The ship size dilemma in shipping industry

Pao Yue-kong Library Electronic Theses Database

The ship size dilemma in shipping industry

 

Author: Lai, Sinn-chong
Title: The ship size dilemma in shipping industry
Degree: M.Sc.
Year: 2009
Subject: Hong Kong Polytechnic University -- Dissertations
Ships -- Cost of operation.
Shipping -- Costs
Department: Graduate School of Business
Pages: 29 leaves : ill. ; 31 cm.
InnoPac Record: http://library.polyu.edu.hk/record=b2355993
URI: http://theses.lib.polyu.edu.hk/handle/200/5732
Abstract: There is a recent trend that most company in transportation industry, including shipping liner and airline company, in buying larger ships or a larger airplanes. The general reason for shipping company using a larger ship (in our case, with 10,000 TEU capacity) is that it can help save unit cost when comparing to using a ship with medium size (with 6500-7000 TEU capacity). That is why especially during economic high tides (during the economic boom in logistics industry between 2005 and 2007) with prosperous market expectation, most shipping liner company has decided to purchase for bigger ships. Larger ships indeed have increased shipping company's capacity so that shipping company can gain more money during economic peak, when the ships are fully loaded. However, during hard times (after 2008 Sep until nowadays), due to high maintenance and delivery cost, as well as the inflexibility of a big ships in terms of physical movement and financial acquisition, owning or investing in building large ships could be a financial burden to some of the shipping company. In addition, with the possibility of capacity exceeding demand in the market, price of goods could fall sharp and cause further loss to shipping company. Capacity and demand management is essential for operators to make radical strategies for recovery in the long term. The purpose of this project is to find out the optimal size of operating ships and to study the impact on optimal size of operating ships if different factors vary in our case, and to give reasonable suggestions to the company on how it can use this model to make the purchase decision.

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