It has been nearly two years since the start of the worldwide COVID-19 pandemic and its resultant trade challenges,
however as we see it today, the global economy is ready for what the possible rebound predicted by the World Bank.
With approximately 90% of the world’s goods being transported by sea, and over 70% of these goods moved in containers,
the importance of fleet and service optimization is paramount.The Current Landscape of Shipping Lines
The pandemic has been both cruel and kind to the liner industry.
The first casualty of the pandemic in early 2020 was felt in the disruption of the upstream supply chain in China. For
the shipping sector, in a bid to remain viable, liner organizations tried to recover in large numbers; Hellenic Shipping
News reported a staggering 630 ships sent for demolition during 2020.Positive market environment
Demand has always dictated capacity, profits were always based on which side you sat as the balance swung from one side
to the other.
The peak in demand after lockdown was exacerbated by a lack of available vessels and containers, causing a chain
reaction that has affected not just the shipping lines but the entire supply chain. Existing vessels are now being
utilised to their fullest capacity and deployed on routes that saw them many years ago.
This has also resulted in a 500% to 600% increase in freight costs, with Drewry, reporting an increase in the
Shanghai-to-Rotterdam route by 640%. McKinsey’s video explaining why container shipping prices have surged, shows that -
pre-pandemic - a container from Asia to Europe or North America would set you back roughly $2,000, will now cost $12,000
or more.
To take full advantage of the positive market environment, shipping organisations are ordering more vessels to increase
their capacity. CMA CGM group, with a market share of 12%, has ordered 22 additional vessels. The combined increase in
capacity these new vessels bring could result in an additional 1.45 million TEU containers.Container shortages
The high demand for goods from China means full containers are leaving China’s harbours, but as has always been the
case, a laden return to Asia is not only unattractive freight wise but also the time taken for this returned laden to be
destuffed and made ready to ship out as an export from Asia just takes too long. Therefore, some carriers are now
finding it be far more cost effective to ship these containers back to Asia as empties, rather than as laden, saving
them container turnaround time and having them ready for a high freighted export.
As a result of the shortage within the cycle, shipping companies like Hapag-Lloyd are also investing in additional
containers to try to ease the bottleneck.Port congestion
In spite of lockdowns being lifted, there are still significant knock-on effects such as port delays, lack of equipment
and other issues due to Covid-19. At the ports of Yantian and Ningbo in China, cargo owners and liner shipping companies
are experiencing several weeks of delays due to Covid-19 lockdowns. According to Maersk, this could have an effect
bigger than the Suez canal closure, resulting in forced missed sailings, unforeseen and unpredictable delays.
Dealing with further restrictions such as vessel size limitation, Deadweight limitation, draft and air draft, tidal
range, vessel age, vessel flag, dry docking, and so on, cause considerable operational constraints further aggravates
the problem.High operational costs and low efficiency
Fleet and service planners who are tasked to keep costs down work with variable freight rates that rise and fall based
on market rates, making it difficult to predict long-term costs. More than that, bunker prices - typically accounting
for 40% of total costs - need to be managed efficiently in order to keep costs down and maximize profits.
The deployment of vessels within a service is backed by analytical reasoning that considers certain known variables.
This means it’s crucial to consider the changing scenarios and tweak your plan accordingly.
Aside from the challenge of managing multiple vessels and cargo and balancing sensitive variables, the ongoing issue of
minimizing costs is often unresolved. “The true hidden cost behind manual scheduling is the cost of operational
inefficiency,” says Captain Vijay Minocha, Chief Commercial Officer at Solverminds. “This is seldom - if ever - computed
or even discussed. Nor is the question broached as to whether the schedule could be generated in a better way. But we
have asked ourselves that question, and the answer is unequivocally, yes! It must - as manual scheduling and high
operational costs go hand-in-hand.”Manual vessel and service scheduling
Liner operation teams face a tremendous task of scheduling vessels optimally on manual or outdated systems, while still
trying to keep costs down. Expanding trade wars, economic instability, infrastructural speed breakers, a shifting ratio
between chartered and owned vessels’ to name a few, have a direct impact on profits and bring complications to effective
planning. Compound that with daylight navigation ports and scheduling within those port windows, port infrastructure
limitations (minimal depth, allowed LOA, allowed beam, tidal restrictions), and you’ll see the complexity of the task at
hand when carried out manually.
Fluctuations in demand and freight rates have a direct impact on schedule reliability - and customer confidence - and
are often catered to by liner companies through blank sailing and idling of ships. Additionally, planners need to
consider how they will meet supply with demand and change pro forma schedules to match the cargo flow, and manually
adjusting schedules to factor in disruptions reported by the vessel or at the port is tedious, error-prone, and
time-consuming.
With so many limiting factors to take into consideration - such as vessel size, cargo demand, port limitations, tides,
draft limitations, berth window constraints, MT container supply, route constraints, operational constraints, and
commercial constraints - liner companies also need to execute with the right-sized vessel on a service with the right
port calls, vessel utilization, minimized fuel, charter, port costs and empty repositioning plan which is global and not
local in nature. Additionally, the right cargo composition (TEUs, weights, and contribution) and right time
decision-making (freight rates are a function of time and season and now even the influence of a virus) are critical to
this optimization.
It is easy to understand why, as a manual process, fleet and service planning is excessively timeconsuming, complex,
inflexible - and costly.
Accelerating Maximum Contribution through hybridised solution such as Optimization and Artificial Intelligence
Maximum contribution - or profitability - is the reason why liner companies seek to attain and maintain a
cost-effective, stable, reliable liner schedule network, and why they are turning to optimization engines and artificial
intelligence (AI) for solutions. Coupled with operational efficiencies, a reliable, AI-automated liner schedule is the
best way to achieve these objectives and overcome these manifold challenges.
Solverminds, a leading global technology company that is well known in the liner and maritime industry for their
enterprise resource management solutions (ERP), as well as consulting and data analytics, has introduced the innovative
OptiFleet solution. This much-needed link between business and technology is a powerful, easy-to-use tool. It optimizes
fleets and services by using the Optimization engine, Time Series forecasts, and its AI platform, simply and
efficiently.
“The expansion from ERP to AI-powered solutions for the liner and maritime sector was organic and natural for the
Solverminds team,” says Capt. Minocha. “Our in-depth domain expertise and advanced technology platforms mean that - not
only do we know first-hand what challenges the planning team face from an operational and commercial perspective - but
we have the means and expertise to solve it.”OptiFleet Helps Make Decision-Making Quick, Easy, and Profitable
OptiFleet takes care of the planning, analyzing, and optimization of the schedule, allowing the trade and operations
teams to quickly and accurately make decisions that maximize profit, minimize costs and eliminate expensive delays.
As OptiFleet takes care of the manual drudge work of fleet and service scheduling, it frees up the liner teams to focus
on more profitable tasks.OptiFleet Does the Heavy-Lifting for You
OptiFleet is smart and fast. So you don’t have to wait for, or worry about, your schedule.
Firstly, it automatically takes every service detail into consideration, such as port rotation, distance between each
port leg, vessel speed on each leg, terminal productivity, port stay, total sea time, maneuvering time, and service
frequency.
It also factors in each of the various vessels’ details, such as fuel consumption at speed, charter hire costs, port
costs, canal costs, insurance and maintenance, vessel max and eco speed, and bunker cost - as well as all various port
capacity, port constraints, and cargo routing criteria to quickly identify optimal port pair allocation by container
type, weight, and freight contribution. More than that, OptiFleet can connect to client application data using API
services for seamless integration. All of this, before you’ve even pressed ‘go’!
It then identifies the port pairs, quantity of TEUs and weights allocated for each port pair, contribution for each port
pair, list of time-chartered vessels within the asset pool, spot chartered vessels (if required), services, preferred
customer and commodity with equipment type, quantity of empties and repositioning between surplus to deficit locations,
and further maximizes vessel utilization - and ultimately profitability.
It then displays these results graphically so that it is easy for decision-makers to understand the financial
profitability, commercial plan, operational plan, and empty plan outputs. You can then request OptiFleet to issue a
fleet and service schedule that maximizes profitability by vessel or by service. All before you’ve finished your morning
coffee.
But don’t stop there. Once OptiFleet also builds demand forecasts using Time series models for each port pair equipment,
optimizes routes for better fuel efficiency, monitors capacity by vessel size or engine capacity, forecasts market
supply and demand data inputs — all with a few simple clicks — and never misses the ultimate goal: to maximize
profitability.
Of all the tech companies to produce this solution, it is no surprise that Solverminds rose to the occasion. Their
expertise in solving real-world challenges through Optimizer engine and AI-powered technology means they are capable,
experienced and equipped to add value.
It looks like its blue skies and full ships from here, forward!.