Economies of Speed in Sea Transportation

Abstract

Conventionally, shipping companies have invested in large ships to achieve economies of scale. More recently, high speed ships have been proposed as a means of achieving timely service for customers and improving shipping performance. Yet another solution offered here is to boost the cargo handling speed at port allowing for a higher number of annual round trips. Both the cost efficiency and timeliness of shipping service can be improved. The economic trade‐offs between the investments in cargo handling and ship propulsion technologies are formally analysed by taking the round trip frequency as the key to performance. The theoretical analyses as well as the practical cases studied indicate that investments in cargo handling technology, such as automation of container terminal operations and hatchless self‐loading ships, have indeed considerable profit‐making potential for shipping companies. Other technology investment opportunities appear less promising: ship propulsion due to energy consumption and environmental concerns; and larger ships due to low customer responsiveness and risks of low capital productivity.

Citation

Laine, J.T. and Vepsäläinen, A.P.J. (1994), "Economies of Speed in Sea Transportation", International Journal of Physical Distribution & Logistics Management, Vol. 24 No. 8, pp. 33-41. https://doi.org/10.1108/09600039410071280