Category Archives: Managerial Econ

Posts relevant to Managerial Economics.

Physical Internet Initiative


The Physical Internet initiative, started in 2013, is active in 5 European countries.  Here’s a note about who is involved.

  They have a conference in Austria on July 4-6 of this year.

A standard like this could radically change the ocean container shipping business. It would affect landside operations as well.

Among other things it proposes a new form of smart shipping container called a pi-container, which would be able to interact with its contents  as well as with external systems to relay many facts about both the products states and the cargo position. The smart container would also be sized much smaller than a standard ocean shipping container, to support smaller package transport better, and to allow greater unitization and simpler and more automated transloading capability.

But ocean carriers have the largest upfront investment in their standardized container specs, since they must be designed into ships.  It would be very disruptive to have to replace all the current ships, so the path to adoption is clearly long, but the push is coming in some form. The same goes to some extent for air, rail  and truck, but since they often handle smaller product unit sizes anyway and the capital equipment is less costly (except in the case of air, which uses smaller custom containers anyway, and do not match the remaining standards). In the case of air, cargo is frequently carried in passenger planes so the cost is covered by the people not the cargo.  And a lot of air freight is package transport anyway since small size and high value are prerequisites for the much more costly air freight.

I think attention needs to be paid to the economics of migrating to the standard.  In the case of the shipping container the economics drove the transformation.  Economics must drive progress on a new model for transport as well.

Source: Physical Internet: simulation | TRACE

There are some real heavyweights involved in the initiative. Their website is below. It is intended as an open standard, that would encourage all carriers and shippers to use the ideas to simplify cooperation and handling of products during shipment, as well as increase visibility to the discrete product level and allow finer sensing of the many quality dimensions products of varying sorts need during shipment and delivery.

  physical internet initiative

Source: Physical Internet Initiative

Their publications are listed in a tab on their site.

Like most standards groups, we don’t know nor can we predict whether this standard will take hold. It has some big retail and grocery backers, but that is no guarantee.

There aren’t any after 2013, which raises the question whether this initiative is now defunct.

Bigger box ships calling at fewer ports puts serious pressure on hinterland connections – The Loadstar

Good article on the effects of larger box ships (which are calling at fewer ports). The hinterland infrastructure is going to have to adjust. I don’t think the ocean carriers are going back to smaller ships. The big ones are just too efficient to give up.

Source: Bigger box ships calling at fewer ports puts serious pressure on hinterland connections – The Loadstar

De-Risking Oil Tanker Investment Decisions

MIT students supervised by Dr Ioannis Lagoudis have come up with an analysis of tanker ownership buying or leasing.  This is a summary of the study.

A simulation study was made, based on a decision tree that covers chartering (leasing) a time charter or voyage charter (per trip), and buying a new or second hand vessel, and various horizon lengths.

It also discusses the risks.  Outcomes seem to show that under their assumptions, time charter is the least risky strategy.

It isn’t profound, but it is a very nice analysis.



Source: De-Risking Oil Tanker Investment Decisions