Four KPIs (shipping) ;

1. On time full delivery

2. Average days late
3. Rate of returns due to shipment damage of error
4. Order picking accuracy

Performance measurement ;
1. Port performance: The cost of handling cargo in ports takes a very large part in the total cost of sea transport, so improving The performance rate
In port is the main factor to reduce cost of international seaborne trade.

1. Factors determine efficiency of berth:

• Identify types of cargo that are stevedoring from berth.
• Average stevedoring of each ship.
• Percentage of the quantity of goods quart are delivered directly or transported by land, Railway or barges.

2. Ship performance:
• The ship completion index measures the rate of cargo handling from and to ship on berth, this indicator shows the effecincy of the cargo handling
process.

• The ship's achievement through 3 different ways , depends on time period during quantity of goods handled is measured.

1. 1st measurement ( tons per ship hour in port )

Total of tons handled from & to ship

3. 3rd measurement ( tons per ship actual working hours )
Total of hours the ship spent in port
Quantity of total traded goods

Total working hours

2. 2nd measurement ( tons per ship hour on berth )

Total quantity of handled goods Ex: ship spent four days on the berth and worked one shift
(8 hours) on the first day, two shifts on the second day, third day, and one shift on the
Total hours on berth working or no fourth day, to stevedoring 4,800 tons of cargo.
Calculate ship completion per hour worked.
3. Indicators of productivity:

The measure here is the ( cost of handling one ton of cargo or costs in the port ), and divided into:
1. Fixed cost (consisted of)
• The capital costs of the berth construction.
• Fixed employee salary costs.
• Equipment Ownership costs, crane purchase costs and routine maintenance costs.

2. Variable cost ( Increase with the increase in performance )

• Temporary labour salary.
• Bonuses.
• Overtime hours.
• Fuel used in cranes.
• Maintenance & repair of some equipments .

3. Shipping cost ( the cost of handling goods from ports of export to ports of imports and cost of transporting at sea the sea voyage .)

Maritime transport is profitable business process, so ship owners must achieve revenues to cover expenses of operating the ship and
costs of managing it.

1. The ship operating efficiency proposed refers to the quantitative value that evaluate The continuous operation of ships.
2. The higher the ship operating efficiency, The higher The operating income of ships.
3. Net operating income of ship = operating revenues - operating costs.
4. Generally , ship costs refers to The various expenses consumed in the process of shipping goods by the ship.

Shipping costs into 2 parts:

1. Dock costs ( port fees & taxes).
2. Shipping freight.
• (Berth costs) paid to port authority.
Ship operating costs divided into:
↳ Divided into: • Fixed cost; necessary costs not affected by the volume of The goods transported
in it, number of ports entries nor length of sea voyage. These costs are spent even
1- Berth usage fees.
if one ship is moored and stopped working.
2- Berth handling fees.
3- Storage fees
• Variable cost; Changeable costs with changes in ship cargo volume, arrivals,
.
departures, organizational methods and other factors.
• (Fright prices )paid to ship owner.

↳ Divided into:
1- period of the ship stay in the port, includes costs of berth in terms of fees.
2- taxes paid to port.

3- fees of stevedoring. Factors that affect the evaluation of the operating income of ships:
1. Fuel costs.
2. Freight.
3. Port dues.
4. Disbursement and etc...
• The cost of transportation and consumption is different due to ship type.
The constrains need to be set according to The ship's operating conditions as
follows:
• Changes in the fixed cost of ship, fixed cost assumed to remain the same during
each period evaluated the operation efficiency.

• Changes in The type of goods transported by The ship & changes in the freight
prices.

• Changes in The unit price of fuel in The variable cost of The ship ( related to
place of production and market fluctuations ).

• Changes in port dues & disbursement.

The operating cost of the ships mainly include:

1. Capital cost ( is due to the depreciation of the ship).

2. Crew cost
• Direct cost (wage, travel, training and union fee)
• Indirect cost (recruitment, medical test, social dues, communication charges,
crew accident insurance payment and sick pay)
3. Fuel cost (is incurred due to the fuel consumption during the operation of the ship)
4. Port charges include port due and service charges.
5. Administration and management cost ( Based on administration and management
charges, communication costs, agents in ports and flag state fees).
6. maintenance, repair and insurance costs.

Example:
Maersk is viewing their reports trying to view how much profit they’ve maintained,
the business reported revenues of $3,000 ;
A. January fixed costs:
capital: $1,000
crew: $200
Port charges: $500
Total January fixed costs: $1,700
B. January variable expenses:
Marine fuel: $1,800
Ports due: $500
Total January variable costs: $2,300

Thus, TC=FC+VC=4,000
Profit = Revenue – TC= 3,000-4,000= (1,000)

A net loss of $1,000

 Maritime market
• Detriments of supply in maritime market :
1. Supply of shipping service is slow and ponderous in response to changes in demand. is
2. Merchant ships generally take about a year to build and deliver may take 2 to 3 years if the shipyards are busy. f s hips ps
p ly o g rou
3. Ships physical life 15 to 30 years. Su p y4
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tro
4. Factors affect supply of sea transport; con

The decision makers who control supply Decision makers who control supply
The merchant fleet
1. ship owners ( ordering new ships, scrapping old ones & deciding when to layup tonnage)
Fleet productivity
2. Shippers / charterers ( May become ship owners of influence ship owners by issuing time charters)
Shipbuilding production 3. Bankers ( finance shipping)
4. Regulators ( make rules for safety)
Scrapping and losses

Freight revenues

Merchant fleet
1. In the long run scrapping and deliver determine the rate of fleet growth.
2. Ships average economic life is about 25 years.
3. There is much specialization in the shipping market in there is also high degree of substitution between ships types.
4. The most striking feature of the word merchant feet in the last 30 years (Rapid escalation of ship sizes, specially the bulk
sector of the fleet)
5. Larger and more efficient ships have progressively pushed their way into the market and depressed rates for smaller sizes.

Fleet productivity
1- Speed
• Determines the time vessel takes on a voyage
• Ships generally operate at average speeds below their design speed

2- Port time
• Introduction of Containerization reduce the port time for liners
• Congestion produces temporary reduction in performance
• Congestion reduced the supply of ships available for trading

3- Deadweight utilization
• Refers to cargo capacity lost owing to bunkers, stores, etc.. which prevent a
full load from being carried.

4- Loaded days at sea

• Vessels designed for cargo flexibility can improve their loaded time at sea
because they are able to switch cargos for backhauls.
 Ship building production
1. Ship building is a long cycle business.
2. Time lag between ordering and delivering ship is between 1 to 4 years depends on the size of the
order book held by the shipbuilders.
3. Orders must be placed on the basis of an estimate of the future demand.

Scrapping and losses

1. Age
• Ships grow older and the cost of routine repairs and maintenance increase
• No specific age at which a ship is scrapped

2. Technical obsolescence
• May reduce the age at which vessel is scrapped
• Obsolescence extends to the ships machinery and gear

3. Scrap prices
Scrap prices fluctuate widely depending upon the state of supply and demand in the steel industry and availability
of scrap metal from sources such as ship breaking or the demolition of vehicles

4. Current earnings and Market expectation

• Scrapping will occur only when the industry's reserve of cash have been run down

Freight revenue
1. Short term
• supply responds to prices as ship adjust their speed and move to and from lay-up, while linear operators adjust their services

2. Long term
• Freight rate contribute to the investment decision which result in scrapping and ordering of ships.

• THE FREIGHT RATE MECHANISM

1. This is the adjustment mechanism linking supply and demand.
2. The way it operates is simple enough, ship owners and shipper negotiate to establish a freight rate which reflects the balance of ships and cargos
available in market ( if there is too many ships the freight rate is low, and if Few ships the rate is high)
3. Once the freight rate is established, shippers and shipowners adjust to it and eventually this brings supply and demand into balance.

The perfect competition model to analyze shipping in market:

1. The supply and demand function • Is The spot market that owners and charters deal with day Vide the ships are ready to load the
2. Equilibrium and importance of time cargos are awaiting transport and a deal must be done.
3. Monetary Equilibrium • The two parties negotiate to find a price at which supply equals demand
• Short run equilibrium
• Long run equilibrium • There is more time for owners and charters to respond to price changes by moving ships in and
out of the layup so the analysis is a little different.