Every business wants to be efficient. It might be the optimization of operations, processes, expenditure, energy, or resources; whatever the area of focus, few organizations will tolerate wastage for too long. In the interconnected world of logistics, efficiency is the north star. Efficient ship operations mean efficient fuel use; efficient supply chains mean efficient use of resources. But is there a way where shipowners and operators could still avoid arriving late without increasing fuel consumption and therefore aid decarbonization? Potentially, if the shipping sector adopts just-in-time (JIT) arrival.
Just In Time Arrivals
JIT isn’t a new concept – it’s been used in manufacturing for many years. In that context, it’s a production model in which items are created to meet demand, not in surplus or in case they’re needed. Benefits to this model include eliminating waste, guaranteeing that everything worked on is used and thereby boosting productivity, and minimizing storage and associated costs. Disadvantages include challenges in forecasting and responding to unexpected increases in demand and being vulnerable to crises affecting supply chains. In logistics, JIT means shipments arrive when required, cutting down the need for warehousing and the time capital is tied up in cargo.
Other modes of transportation already use JIT. Air is often used for time-sensitive, high-value shipments, with airlines, forwarders, and ground handling companies collaborating closely to eliminate unnecessary delays and disruption. Road haulage, often providing last-mile services, is also heavily involved in JIT, as are railways.
In other words, ships arrive on time to be met by relevant port services, cargo is efficiently discharged and loaded, and the vessel continues to its next destination. When deployed correctly, JIT arrival enables the optimization of vessel speeds during voyages. Rather than hurrying up before waiting, vessels receive regular updates on the Requested Time of Arrival at the Pilot Boarding Place (RTA PBP) and adjust speeds accordingly. In doing so, operators can better manage fuel consumption and significantly reduce greenhouse gas emissions (GHG). It is estimated that adjusting how quickly vessels reach their destination could eliminate 15-20% of shipping emissions without affecting fleet capacity.
But why is a recognized means of reducing emissions not yet reaching mainstream adoption for the shipping industry when it is under ongoing regulatory and commercial pressure to improve energy efficiency? Many of the challenges lie in how contracts are written. For example, in many instances, a certain amount of laytime is permitted on each voyage. Once that limit is surpassed, demurrage is can often be charged at a much higher rate than originally defined in the voyage charter was originally based on. It’s no wonder that demurrage remains a significant revenue source for owners. As such, it often incentivizes running the vessel in a so-called “hurry-up-and-wait” or “sail-fast-then-wait” (SFTW) model to arrive as early as possible, no matter whether a berth is available. This allows the operator to tender notice of readiness (NOR) and maximize demurrage potential.
There are also operational complexities in deploying JIT. It requires a coordinated collaboration between port authorities, terminal operators, cargo owners, intermodal providers, and other stakeholders involved in the port call to succeed. That’s not to say that other parties don’t stand to benefit; it’s just that getting everyone on the same page, particularly when there can be competing commercial priorities, has long been a challenge in shipping. For instance, vessel speed optimization requires ongoing communication of RTA PBP. Yet, while this is supposed to begin days in advance, in reality, many are not communicated until 48 hours before arrival.
Reducing Carbon Footprint
As shipping seeks to improve fuel efficiency measures, JIT arrival offers one solution that could optimize operations while reducing carbon emissions. Helping the industry move away from hurry-up-and-wait behavior could create new financial opportunities that would incentivize the adoption of this new approach. For this to happen, however, existing charter party frameworks must be transformed from static contracts to dynamic agreements that align both owner and charterer commercial and regulatory objectives. Using technologies such as sensors could enable insights that help build accurate predictions of speed and routes.
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