply chains and determine the strength of a port. The role of the latter port authority evolves from being a landlord to being a reliable actor in the supply chain, whose only remaining trump cards are concessions and the potential to lobby with governments for more capacity investment, also in the hinterland (Verhoeven, 2015).

After this, the focus of recent research has shifted to topics such as the security (Banomyong, 2005; Yang, 2011), sustainability (Lam, 2015), and resilience (Christopher and Holweg, 2011; Christopher, 2016; McKinnon, 2018) of the maritime supply chain. These developments contribute to increased complexity of the maritime supply chain. In order to manage the end-to-end integration of maritime supply chain processes, each stakeholder needs to control its maritime supply chain (reduce uncertainty) and create value for every actor involved in the sustainable ecosystem with the aim of serving their customers in a better way.

2 Aim of the book

This book provides an analysis of the most frequently encountered problems in maritime supply chains hampering the move toward network. It furthermore provides solutions for handling those problems. Those are of interest to scientists as the chapters are at the forefront of methodological developments in their respective fields. Also, the chapters are of immediate relevance to business practitioners at the managerial level as well as policy makers, as they provide answers to key operational issues. Finally, the book is useful for any supply chain course all over the world. Students, minimally at a master's level or higher, can take useful lessons from the book.

The book tackles problems and challenges throughout maritime supply chains. The parts of the book are also built up in that way. The first part deals with the maritime section. Those chapters are of interest to shipping companies, market analysts, and shipbuilders, but indirectly also to port authorities and terminal operators. The second part deals with the port. Again, market analysts can draw useful insights from the provided chapters, just like port authorities and terminal operators. Indirectly, shipping companies, as customers of the port, can also benefit. The third part touches upon the hinterland. Land transport (road, rail, and inland waterway) operators can directly profit from the findings of the research that has been carried out. But due to the increased involvement from other chain players (shipping companies, (inland) terminals, shippers) in land haulage, those can also enjoy useful lessons and recommendations. The final part consists of a transversal chain analysis. Here, the focus is on digital innovation gradually changing the maritime chain. More specifically, the potential of blockchain—as a technology that has the potential to fundamentally alter the way supply chains are operating and who is active in them—is addressed. The last chapter is an overview of the key issues and how to handle them. The outcome concerns a general discussion covering the further integration of the maritime supply chains and puts forward some scenarios as to how the industry should evolve from bilateral partner collaboration to a maritime supply chain network.

The issues dealt with generically concern the operator's strategic roles in chains and markets, pricing features, infrastructure investment, and regulatory developments and needs as well as technological items, including IT. The reader will find for each of those topics the latest developments as well as strategies that can be followed to cope with emerging challenges.

3 Features of the book

This book has a number of particular features. First of all, it is the first book in the wider field of transport and logistics that takes a transversal look throughout the maritime supply chain, not staying at the higher level of chain analysis, but breaking the chain down into its components but always keeping the wider integrated chain perspective.

Second, the book groups the key issues in current maritime supply chains. Hence, whatever the role of the reader in the maritime supply chain, or even outside as a scientist or market analyst, the reader will have a very complete overview of the decision items that matter.

Third, the book serves scientists, who have a rather methodological perspective, as well as business practitioners. Methodologically, the chapters apply cutting-edge scientific techniques. For practitioners, the latest state of developments in business practice as well as recommendations can be found in the book.

4 Contents of the book

The book contains 12 chapters and is structured around four themes: shipping, ports and terminals, the hinterland, and transversal issues.

The introductory chapter to the book addresses the red line that runs through the book, so as to identify where the key issues are in the chain. The last chapter comes to overarching conclusions and reflections from the integrated chain perspective by combining the findings from the preceding chapters.

Under the shipping section (Part I), the contribution by Santos and Guedes-Soares in Chapter 2 provides an integrated methodology for the economic assessment of possible alternative short-sea shipping (SSS) routes using roll-on/roll-off (Ro-Ro) ships. This methodology has been applied in a case study, which considered different destination ports in Northern Europe, namely Antwerp, Rotterdam, Le Havre, and Hamburg, to characterize the maritime transportation demand for intermodal transportation between Portugal (port of Leixões) and these ports. The analysis takes the perspective of the users of transportation, their decisions being based on cost and transit time considerations, without and with external costs included. The practical use of these results is twofold. On the one hand, they may support a second step of the evaluation process, this time taking the perspective of the shipping company, which will determine if each pair of maritime freight rate and ship speed is technically and economically feasible. On the other hand, these results may assist European or national authorities in determining if a novel service should be granted public funding (considering also the intermodal attractiveness potential) and then defining the required level of such funding.

Still in shipping, innovation in maritime supply chains is an important element of strategy. In Chapter 2, Meersman et al. introduce the innovative concept of vessel trains (VT) that resembles the concept of truck platooning. The VT is a waterborne platooning concept featuring a manned lead ship and a number of follower ships that follow at close distance by automatic control. In particular, the authors focus on the performance indicators (PIs), which such a concept should comply with from a supply chain point of view, so as to attract traffic and be successful. The triple bottom line performance of the concept is assessed and compared to the performance of the current transport system. This chapter focuses on the economic performance and sets the foundations for its measurement by (1) describing the current situation of inland navigation, short-sea shipping, and sea-river transport; (2) analyzing the railway and road operations as the main competitors so as to take lessons; (3) presenting a review of the data sources available with respect to cargo flows and collecting the current cargo flows that will be used to set up the origin-destination (OD) matrix of the Antwerp case, (4) determining the geographical scope of a second case study area; (5) conducting a literature review of supply chain PIs, and (6) identifying the key PIs.

The final chapter in Part I, by Kuipers and Streng, analyzes the macroeconomic effects of the trend toward autonomous and unmanned shipping. Within a framework of technological development scenarios, the general directions of the impacts are indicated and the effects of autonomous ships are analyzed by means of a literature analysis and expert interviews. There seem to be economic effects of autonomous shipping such as a decrease in offshore employment, an increase in onshore employment, and a positive effect on sailing safety. This research focuses on the direction and main types of economic effects but does not aim to provide an exhaustive analysis of the economic and social effects of autonomous shipping.

In the port segment (Part II), a key issue is the occurrence of congestion, as it risks spreading its impact further into the supply chain. With needs for port handling capacity ever increasing, and the means for investment more restrained, especially on the public side, congestion gets increasing attention. Pruyn and Groeneveld investigate the suitability and potential of a number of Markov processes in relation to port waiting times. An analysis is done on the applicability of a variety of Markov processes, an elaboration on the best usable Markov process, and the potential of the results. To limit the complexity of the problem and to make sure sufficient and relevant data are available, the focus is on the dry bulk shipping market and relevant ports/areas. The idea is that port waiting times are related to the area, economic situation, and current waiting time. By studying these relations, insight into triggers and potential long-term equilibria is obtained. Finally, the potential to predict future waiting times is evaluated.

A further port study deals with the economic impact of ports. The functional role of a port has been diversified due to various factors in relation to its surroundings. In addition, the relational changes in port governance have caused various debates with regard to both the port hierarchy and port impact studies. Particularly, port impact studies face the criticism that they do not reflect the relational changes of port-related activities. This is mainly due to the methodological limitations of the cross-sectional approach rooted in input-output analyses. Soon and Preston develop an approach to understand the economic impacts of four major ports in South Korea indirectly through analyzing the gross value added per worker in transportation for 25 years using shift-share analysis as an exploratory method. The approach of this study clearly shows a number of limitations. It is expected that meaningful research results can be derived if some of the limitations would be removed through additional studies. First, as mentioned in the main text, the analysis of subsectors in transportation can be used to better understand the changes in port-related industries. It is possible to suggest more clearly how the port contributes to the growth of its regional economy by explicitly looking at the changes in more disaggregated subsectors. In addition, this study analyzes four major ports in South Korea, but it may be useful to study port systems in other countries or regions that have a port governance system where the port authority makes major decisions related to investment among several ports. Finally, a researcher can obtain information on the statistical significance that cannot be provided in this study if the data used in this study are analyzed by econometric analysis.

A last port contribution, by Easton, deals with a flow of goods that passes through ports and attaches itself to regular flows of goods, namely that of illegal goods, and drugs in particular. The flow of cocaine through the port of Antwerp is a glocal phenomenon as cocaine trafficking is a global phenomenon with local impact on crime in the port and its surroundings. This chapter addresses the announced Stream Plan (2018), which was set up to tackle this phenomenon. This plan is studied using the conceptual framework of nodal and networked policing. It puts a focus on the diversity in views and approaches by the public and private actors involved. Findings from previous port-related research on these views and approaches are used as a source of inspiration to reflect upon expected dynamics and possible pitfalls in the implementation process of the Stream Plan.

Further research into this issue (particularly with regard to ports) can be useful to make well-founded statements about the nature of plural policing in Belgium and to gain further insight into the development of this concept in practice. Is the private sector considered a full partner in the pursuit of greater public safety? This type of analysis must form the basis of any comparison made between sectors or even countries so that possible differences may come to light and be explained. In terms of practice, it can be interesting to see how (and if) the various policy domains address security as a horizontal theme. The question that arises is whether the efforts in all policy domains can be linked and whether this will generate a greater impact. Does cooperation work? Does this type of cooperation contribute to increased safety in the port and in the city (global phenomenon with local impact)? These are questions of great importance for the public and private sector, and they form a possible agenda for future research.

At the intersection with the hinterland (Part III), starting from the enhancement of the Motorways of the Sea (MoS) in the White Paper 2001 on European Transport Policy, short-sea shipping became one of the key aspects in the development of the Trans-European Transport Network (TEN-T). Indeed, short-sea shipping is considered one of the possible strategies to find competitive and sustainable transport alternatives with respect to the road-only transport, if a length of over 300 km characterizes the connections. The chapter by Petrelli et al. proposes and investigates several policies to increase the use of short-sea shipping, moving freight from the road-only alternative to intermodal logistics chains based on domestic cabotage through Ro-Ro services. The objective is to quantify the potential demand of the combined road-sea transport as a function of different actions in terms of new Ro-Ro services/routes and subsidies to the road haulers or to the shipping companies. The case study refers to domestic services involving the Italian seaports.

A typical problem in hinterland transport is suboptimal loading. Full container load (FCL) shipping allows for cost savings compared to less than container load (LCL) shipping. However, many small to medium companies (SMEs) lack sufficient volume (on specific routes) to allow for FCL shipping. Hence, efficiency gains can be obtained through cooperation between different LCL shippers (cargo bundling). Such cooperation has been researched extensively in logistics research. However, the problem with such cooperation is that the cooperation itself causes significant transaction costs. These costs can, especially for SMEs, strongly reduce or even eliminate the efficiency gains generated by FCL shipping.

Therefore, Verheyen and Debruecker focus on making cargo bundling accessible for SMEs. In order to boost the competitiveness of the SMEs, they build a model for an online tool to consolidate small individual shipments of several SMEs. The goal is to match SMEs with compatible shipments and compatible destinations. Designing an automated cargo bundling tool requires research in two fields. First, the authors develop a matching algorithm based on mathematical optimization techniques. The result is a set of possible bundles with their respective costs, timing, and route, allowing for the strategic matching of the partners. Second, the design of the tool requires a legal design. This legal design takes place in two different relationships: (1) the relationship between the tool and the users (shippers), focusing specifically on the assessment of the liability exposure of the platform (as mentioned above); (2) the relationship between the different partners, focusing on the question as to how the legal design can maximize the chances for a successful contracting by (a) binding them at an early stage of the cooperation and (b) by providing contract terms that enjoy general acceptance from those parties. The legal design is built upon a literature study of case law and doctrine, supported by a survey on preferences for a design of a horizontal cooperation model.

The transversal section, Part IV, features two contributions dealing with blockchain. The first one, by Clott et al., states that with the advent of blockchain-facilitated transactions, it is anticipated that major structural changes will occur in the maritime field. The impact of these changes is global; however, major transaction issues and standards still must be agreed upon and enacted. This paper investigates the use of blockchain technology, its limitations, and the potential impact of blockchain on the maritime industry. The blockchain technology itself is evolving so quickly that it is hard to track for any firm to detect which features and trends matter and which are irrelevant. Even the technical parameters are changing; this paper had to talk about changes that have not yet materialized, as though they were in place (PoS).

The second chapter of Part IV, by Coppens et al., states that maritime supply chain thinking is an important trend. In practice, this thinking clashes with a few challenges, not the least with achieving collaboration with supply chain actors. Distributed ledger technology (DLT), or blockchain, having proven its merits in digital currencies (e.g., bitcoin), suggests large benefits for the actors in the maritime chain (where decentralized consensus is present as well). As the technology is not regarded as an issue anymore, however, questions with regard to the implications on the maritime supply chain, operational efficiency, ownership traceability, or financial streams remain unanswered. While DLT might theoretically seem an interesting fit, it was initially not intended for maritime supply chain applications. Therefore, there are several challenges that still need to be addressed in order to allow for a successful deployment of DLT in the maritime supply chain. And this is exactly the objective of the present paper.

By taking an empirical approach, this scientific research investigates whether DLT can overcome barriers such as lack of trust and unwillingness to collaborate by the supply chain partners to provide integrative solutions. To do so, it conducts an in-depth literature review and a market overview with regard to emerging blockchain initiatives in the maritime supply chain as well as collects in-depth insights over an implemented blockchain solution. The literature review puts forward the fundamental conceptual choices that DLT developers make. In parallel, an overview is given with regard to the integration barriers that maritime supply chain stakeholders face. This overview brings, under a comprehensive framework, the integration barriers that are associated with economic, legal-political, technological, and cultural-managerial reasons. From a competitive perspective, the further integration of the maritime chain is needed to eliminate inefficiencies and meet increased customer demand. These inefficiencies are linked with up-to-date data-exchange practices in the maritime supply chain. Furthermore, the market research gives valuable insights with regard to the presence of blockchain initiatives in the supply chain. The later in-depth interviews confront already implemented solutions with the literature results and point out the inefficiencies addressed by contemporary DLT solutions, the integration barriers they face, and the conceptual choices made for their successful implementation.

The book concludes with an overarching chapter discussing the further integration of the maritime supply chain. The aim of this chapter is to put forward some scenarios on how the industry should evolve from partner collaboration (one-to-one collaboration) to a maritime supply chain network (many-to-many collaboration). From a business perspective, this trend of maritime supply chain actors banding together enabled by technology can leverage their strengths and competitiveness.

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