Developments in the Management of Container Demurrage in Marine Container Terminals

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Developments in the Management of Container
Demurrage in Marine Container Terminals
IAME, Melbourne, 2006

• Hernan Wurgaft, Ph.D.
• Assistant Professor
• SUNY Maritime College
• hwurgaft_at_sunymaritime.edu

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OUTLINE

• Introduction/Motivation
• Price Model
• Institutional Framework
• Collaboration
• Future Research

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Definitions

• Container Demurrage dwell time
• Container Demurrage fees
• penalties, fines, tariffs
• Container Demurrage rules
• point in time when demurrage begins,
  structure, value of fees.

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Typical Container Demurrage Rule
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Chronology (2005)
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Research Questions

• How should container demurrage rules be
  formulated?
• Objective Achieve most efficient use of terminal
  resources.
• Practical Approach Experimental
• New Ideas?

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Paper Themes

• What are the behaviors behind the container
  demurrage phenomenon Price Model
• Are there alternative rules that offer positive
  incentives and foster collaboration and
  continuous improvement?

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Price Model

• Demand and supply curves represent behavior of
  consumers and suppliers of container storage
  capacity at the terminal.
• Quantity Average number of containers stored at
  terminal (annual average number of TEU stored at
  terminal).
• Price Payment to terminal operator for services
  that consume storage capacity.

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Demand Natural Operation of loading/unloading
vessels

• DS ATR ATT
• DS Demand for Storage
• ATT Average Throughput Time
• ATR Average Throughput Rate

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Other sources of Demand

• Unplanned demand co-ordination cost.
• Supply chain inventory
• Seasonal Inventory
• Cycle Inventory
• Safety Inventory
• Empty containers trade imbalance

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Supply

• Fixed Factor Land
• Variable Factors Operating Methods, Technology
• Average Throughput Time can be reduced

• Examples
• Murthy et al (2005) HK elastic capacity
• Steenken et al (2004), Vis and Koster(2003)
  Surveys.

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Institutional Framework

• Port Authority
• Terminal Operators
• Shipping Lines
• Shippers
• Brokers
• Noteboom (2004)

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Collaboration

• Arms length transactions
• Mutually beneficial relationships
• Guaranteed volume
• Added services
• Trust, Flow of Information Creative Solutions
• Example Maher and IKEA

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Positive Container Demurrage Incentives

• Average Dwell Time across many containers
• No Free Time conflicts with continuous
  improvement
• Reduce uncertainty about dwell time

Benefit from relationships and collaboration
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Future Research

• Actual performance of Container Demurrage Rules
• Case studies Expressions of relationships and
  Collaboration
• Contracts as mechanism to implement innovative
  management of container demurrage.

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SUNY Maritime College
www.sunymaritime.edu