Fleet Expansion Strategy of Indonesian Container Line Integrated with Sea Tollway Logistics System

Abstract

This paper presents the potential fleet expansion strategy to be deployed by one of Indonesian shipping liners for Indonesia’s domestic shipping market. Incorporating the new changes on the sea tollway logistics system, the study performed an analysis to provide a subtle investment strategy for container shipping given market uncertainties that might happen in the future. The study performed economic growth analysis and translated them into freight growth potential. By incorporating diverse company market capitalization scenarios, relevant expansion strategies were discovered. It is found that slot utilization and carrying capacity plays important role in assuring company’s profitability. The proposed research also suggested potential new routes to be exploited by the container shipping line.

Appendices

Appendix A

Detail Formula

Regional Economic Growth (Song and Geenhuizen 2014 )

$$\begin{aligned} Y= f(K, MAN, TID, S, IC) \end{aligned}$$

(1)

Where Y denotes the real gross domestic products as an outcome; i and t are the indices for the main port of each province and year respectively; K describe about the ferry and inland waterways investment plan; MAN represents about the share of manufacturing sector in the annual GDP; TID is the traffic infrastructure density; S is the potential spillover effects in the adjacent port of each provinces; and IC which represents the total aircraft movements (used to assess connectivity of the port provinces to the international connectivity).

Freight Demand Growth (Ortuzar and Willumsen 2002 )

$$\begin{aligned} T_{ij} = \tau _{ij}.t_{ij} \end{aligned}$$

(2)

Where ${T_{ij}}$ is the flow from i to j at the design year, ${\tau _{ij}}$ is the growth factor and ${t_{ij}}$ flow at the base year. The growth factor of a region determines the change in its supply, therefore, the growth factor is applied from the origin provinces.

Fleet Development Analysis (Tran and Hassis 2015 )

$$\begin{aligned} {rev_{it}} = \beta _0. cap_{it}^{\beta _1} size_{it}^{\beta _2} slot_{it}^{\beta _3} oil_{it}^{\beta _4} fr_{it}^{\beta _5} \epsilon _{it} \end{aligned}$$

(3)

$$\begin{aligned} {u-rev_{it}} = \beta _0. cap_{it}^{\beta _1} size_{it}^{\beta _2} slot_{it}^{\beta _3} oil_{it}^{\beta _4} fr_{it}^{\beta _5} \epsilon _{it} \end{aligned}$$

(4)

$$\begin{aligned} {cost_{it}} = \beta _0. cap_{it}^{\beta _1} size_{it}^{\beta _2} slot_{it}^{\beta _3} oil_{it}^{\beta _4} fr_{it}^{\beta _5} \epsilon _{it} \end{aligned}$$

(5)

$$\begin{aligned} {u-cost_{it}} = \beta _0. cap_{it}^{\beta _1} size_{it}^{\beta _2} slot_{it}^{\beta _3} oil_{it}^{\beta _4} fr_{it}^{\beta _5} \epsilon _{it} \end{aligned}$$

(6)

Where

$\beta _1, \beta _2, \beta _3, \beta _4, \beta _5$       : slope parameter;

$rev_{it}$                   : variation of total revenue;

$u-rev_{it}$               : variation of unit revenue;

$cost_{it}$                  : variation of total cost;

$u-cost_{it}$              : variation of unit cost;

$cap_{it}$                   : variation of fleet capacity;

$size_{it}$                  : variation of average ship size;

$slot_{it}$                   : variation of slot utilization;

$oil_{it}$                    : variation of oil prize;

indexes                : i for carrier, t for year;

Appendix B

Parameters for fleet expansion profitability analysis

Table 4. Decision and control variables