Sea Transport: Business Logistics Management, Vogt/Pienaar/de Witt

Sea Transport
Business Logistics Management,

Vogt/Pienaar/de Witt
Operational overview
• Ocean carriage is the most cost-effective way of
transporting high-bulk commodities over long distances
and is therefore the most widely used international
shipment method.
• It is used for both inbound and outbound shipments,
although there is usually an unbalanced flow of freight.
• The development of large bulk carriers has enabled sea
transport to assume a vital role in the transportation of bulk
materials such as ores and minerals, grains, and timber
products; and especially coal, crude oil, and petroleum
products between energy-producing and energy-importing
countries
Operational overview cont’
• Water transport is often limited to international

deep-sea transport and coastal shipping between
local ports.
• Inland water carriers are dependent on the
availability of navigable lakes, rivers, and canals. I
• n North America, Europe, and Asia, for example,
a significant portion of the total intercity freight
tonnage is transported on inland waterways by
river barges and small vessels.
• Shipping has become highly specialised since the

1960s, each type of specialist ship being designed
to be more productive than the ship it replaces.
• Specialisation has resulted in ships becoming
complementary to other modes of transport in the
Logistics chain.
• They are therefore often designed for a specific
trade route and commodity type, with little
prospect of employment on other trade mutes.
• Bulk carriers carry cargoes with low value-to-

weight ratios, such as ores, grain, coal, and scrap
metal.
• Tankers (mostly crude oil vessels) carry the
largest amount of cargo by tonnage.
• Roll-on/roll-off (Ro-Ro) ships carry cargo that is
driven directly onto the ship, and allow for
standard road vehicle trailers to load and unload
cargo.
• Oil-bulk-ore (OBO) vessels are multi-

purpose bulk carriers able to carry both
liquid and dry bulk products.
• Container ships have greatly expanded the
use of sea transport for many commodities.
Most international shipments involve the
use of internationally standardised
containers suitable for intermodal carriage.
Typical strengths of Sea Transport
• A low-cost service can be supplied.
• Large volumes of high-density freight can be
conveyed over long distances.
• Standard intermodal containers can be utilised to
facilitate freight handling and transhipment.
• Traffic congestion is virtually non-existent on the
open sea.
• Sea transport offers a very safe and secure
service.
Typical limitations of Sea Transport
• Service can only be rendered to and from sea-ports
that have the facilities to receive the ship and
conduct the required transhipment. A door-to-door
service is therefore not possible.
• Because transhipment is unavoidable at both ends
of a voyage, more freight handling takes place
than with other surface transport modes.
Typical limitations of Sea Transport cont’
• Ships are vulnerable to inclement weather

and stormy sea conditions. This can delay
delivery and in some cases prevent it
altogether.
• Sea transport offers a slow and low-
frequency service.
Freight characteristics
• Almost any kind of freight can be conveyed
by ship at a relatively low cost.
• Short delivery times are not of critical
importance as far as the vast majority of
commodities that are transported by ship
are concerned.
• Clients make a trade-off between long
transport times and the relatively low tariffs
offered by sea transport.
Competition within Sea Transport
• Ocean shipping competition range from
open competition, as in the case of tramp
shipping (individual ships seeking cargo),
to oligopolistic cartels, as in the case of
liner shipping conferences.
• A liner shipping conference is a number of
ships from various shipping lines working
on a route in conference, or sharing the
loads on the route.
Competition within Sea Transport cont’
• As is the case with air transport, economies

of scale are possible with large individual
vessels and not necessarily with large fleet
operations.
• Single-ship operators, for example owners
of tramp ships, are therefore able to
compete with larger scheduled conference
liners.
Sea Transport Cost Structure
• The cost structure of sea transport is similar to that
of air transport.
• It is characterised by a high proportion of variable
costs due to the fact that the way the means of
transport involved (the sea) does not require
investment and seaports are not owned or supplied
by shipping firms.
• Expenses in ports can be as high as forty per cent
of sea transport costs.
• However, these obligations only arise when a port
is visited.
Fixed costs
Overhead costs
• general overheads (management,
administration, and office commitments);
• marketing costs (advertising, sales costs,
and agents’ commission); and
• marine costs (land administration directly
involved in shipping activities).
Standing costs
• maintenance and repairs;
• vessel inspection and check-ups (usually every
four years);
• insurance;
• depreciation;
• fixed crew costs (unless contracted for individual
voyages);
• radio and communication dues; and
• auxiliary stores aboard.
Variable costs
Variable costs of shipping are voyage-specific and
include:
• fuel;
• crew costs (when contracted for individual
voyages);
• port and other terminal costs;
• insurance to cover risks on the water,
• maintenance relating to motion;
• freight (all costs associated with freight storage,
loading, stowing, and unloading); and
• miscellaneous sailing costs.
END

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Sea Transport

Business Logistics Management,

• Water transport is often limited to international

• Shipping has become highly specialised since the

• Bulk carriers carry cargoes with low value-to-

• Oil-bulk-ore (OBO) vessels are multi-

• Ships are vulnerable to inclement weather

• As is the case with air transport, economies

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