Newcastle University Business School

Empty Containers

Empty Containers

Empty containers could be costing the shipping industry up to $30 billion a year. Dr Jingxin Dong is intent on solving this problem.

The global liner shipping industry is worth an estimated $437 billion. It is thought that around 90% of international trade by volume is transferred by sea. The past few decades have seen rapid growth in the industry. Significant investment has been made, resulting in increased fleet sizes and an increasingly complex system.

One of the main problems resulting from this increased complexity is that of empty containers. The problem, says Dr Jingxin Dong, could be costing the shipping industry up to $30 billion a year. It’s a problem he is intent on solving. Using the application of mathematical and technological solutions to operations management, Dr Dong believes an algorithm he has devised could provide the answer.

Minimising costs and emissions

Currently, once a container reaches its destination, often having travelled great distances such as from Shanghai to Southampton, it is emptied. The containers are then left empty for periods of up to two weeks before being returned to their port of origin, a journey which often takes weeks.

Dr Dong believes that if shipping companies use the algorithm he has devised to better manage container flow, this could not only result in a huge cost saving for the industry but could help reduce the 1000 million tonnes of CO2 emitted annually which results in the shipping industry being responsible for 2.5% of global greenhouse gas emissions.

The industry’s focus is on maximising the profit and customer satisfaction from full containers, but not on minimising the cost and environmental outputs of the empty ones. This is because maximising the routes of the laden containers has a direct impact on customer service levels, as the shipments take less time and therefore cost the customer less. There is little consideration of the environmental and economic impact of sending an empty container from Southampton to Shanghai, if it is travelling with valuable full containers.

Sustainable solutions

Research around this issue suggests there are a number of key assumptions which must be considered before a solution to the problem can be found. These include the assumption that:

  • shipping vessels follow fixed routes and schedules which cannot be changed
  • decisions about unloading empty vessels are made when the vessel arrives at the port or when they are loaded onto the vessel

There are therefore two solutions which could be used by shipping companies to determine the best course of action for the company’s empty containers, both from a cost and a sustainability perspective. Firstly, a shipping company could change its routes according to consumer demands. Secondly, a company could consider the dynamic distribution of laden containers across its shipping routes.

The first solution would improve the existing shipping routes by determining the shortest path to be taken by liner ships. This is known as the two-stage shortest-path based integer programming solution method. This solution could be used at the planning stage and links together two customer service demands to enable ships to make the shortest journeys possible. However, to use this model efficiently the routes would have to be programmed on a daily basis and therefore from an operations perspective this is not the most time and cost effective solution.

The second solution, which is provided by Dr Dong’s research, is for shipping companies to apply an optimisation algorithm to tackle large scale planning problems. This solution is called the heuristic-rules based method and considers a much greater range of variables than just the convenience to customers. Whereas the first solution is only concerned with making changes to the physical route based on customer demands, the second solution is concerned with assigning the laden containers over the shipping network dynamically according to route plans. The first solution also only allows decisions to be made based on the full containers and not on empty container repositioning.

The second solution enables the shipping company to devise the most economical and sustainable routes. According to Dr Dong’s models, it could also result in an overall improvement in the performance of large scale shipping operations of 89.3% on average, and a cost reduction of between 5% and 10%. This algorithm also considers the use of other methods of transportation such as rail to move the empty container to where it is most needed if more appropriate.

The algorithm is currently a one size fits all solution. Dr Dong hopes to work with shipping companies to tailor it to their specific needs. Dr Dong would use the algorithm to create a computer programme, enabling individual shipping companies to manage their operations to the greatest efficiency.

By applying the algorithm in this way, Dr Dong hopes that the industry could save billions of dollars and reduce its emissions, which are predicted to increase by between 50% and 250% by 2050. This would help the industry to become more profitable and more sustainable.

Discover more of our research.