A Strategic Empty Container Logistics Optimization in a Major Shipping Company

Abstract

In this paper, we present a system that Compañía Sud Americana de Vapores (CSAV), one of the world’s largest shipping companies, developed to support its decisions for repositioning and stocking empty containers. CSAV’s main business is shipping cargo in containers to clients worldwide. It uses a fleet of about 700,000 TEU containers of different types, which are carried by both CSAV-owned and third-party ships. Managing the container fleet is complex; CSAV must make thousands of decisions each day. In particular, imbalances exist among the regions. For example, China often has a deficit of empty containers and is a net importer; Saudi Arabia often has a surplus and is a net exporter. CSAV and researchers from the University of Chile developed the Empty Container Logistics Optimization System (ECO) to manage this imbalance. ECO’s multicommodity, multiperiod model manages the repositioning problem, whereas an inventory model determines the safety stock required at each location. CSAV uses safety stock to ensure high service levels despite uncertainties, particularly in the demand for containers. A hybrid forecasting system supports both the inventory and the multicommodity network flow model. Major improvements in data gathering, real-time communications, and automation of data handling were needed as input to the models. A collaborative Web-based optimization framework allows agents from different zones to interact in decision making. The use of ECO led to direct savings of $81 million for CSAV, a reduction in inventory stock of 50 percent, and an increase in container turnover of 60 percent. Moreover, the system helped CSAV to become more efficient and to overcome the 2008 economic crisis.