Capacity utilisation in short sea shipping

Doctoral thesis, 2010

Shipping is a capital-intensive industry and is characterised by high fixed costs and economies of scale. Trade imbalances and demand variations, market fluctuations and customer demands for high frequency create a situation where shipping companies tend to operate with a high level of unutilised vessel capacity. The purpose of the research is to identify the potential for enhancement of the physical vessel capacity utilisation, with the aim of reducing the cost per transported unit. The research is based on both qualitative and quantitative data included in three studies of short sea vessel concepts: ferries, RoRo vessels and container feeders. Vessel capacity utilisation can be enhanced by applying short-term and long-term measures and by counterbalancing supply and demand. Appropriate vessel design, efficient sailing schedules, stand-by cargo, price differentiation and improved communication between companies in the transport chain are among the most important improvement measures. Two approaches are available when matching supply and demand: to increase demand through larger market share, and to change supply in smaller and more frequent steps. Route characteristics and market conditions all affect the selection of an appropriate strategy for enhancement of vessel capacity utilisation. The different approaches are: the Cut peaks strategy, the Never say no strategy, or a combination of the two. The purpose of the Cut peaks strategy is to have a high average capacity utilisation by keeping the maximum capacity lower or increasing the market share. The Never say no strategy allows a higher level of unutilised capacity in order to have good flexibility, a possibility to grow in the market, and the ability to maintain a high service level. Knowledge gained from the research resulted in a framework for short sea shipping companies that are aiming at enhancing their vessel capacity utilisation. The framework consists of four elements: selection of capacity utilisation strategy, definition of sailing schedule, improvement measures for established vessel capacity, and improvement measures for changes in vessel capacity. The main objective of applying a conscious strategy and suitable improvement measures is to attain a long-term economic sustainable shipping service with a reasonable service level, flexibility and reliability towards customers. Consequently, both shipping companies and shippers benefit from the enhancement. Furthermore, society also gains if goods can be moved from road to sea, as short sea shipping is efficient in terms of environmental performance and energy efficiency and can ease road congestion.