The impacts of voyage optimization and slow steaming on the liner shipping strategy through dynamic simulation
Date of Award
2011
Document Type
Thesis
Degree Name
Doctor of Philosophy in Maritime Affairs
Specialization
Ph.D (Maritime Affairs)
Campus
Malmö, Sweden
Country
Korea
First Advisor
Daniel, Moon S.H.
Abstract
In recent times, an obvious strategy in the liner shipping industry that has come to the fore is slow steaming. Shipping lines have decelerated the voyage speed to 15-18 knots on major routes, and some leading shipping lines have a plan to reduce it to below 15 knots. This is because slow steaming is helpful in reducing the operating cost and the amount of GHG emissions in the condition of high fuel prices and low freight rates. However, it also creates negative effects such as the opportunity cost, additional fixed costs and an in-transit inventory cost on a loop. Hence, net operating cost on a loop is changing dynamically due to the changes of voyage speed based on various slow steaming effects. This study started with the basic question; is it true that as voyage speed reduces, the operating costs and GHG emissions can be reduced at the same time? If this is true, shipping lines will definitely decelerate their voyage speed themselves as much as possible. However, if not, they will concentrate just on increasing their profits by not considering environmental factors. Moreover, when considering the high uncertainties in the markets, what is the optimum operational strategy for shipping line and how can they build the optimum operational strategy that can achieve their strategic goals? This has led the authors to set out twin aims. The first aim is to analyze the slow steaming effects and find the optimal voyage speed that can minimize the operating costs and GHG emissions in various conditions. The second is to build the optimum operational strategy that can achieve various strategic goals of shipping lines. To achieve the aims, a Dynamic Slow Steaming Evaluation Model (DSSEM) was vi established using System Dynamics. Moreover, the significant results were derived by simulation and the alternatives as the optimum operational strategy were presented for shipping lines. According to the result of the simulation, slow steaming is not helpful always to reduce the operating costs. It can be reduced just within the economic range of voyage speed (24.9-11 knots), and minimized at 17.2 knots. Hence, when shipping lines control their voyage speed between 25 and 11 knots, they can enjoy the slow steaming effects. Moreover, when voyage speed is reduced by 17.2 knots, i.e. when the service loop is organized by 10 vessels of 8,000 TEU class, shipping line can minimize their operating costs using slow steaming on a loop. On the other hand, there is a negative correlation between the slow steaming effects and the increase of ship size. Hence, as ship size increases, the operating costs on a loop including an average slot cost are increased. Therefore, from the viewpoint of shipping line, it is necessary to choice one strategy of both to reduce their operating costs on a loop. In the case of the amount of GHG emissions, it is not reduced in direct proportion to the changes in voyage speed. When shipping lines control voyage speed within the range between 25 and 14 knots, they can reduce the amount of GHG emissions efficiently from the viewpoint of elasticity. Moreover, there is a positive relationship between the slow steaming effects and the increase of ship size. So, as employed ship size increases, shipping line can improve their level of environmental performance on a loop. Moreover, this thesis provides 66 optimum alternatives as the operational strategy for shipping line with considering three main current strategic goals such as the minimization of operating costs, the improvement of environmental performance and the increase of level of service quality for shipping lines. Hence, shipping lines can select their optimal operational strategy among them with considering their own strategic goals.