Bunker Purchasing in Liner Shipping

Abstract

PrefaceAs international trade continues to grow rapidly and supply chains become more globalized, many operations have been outsourced and moved offshore. About 90 % of the international trade volume was facilitated by ocean transportation. If we assume that half of China's exports by value in 2013 were moved by ocean transport and on average it takes one month for the goods to reach the consignee, then about 85B$ 1 worth of goods would have been caught up during the transportation. Due to environmental and bunker cost considerations, international air cargo transport has been reduced from 3.1 % in 2010 to 1.7 % in 2013 2 , with a shift towards more economic transportation modes, especially ocean transport. Hence, ocean transport logistics has played a very significant role in global supply chains.Although ocean transport logistics has been well studied in maritime economics and operations research/management science, many important issues have yet to receive the attention they deserve. In this book, we reveal the interaction among parties along the chain, including shippers, terminal operators and line carriers. We examine the impact of ocean transport logistics on global supply chains and address many important topics to shed new light on the subject. This book is organized into three parts. The first part talks about the innovative development of terminal operators and the competition they face. The second part delves into the many tactical and operational aspects of managing shipping liners, including empty container repositioning, disruption management, slow steaming, bunker purchasing, ship route schedule, and transport network design, and evaluates their corresponding challenges and opportunities. The third part studies the impact of ocean logistics transport on global supply chains. The 18 chapters of the book all highlight the immediate effect of ocean transport logistics on global supply chains.

How Does Oil Future Price Imply Bunker Price—Cointegration and Prediction Analysis

“…There are also many studies in the extant literature on the optimal bunker refueling strategies for liner shipping, in which ways the operators can control the cost of bunker oil. Plum, Pisinger et al [7] mention that fluctuations in bunker prices are usually related to crude oil prices, but prices vary significantly between ports, so the bunker purchasing cost optimization problem needs to be reformulated daily, but bunker purchasing is generally made by contract a few weeks prior to arrival the port, which complicates the adjustment of the optimal plan. De, Choudhary et al [8] consider stochastic fuel consumption for different segments, stochastic bunker prices for each port, and different fuel refueling strategies to determine the optimal fuel management strategy.…”

Optimization in liner shipping

“…These risk management measures are the two most important measures employed by container shipping companies to reduce bunker fuel price risk. Plum et al (2015) presented a decomposition algorithm for the Bunker Purchasing with Contracts Problem (BPCP), and showed that the model is able to solve even very large real-life instances. The model is based on writing up all bunkering patterns, and hence may be of exponential size.…”

“…Moreover initial and terminal criteria for bunker volumes must be met. Finding a legal bunkering pattern can be formulated as a MIP model (Plum et al, 2015) and solved by commercial solvers. Each pattern r ∈ R v is denoted as a set of bunkerings.…”

“…Due to the large number of columns in the model, Plum et al (2015) proposed to solve the LP relaxed model by Column Generation. Using the generated columns from the LP-solution, the resulting problem is solved to integer optimality using a MIP solver, leading to a heuristic solution for the original problem.…”

“…A simple form of dual stabilization has been used in the implementation by (Plum et al, 2015) to speed up convergence. The Box-step method imposes a box around the dual variables, which are limited from changing more than π max per iteration.…”