The new Copenhagen-based company LinerGrid said it uses advanced mathematical simulations to provide container lines with information in order to make decisions.
The new Copenhagen-based company LinerGrid, which is a cloud-based optimization tool aimed at enhancing networks in liner shipping, is suggesting the two new ocean carrier alliances that are scheduled to commence operations next spring, the OCEAN Alliance and THE Alliance, will have a combined global cost savings potential in excess of $1 billion.
LinerGrid also published a white paper analyzing the transpacific liner shipping network of the G6 Alliance – comprised of APL, Hapag-Lloyd, Hyundai Merchant Marine (HMM), NYK, MOL and OOCL – in July and August of this year “to ascertain the degree to which it could be further optimized.”
The white paper concluded the G6 Alliance could potentially reduce annual operational costs by 6 percent or $200 million on the transpacific.
There are currently four major shipping alliances. In addition to the G6 Alliance, the other three alliances include the 2M Alliance, consisting of Maersk Line and MSC; the Ocean Three Alliance, comprised of CMA CGM, United Arab Shipping Co. (UASC) and China Shipping; and the CKYHE Alliance, which includes COSCO, “K” Line, Yang Ming, Hanjin and Evergreen Line.
However, these carrier agreements are being overhauled and replaced with just three alliances as a result of the mergers of COSCO and China Shipping, APL and CMA CGM, and Hapag-Lloyd and UASC, as well as the financial problems of HMM, along with Hanjin filing for restructuring in Korea.
Starting next April, the three alliances will include the 2M Alliance, which will then include HMM, in addition to Maersk Line and MSC; the OCEAN Alliance, which will comprise Evergreen Line, OOCL, CMA CGM (which now includes APL), and the combined COSCO and China Shipping; and THE Alliance, which will include NYK, MOL, “K” Line, Hapag-Lloyd/UASC, Yang Ming and Hanjin. However, Hanjin’s insolvency has created uncertainty about its future.
LinerGrid said it uses “advanced mathematical simulations to provide decision support for container lines.”
The founders of LinerGrid include: Charles Moret, chief executive officer, the founder of CTI Consultancy and OCEO Talent & Leadership; Lars Jensen, chief commercial officer, and the founder of SeaIntel Maritime Analysis, SeaIntelligence Consulting, CyberKeel and LinerGame; Nicolas Guilbert, chief information officer, and the founder of Ange Optimization; and Jesper Praestensgaard, chairman of the board, who is also chairman of the board of UniFeeder and a senior advisor at Boston Consulting Group.
“We know from practical experience inside global carriers that network savings in the range of 5-10 percent are realistic,” Moret said.
“The number of members in an alliance is both a positive and a negative factor in network efficiency,” Jensen said. “A larger number of members in itself increases the potential scale advantage. However, it appears that the process whereby the members agree on the joint network design prevents the alliance from reaping the full benefits of their scale.”
The white paper describes LinerGrid’s study in more detail, but it said it started by looking at 15 services utilizing 114 ships offered by the G6 Alliance. The study identified different scenarios involving service closures, service alterations, and changes in the number and types of vessels deployed per service.
“The mathematical model then performs a detailed optimization routine for a range of scenarios, and calculates both the costs associated with each optimized scenario,” LinerGrid said. “In each calculation, the optimization will attempt to seek different ways of flowing the demand between ports, seeking the most optimal solution. This gives rise to varying transshipment costs across the scenarios, with the optimizer ensuring the identification of the best solution.”
LinerGrid said four scenarios gave rise to an annual cost reduction of 4 percent or more, equal to an annual savings in the range of $168 million to $235 million, with one scenario using 104 ships, one scenario using 98 ships and two scenarios using 93 ships.
The company said that although each of the scenarios result in minor existing cargo flow that cannot be catered for in the new proposed solutions, the loss in revenue should be viewed against the operational savings.
“It can also be seen as a means to more actively pursue a yield management strategy – as the new proposed networks utilize the assets much more efficiently, the carrier obtains a position from which it can select and deselect cargo, and hence pursue higher yielding cargo to a greater degree than what is possible in the existing network, which has much more unused capacity,” LinerGrid added.
LinerGrid projects new carrier alliances will lead to big savings
