Tag: shipping industry

OM in the News: How to Make a Ship Bigger–Cut it in Half First

What’s a cruise company to do when it needs a bigger ship? Apparently, just saw it in half and add an extra 49 feet. Silversea Cruises began the lengthening process of its Silver Spirit ship this month as part of a $100 million renovation, USA Today reports (March 20, 2018).

The transformation is currently underway at Fincantieri Shipyard in Italy. This type of lengthening has never before been employed for the extension of a luxury cruise ship. An extension is much cheaper than ordering a brand new ship, which can cost upwards of $1 billion.

The project will create more space in public areas and will enhance Silver Spirit’s facilities, including adding increased space to the dining area, making room for additional outdoor seating, expanding the pool deck, a new spa, two new public spaces and a new aerobics area.

The massive expansion will require 500 workers who will spend approximately 450,000 hours in the job. The project will be complete in May, 2018. (Construction of the new section began 10 months ago). When finished, the Silver Spirit will measure 691 feet in length and have an increased capacity of 12%. About 846 tons of steel, 360,892 feet of cabling and 26,247 feet of piping will be put to use in the lengthening.

Classroom discussion questions:

  1. Compare the Silver Spirit to Royal Caribbean’s brand new Symphony of the Seas.
  2. Is this project more or less complex than building a ship from scratch? Why?

 

 

OM in the News: UPS’s Holiday Capacity Struggles

UPS's "white glove" delivery market is one of the fastest growing areas of e-commerce, in which drivers are required not only to deliver but unpack and install bulky items in customers' homes.
UPS’s “white glove” delivery market is one of the fastest growing areas of e-commerce, in which drivers are required not only to deliver but unpack and install bulky items in customers’ homes.

Capacity decisions, our main topic in Supplement 7, have quality, human resource, and maintenance implications which are evident at shipping companies this holiday season. On-time delivery rates for UPS ground packages last week fell to 91%, from UPS’s usual 97% average, reports The Wall Street Journal (Dec. 11, 2015). The giant firm has been slammed with unexpectedly high volumes, extra pickups and not enough staff and equipment to handle all of the packages. UPS this week assigned managers from corporate headquarters in Atlanta and elsewhere to work at delivery centers to handle the additional packages.

The reason: Online sales surged more than expected over the Thanksgiving holiday weekend and into last week. Consumers spent an estimated $4.45 billion online on Thanksgiving and Black Friday, with Black Friday sales rising 14% from a year ago. UPS and FedEx are trying to a avoid a repeat of 2013, when their systems were so overloaded at the last minute that they couldn’t deliver everything on time. But they also are wary of overdoing it like UPS did last year when it overspent and over-hired commensurate to the volume.

Both years, UPS ran over cost estimates by $200 million. This year it has increased capacity by 6% by modernizing its hubs among other things, and it has planned to keep seasonal hiring to the same levels as last year and bring on extra workers as needed.

Classroom discussion questions:

  1. What tactics are available to help match capacity to demand (see page 302)?
  2. What has UPS done to tackle the problem?

OM in the News: The Shipping Revolution

Fortune (May 21, 2012) carries a fascinating analysis of the global shipping industry that fits nicely into a discussion of logistics in Chapter 11. We find in the article that nearly 90% of all goods traded across borders travel at some point by sea.The fastest growing routes are between ports in Asia, accounting for 43% of all maritime trade., with the most heavily trafficked route being between China and the US West Coast. Unfortunately for the trade deficit, 4 times as many goods travel to the US than make the return trip. New, faster routes are opening with the Northeast and Northwest Passages ice-free every summer since 2008.

The real revolution has been in the ships themselves. Back in  the 1956-1970 era, cargo vessels were 443 feet long and hauled 500 twenty-foot “equivalent container units” (called TEUs). Next year, Maersk, the Danish shipping giant, will launch its EEE-Class, the largest cargo ship in history. Length: 1,312 feet. capacity: 18,000 TEUs. Cost: $190 million/ship.

As ships have gotten bigger, economies of scale have improved, and the cost of shipping has dropped dramatically. Here are some typical ocean-crossing costs: TV, $10; DVD player, $1.50; vacuum cleaner, $1; barrel of oil, 80 cents; 6-pack of beer, 6 cents; 100 pounds of coffee, $6.80. (Oil, grain, and iron are more expensive because ships make the return trip empty.)

And the containers themselves are no longer just a steel box. They have doubled to 40 feet, and are often fitted with RFID chips to let ports and owners keep track of them. Some  containers are built to be folded up when empty. Others can float if lost at sea and  come with GPS satellites to make them easier to find in the ocean.

Discussion questions:

1. Why are the ships getting bigger and bigger?

2.  What are the dangers facing the shipping industry?