LINER CONFERENCE SYSTEM IN SHIPPING INDUSTRY

Liner Conference System in Shipping Industry

Liner Conference System in Shipping Industry

Introduction

Shipping is a service industry that by general acknowledgement provides the lifeline of international trade. Shipping companies have organized themselves since the nineteenth century in the form of liner conferences which fix prices and regulate capacity. Liner conferences are most prevalent on routes between Europe, on the one hand, and North America and the Far East, on the other hand. They are associations of ship-owners operating on the same route served by a secretariat.

The block exemption contained in Council Regulation 4056/86 allows them to set common freight rates, to take joint decisions on the limitation of supply and to coordinate timetables. The exemption was granted on the assumption that it was necessary to ensure the provision of reliable services. It should be noted that liner conferences do not engage in operational co-operation and do not provide joint liner shipping services. It is up to the individual lines, consortia or alliances to offer such services.

Discussion

The shipping industry is categorised in two major sectors (markets): the bulk shipping sector (engaged mainly in the transportation of raw materials such as oil, coal, iron ore and grains), and the liner shipping sector (engaged in the transportation of final and semi-final products such as computers, textiles and a miscellany of manufacturing output) (McKinnon 2001).

From industry structure point of view, the two sectors are as different as they could be: bulk shipping uses very large carriers, such as tankers and bulk-carriers, to transport goods in bulk on a contract basis. The service requires minimal infrastructure and in this respect it resembles a taxi service whereby the contractual relation between passenger and driver (cargo owner and shipowner) expires upon the completion of the trip. The industry is highly competitive with prices (freight rates) fluctuating wildly even in the course of a single week (Veenstra 1999).

Modelling in bulk shipping is therefore focused on the estimation of demand and supply functions and freight rate forecasting. On the contrary, liner shipping is geared to the provision of regular services between specified ports according to time-tables and prices advertised well in advance (Haralambides and Veenstra 2000). The service is in principle open to all with some cargo to carry and in this sense it resembles a public transport service, like that of a bus or a tram. The provision of such a service -often offering global coverage- requires extensive infrastructure in terms of ships, agencies and equipment (Veenstra 1999).

Optimisation of Liner Shipping Operations

Since the 1980s, the problems addressed in the literature have become more realistic, involving 'actual' optimal solutions rather than approximations (in operations research the latter are called 'heuristic' solutions and are rather common due to the mathematical complexity of real-world problems) (McKinnon 2001). He attributes this to advances in mathematical programming, facilitated by the existence of inexpensive computing power. Deployment of vessels has to do with the problem of allocating ships to routes within the service network of a ...