Export costs and service conditions in times of a global container shortage

Abstract

Covid-19, the Suez canal blockade and a decreasing amount of larger shipping companies have changed the container shipping industry. A power shift from the exporter towards the shipping companies is occurring, paired with capacity constraints and surging container transportation prices indicating a global container shortage. Exporters of large volume mainly experience this with contract negotiations and are left with a choice for higher prices or less flexibility in contractual service conditions whilst striving to become more sustainable. This study answers the following research question: ‘How should large exporters like HNS weigh off transportation costs, flexibility in service conditions and environmental effects for contractual agreements in times of a global container shortage?’. This study poses several designs through the DMADE methodology to anticipate the aforementioned changes. It does so by modelling several designs based on contract variables, a modal shift and a production division based on geographical locations of breweries for Heineken Netherlands Supply. The study found that higher standard tariffs for container transportation should be preferred above less flexibility. Next to that a modal shift towards road transport is advised if the service conditions in contractual agreements become less flexible.