Monthly Archives: September 2015

How to Take Full Advantage of CBF for Stowage Planning

In our last article, we took a look at the merits of the client/server stowage planning system and checked how process improvement realizes cost reduction. In this article, let’s take a close look at specific cases in which solutions are created and operated for shipping companies. We will focus our attention on how stowage planning system uses CBF data that is received from outside.

 

What is CBF (Container Booking Forecast)?

CBF literally means data on booked container. When container ships sailing along a lane arrive at specific ports, unloading begins. Different cargoes have preset port of loading (POL) and port of discharging (POD). As was described in the previous article, a shipping company’s stowage planner should draw up stowage plans for different ports, and doing this obviously requires data for cargoes that are going to be uploaded from the specific ports. The numerical data about the cargoes that are going to be uploaded from different ports is called container booking quantities. The data includes the operator, POD, cargo size and type, and quantity of a specific cargo.

Then, why ‘forecast’ that tags along? The quantitative data that is delivered to a planner when a stowage planner draws up a stowage plan is nothing but a ‘forecast’. It is not finalized but forecast as long as a ship arrives to a port and actual uploading begins. If an unexpected situation develops after a stowage plan has been established, stowage volume may change or its type and size may change. So, a stowage plan created by a planner is based not on finalized data but on a forecast volume.

 

Reasons why CBF is not fully used in stowage planning

1. It is difficult to collect CBF data

As mentioned earlier, the terminals of different ports send CBF data to shipping companies. The CBF sent from different origins is more or less the same while it takes various electronic file formats such as e-mail, fax, and Excel. As there is no standard as to the form of CBF and its content, this causes inconveniences in exchanging data with other shipping companies. So, discussions are going on among shipping companies with a view to establishing a standard EDI-based format.

2. It is difficult to use CBF data

The stowage planner of a shipping company draws up a stowage plan based on CBF received from terminals.. Since the entire booked stowage which has been filed in CBF has to be loaded onto a ship, CBF and a filled-out stowage plan are indispensable. At this point, the problem is that CBF may not have been submitted as an electronic file and if it comes in as an electronic file which is different than is used in the system, verification wouldn’t be easy.

The stowage planner must either check two versions of data with his or her eyes or perform extra work to use an electronic verification. In the latter case, a system must come with an additional feature for processing CBF, while a user must manually enter CBF data to use the function. Then, how can one reduce this cumbersome work? We will see how this is possible with OPUS Stowage, the stowage planning software from CyberLogitec.

 

Effective ways to use CBF data

1. CBF data interface with the main system of a shipping company

In general, data on stowage can be verified at the contract stage and related data is stored in a shipping company’s main system. Through interface, OPUS Stowage processes the data into an appropriate form for the system. The data used in OPUS Stowage also exists in the shipping company’s database server, so CBF data can be taken through direct connection.

From a technical perspective, while a table view for CBF data is created in the shipping company’s database, OPUS Stowage operates internally with the data of the specific view alone. The advantage of this structure is that it allows a shipping company to easily conduct its data security management and reduces the additional workload that is generated for interface. Adopting the system becomes very simple, as it only has to process the data supplied by a shipping company for the afore-mentioned table view.

2. OCR-based CBF data analysis and processing

There is no designated form for data submitted via fax or in PDF, but data can be processed through image pattern analysis, as most shipping companies write data in similar forms before they send it. D-Cube, a solution from CyberLogitec, includes an OCR (Optical Character Recognition) engine and serves to analyze the pattern for documents exchanged with shipping companies and process it into data. Handwritten documents submitted via fax, emails, or image-converted PDF files can be automatically processed in connection with relevant solutions.

3. Improvement through automated CBF input

A number of shipping companies including Hanjin Shipping have created CBF interface with OPUS Stowage. Now able to take less time to collect, compare, and review CBF data, a stowage planner can focus on his or her main duties. It’s because the solution goes beyond just receiving quantitative data to enable automatic inputting of weight data for specific volumes of stowage.

Stowage planning system for Hanjin Shipping

Stowage planning system for Hanjin Shipping

This not only drastically reduces data input time, but also allows the stowage planner to create a stowage plan based on accurate data from the stage of pre-plan creation. In general, a pre-plan does not involve entering weight data accurately (due to possible changes and limited time), but uses average weight. Automatic inputting of accurate weight data not only promotes the convenience of a planner but also reduces variability and checks a ship’s restoring forces.

Also, as CBF data is processed into what can be used in OPUS Stowage, a planner uses the system-supplied verification at the point when a plan is created.

 

If you have any queries or discuss more, please contact us.

CyberLogitec Contact

 

 

Budding Merger Trend among Shipping Companies Something Out of the Ordinary

Budding Merger Trend among Shipping Companies Something Out of the Ordinary


Lately, specifics of a merger are being discussed between COSCO and China Shipping, China’s two biggest shipping companies, while various media outlets have forecast its completion in 2017. COSCO has a 4.8% share and China Shipping has a 3.6% share of the current liner shipping market. If a merger realizes, the combined company’s market share will shoot up to 8%, thus placing it at fourth after CMA-CGM (8.9%). Meanwhile, it was reported that UASC was going to acquire APL. Provided the merger of the two companies realizes, their combined market share will soar to 5% and their combined fleet will exceed 1 million TEU.

Division

2M

CKYHE

G6

Ocean3

Other

Shipping routes to North America

MSK 9.6%

MSC 4.6%

 

 

 

 

SUM 14.3%

HJS 7.5%

COSCO 7.8%

EMC 9.8%

YML 4.5%

K-Line 6.0%

 

SUM 35.6%

HPAG 5.3%

NYK 4.2%

OOCL 4.9%

APL 6.9%

MOL 5.2%

HMM 4.1%

SUM 30.6%

CMA-CGM 7.5%

CSCL 2.6%

UASC 1.7%

 

 

 

SUM 11.9%

7.7%

Shipping routes to Europe

MSK 19.0%

MSC 16.3%

 

 

 

 

SUM 35.2%

HJS 4.8%

COSCO 5.9%

EMC 6.2%

YML 4.1%

K-Line 2.9%

 

SUM 23.8%

HPAG 4.4%

NYK 3.1%

OOCL 2.3%

APL 3.3%

MOL 2.9%

HMM 2.4%

SUM 18.4%

CMA-CGM 10.9%

CSCL 5.8%

UASC 4.5%

 

 

 

SUM 21.1%

1.4%

All oceans

28.5%

17.0%

18.4%

14.7%

21.4%

 

If you look at the market shares for the four major alliances as shown on the table, 2M has 14.3%, CKHYE has 35.6%, G6 has 30.6%, and O3 has 11.9%, thus showing CKHYE and G6 as rulers of the North American market. For European shipping routes, 2M takes up 35.2%, CKHYE takes up 23.8%, G6 takes up 18.4%, and O3 takes up 21.1%, thus showing 2M and O3 as dominating the market.

Current market shares for major global shipping companies

 

If COSCO and China Shipping really merge and the combined company chooses CKHYE, it will significantly compromise the market dominance of O3 in European shipping routes. On the contrary, if the combined company chooses O3, it will significantly diminish the market dominance of CKHYE in North American and European shipping routes.

Furthermore, if major shipping companies break out of an alliance, it inevitably brings change to the fleet organization, ports of call, and services for the entire alliance. In this light, we can expect that the merger and acquisition trend among major shipping companies will reorganize the current alliances while the combination of shipping companies will create new alliances.

Besides, since the strategic alliances are closely related to the ordering of super-large ships and collection of cargoes, global shipping companies should wisely cope with the changes coming to the current alliances.

 

Author: Jeon Hyeong-jin, Shipping Market Analysis Center Director
Source: KMI Shipping Market Trend Focus, No. 268

Interview with Beom-chu Lee, head of Technology Innovation Division

Interview with Beom-chu Lee, head of Technology Innovation Division

 

- If you tell us briefly about yourself.

I am Beom-chu Lee, Head of Technology Innovation Division (TID). Before I joined CyberLogitec, I worked with System Strategy Department of Hanjin Shipping, where I handled IT planning, project management, review of application of new technology and so on. When CyberLogitec was created, I managed its technology institute. And I participated in PI(Process Innovation) project and Alps project at Hanjin Shipping before I served as Services Division Director. For last two years, I worked for two years for Hanjin Shipping, designing and setting up the system as IT Planning Team Manager, which is equivalent to its CIO, and recently I returned to CyberLogitec.

Currently working with TID, I am in charge of managing the quality of companywide solutions and companywide fundamental technologies. And I am responsible for managing a complete lineup from software standard to infrastructure building.

 

- Any memorable project or job?

I have spent 16 out of all my 24 years at work participating in projects. I update my resume every two years, and I see that including last year, I have carried out 30 IT projects in all. While all projects have been rich with different experiences and rewarding in their own way, I particularly remember my involvement in the creation of technology institute for CyberLogitec, when the company was created as a spinoff from Hanjin Shipping.

Then, as a head researcher, I taught the entire company staff new technologies such as CBD (Component Based Development), UML, and Data modeling and built the foundation of the company technology with that. And those technology institute employees I worked with in those days are now performing with excellent results in key positions of CyberLogitec.

With the technology developed at the institute, we were able to carry out the PI project of Hanjin Shipping and ALPS project consecutively. Such technological foundation has continued up until now through continued R&D efforts, thus creating the basis for OPUS Container, the solution for container shipping companies.

 

- If you describe Techonlogy Innovation Division.

TID is charged with the task of establishing companywide quality and companywide technology standards.

As for companywide quality, we are working to upgrade quality in the two categories of process and products. Especially for process quality, we have acquired certification for ISO 9001, CMMI, and ISO 27001. For product quality improvement, we are working through conducting customer satisfaction survey and reviewing customer feedback.

As for companywide technology standard, we are working to establish software architect’s standards and create infrastructure (for technical architects).

Technology Innovation

Technology Innovation

- What are the latest IT market status and issues, and what directions do you see for the development of the market?

The biggest issues in latest IT are big data and IoT, or IoE for Internet of Everything. Judging from their current status, these things have gone beyond just a technological level to become a trend.

When we try to forecast market in IT, we use the Hype Cycle. The concept refers to how a technological concept emerges into the market and develops and then declines for reasons of worsening profitability and insufficient related technology before it gets to secure stable growth.

Big data and IoT are currently in the introduction phase on the Hype Cycle and are expected to register severe fluctuations for next couple of years. Five more years will have to pass to be reassured of their stable growth, but since they are hot in the market, people are putting out feelers.

The core capability of CyberLogitec consists of business know-how, or knowledge capacity. While CyberLogitec may appear to be a technology-centered firm, I think that the company is creating business out of the technology that realizes through tapping into business knowledge. Therefore, I think that it is more important for us to translate business skills into appropriate IT skills than to take up challenges in spearheading the adoption of new IT skills.

 

- How are you dealing with market issues?

IT skills market is dominated by big vendors. As data processed in IT gets bigger and bigger, the market is ruled by platform vendors and communications & network companies that have to handle it in between. It’s because signals generated with various IT devices and equipment cannot but be received through networks or communication lines. Thus, data refined through intermediate platforms is realized into business. And CyberLogitec is working hard to combine business and IT know-how by tapping into the data owned by its customers.

Technology Innovation

Technology Innovation

- What directions do you see in operating TID?

We want to base the operation of our division on three key words: basics, communication, and global standard.

First, keep to basics. While we do the basics, we have to go from there to explore changes. This constitutes an important task designed to provide our current customers with stable services, and we want to upgrade our services based on such stable services.

To keep to basics, we must demonstrate sincerity. Sincerity is an abstract notion, and Principle-Centered Leadership by Stephen Covey defines it like this. Sincerity refers to “the agreement between habits and values, speech and action, and expressions and feelings”.

Second, it’s effective communication. To quote Stephen Covey again, Communication refers to “the ability to deeply understand other people and be understood by them.” When talking with or consulting customers about tasks, our staff wants to have to ability to be understood by customers by understanding them first.

Third, it’s global standard. It means that CyberLogitec wants to be a leader in different business solutions. For instance, the company aims to be recognized as a global standard for business solutions just like SAP or Oracle for ERP solutions. And we believe that it is more important to position ourselves in the global market as a first mover in knowledge industry that creates added value than to merely sell products.

With this, we want to contribute to realizing sustainable business for the company.

 

CyberLogitec Contact

The Prisoner’s Dilemma and the Competition for Ultra-Large Ships

The Prisoner’s Dilemma and Nash Equilibrium

The prisoner’s dilemma, as so many people know it, is a theory that shows how two prisoners drop the best choice for the worst one because they can’t trust one another. It shows that the best choice for two prisoners lies in mutual trust and cooperation.


<Prisoner’s Dilemma Explaind by This Place>

In 1950 when he was 22, John Nash, the American mathematician, suggested the Nash equilibrium in his doctoral dissertation on non-cooperative games, thus presenting a mathematical proof that competitors can choose the best option through mutual trust and cooperation.

The Nash equilibrium suggests that when two persons each make the best choice according to one another’s responses, they reach a condition where they don’t feel the need to change their choices. Put differently, it is about pursuing the maximum mutual benefit by understanding and caring about how the counterpart tries to achieve gains instead of seeking one’s gain only. In a nutshell, the theory demonstrates that working with one’s counterpart to maximize one’s gains constitutes the best choice that brings gains to both parties.

For example, if the US and China as G2 pursue their respective economic interests and choose betrayal instead of cooperation, what would become of the world economy? In fine, the US and China would slip into an economic recession due to unnecessary costs for competition, which would drag the global economy as a whole. On the contrary, however, if the two countries take an option that would reinforce mutual cooperation, not only the two economies but also the global economy could create a basis for renewed growth.

 

The prisoner’s dilemma in shipping market

This has a lot of implications for container ship market, which is involved in no-holds-barred competition for ultra-large ships of 18,000TEU and above. In container ship market that awards superiority to shippers, individual shipping companies’ best option should be the strategy to secure sustainable cost superiority through ultra-large ships.

Moreover, the fact that the construction cost for ultra-large ships of 18,000TEU and above is about 7,500 dollars per TEU, 20 to 30% lower compared to very-large ships of 14,000TEU and above and that designed as eco-ships, ultra-large ships register excellent fuel cost reduction suggests that the competition for ultra-large ships is inevitably no-holds-barred. Furthermore, the self-seeking competition among shipping companies that want to increase their market shares through their cost superiority is fueling the competition in expanding their fleet of ultra-large ships.

Capacity of ordered megaships dwarfs capacity on the water

Capacity of ordered megaships dwarfs capacity on the water (IHS Maritime & Trade)

However, this just shows how those shipping companies are entangled in the prisoner’s dilemma. Clearly, it demonstrates a typical mutual distrust involved in the thinking: unless I get ultra-large ships, my rival will get them and thereby collect the benefits of cost superiority, which will cause damage to me.

 

Cooperation is needed among shipping companies for common interests

If shipping companies stay the course and continue to expand their fleet of ultra-large ships, it is likely that they will struggle to keep their market shares and their return on investment will come far below its current level, when they have spent an enormous amount of money. And this wouldn’t be an outcome that is desired by shipping companies that have already obtained or are going to obtain ultra-large ships.

Then, what should be done? As the Nash equilibrium shows, we need to explore a way to maximize the common benefits for shipping companies. As long as the market is dominated by shippers, unlimited competition among shipping companies is anything but beneficial to shipping companies. Therefore, it is a matter of urgency that shipping companies explore a way to refrain from racing to get ultra-large ships.

 

 

Author: Jeon Hyeong-jin, Shipping Market Analysis Center Director
Source: KMI Shipping Market Trend Focus, No. 266

Does the Depression in Container Ship Market Have Structural Factors?

Does the Depression in Container Ship Market Have Structural Factors?

The recent depression in container ship market is getting protracted, and we are going to take a look at it from a supply-demand perspective for shipping market and size up its prospects.

 

Low growth for shipping due to slowing exports from Asia

According to “The Causes and Implications of the Export Slow-down in Asia”, a report published in June by Korea Center for International Finance (KCIF), the slowing growth in Asia was found to have two major causes. One factor is economic cycle. Lagging demand and investment and slowing economy in advanced countries have lowered the demand for imports in those countries. The other structural factor is that manufacturing returning to advanced countries (increasing reshoring) and domestic demand-driven growth strategy for China have stoked up protectionist measures such as weakening global value chain and technical barriers to trade, which has led to lagging export sales.

Growth in the volume of merchandise trade, 2010-2013

Growth in the volume of merchandise trade, 2010-2013 (UNCTAD)

KCIF further forecast that exports from Asia wont’ show a recovery as quick as before the financial crisis, owing to the slow economic recovery in the US and Europe and weakening global value chain. This suggests that the slowing export from Asia, the largest shipping market in the world, is a long-term trend and that the cargo volume for the global shipping market will register a low growth rate for a long time.

 

Intensifying competition among shipping companies in ordering ships

Like this, while demand for shipping market is expected to register low growth for a long time, shipowners are into ordering ships to add to supply. As of last July, there were 29 ultra-large ships of 18,000 TEU and above, and with 68 ships already ordered, total 97 ultra-large ships will be delivered no later than 2019. And looking to 2018, 55 ultra-large ships of 13,000 to 17,999 TEU have been ordered.

The Emergence of the Mega Boxship orderbook

The Emergence of the Mega Boxship orderbook (Clarksons Research)

Then, why is it that ultra-large ships continue to be ordered in the face of such oversupply? Since it is extremely difficult to achieve differentiation of services in current shipping market, the only feasible competitive strategy has to ensure continuous cost advantage. For this reason, shipowners cannot but keep ordering large ships that allow fuel cost and ship operating cost reduction.

 

Causes for the long-term depression in container ship market

Quite likely, shipping market, and particularly, container ship market is facing a long-term and structural depression, for following reasons.

First, while service differentiation is difficult, shipping companies cannot help choosing the option that would secure cost competitiveness. In other words, their practically only alternative has become to get ultra-large ships that have cost advantage at the risk of oversupply when demand is weak.

Second, endless cost competition has become inevitable, because a strategic alliance aims to maximize cost reduction effect by reorganizing sea routes and services through making ships ultra large.

Third, support for shipping and shipbuilding industry from countries of the world is aggravating oversupply. While performing an important role in creating the basis for the growth of shipping and shipbuilding industry, it has made shipowners and shipyards forfeit the ability to autonomously adjust demand and supply according to the shipping business cycle.

 

Long-term depression is expected to continue

In the current container ship market, ultra-large ships and strategic alliances are not optional but required. But, the depression of the container ship market is likely to be long-term and structural, in that ultra-large ships and strategic alliances will cause another oversupply. Mindful that the current container ship market is increasingly likely to have a perpetuated oversupply, shipping companies must stop expecting to see oversupply corrected and should instead come up with a way to survive this market situation.

 

Author: Jeon Hyeong-jin, Shipping Market Analysis Center Director
Source: KMI Shipping Market Trend Focus, No. 267