3.1 The Port of Jeju Island and the Port of Mokpo
Jeju Island lies in Korea straight; Mokpo lies in the southwest of Jeollanam-do province. The distance from the northernmost point of Jeju to Mokpo is 178 km.
On Jeju Island, there are six ports: Jeju, Sungsanpo, Seogwipo, Hwasun, Hanlim and Aewol. The port of Jeju handles about 71% of total port handling volume (Fig.
3). Throughout this paper we are speaking of JMCR, referring to the port of Jeju.
Fig. 3
Fig. 3 Ports turnover volume
Units: Thousand ton, percent (share)
Source: Jeju Logistics master plan (2016)
The port of Jeju is measured at 20 berths with a total area of about 3,771 m² and the length of the quay wall is 3,518 m., its open-storage area is 114 thousand m², and its cargo handling capacity is 13,456 thousand R/T per year.
The port of Mokpo is measured at 27 berths with a total area of about 41,300 m² and the length of the quay wall is 5,149 m., its open-storage area is 568 thousand m², its cargo handling capacity is 2,632 thousand R/T per year.
Sea and air are the only transport modes for Jeju Island; therefore, the logistics cost between itself and mainland South Korea are relatively high. By sea, Jeju is connected with Mokpo, Busan, Incheon, Pyeongtaek-Dangjin and other ports. Table
1 summarizes the traffic outbound Jeju Island.
Table 1
The Jeju Island -mainland traffic volume
The JMCR reaches up to 62% (690.8 thousand tons) of the Jeju-mainland freight turnover volume in 2015.
Table
2 shows shipping routes between ports.
Table 2
The Jeju Island - Mokpo shipping routes
The shipping routes were designed to serve the Jeju local manufacturers of bottled mineral water (JEJU Lava Water; Samdasoo), agricultural products and other goods.
The K Line was the first type of cargo ship to be introduced in Jeju as Container (LO-LO) & Vehicle Carrier (RO-RO) that can receive cars and be loaded with containers simultaneously. The tonnage is the largest among cargo ships registered on Jeju.
International standard containers (20 ft. and 40 ft.) are not common in the Jeju area, instead, smaller non-standardized containers are widely used - about 80% of them are 8 foot containers.
Table
3 presents the usual cargo types shipped in containers between Jeju and Mokpo - mostly fruits, fodder, inorganic compounds, and vegetables.
Table 3
Goods, transported between Jeju and Mokpo (2010-2015) (Units: R/T)
3.2 Jeju - Mokpo Container Route cost-effective analysis
For the purposes of this paper, we made the assumption that four empty foldable 8 ft. containers can be bundled into a stacked unit, which equals in size to one 8 ft. standard container.
On the basis of the number of links in the logistics chain, the port-to-port concept was employed. The transportation by Jeju - Mokpo - Jeju (or Mokpo - Jeju - Mokpo) container route is assumed to be a one-cycle route; the Jeju - Mokpo (or Mokpo - Jeju) route is a one-way route. The one-cycle route:
consists of several stages, listed in Table 4 and 5;
the duration of sea journey is one day;
the duration of land stage is 14 days total in both directions and it includes periods of stay at terminals and in depots;
the average duration of an empty container’s stay in a depot in one-cycle route is 10 days.
one-cycle route reaches 15 days and there are 2 cycles in one month.
Table 4
The one-cycle route cost, using a standard container
Table 5
The one-cycle route cost, using a foldable container
It was also assumed that containers were purchased. The price of a standard and a foldable container is 1,500,000 won and 3,000,000 won, respectively.
The fees for activities was set for one 8 ft. container and in terms of laden or empty container may vary.
All these assumptions, as well as fees and records from following tables, were made in conformity with the data received from Korea Container Pool Co., Ltd.
In Table
4 and Table
5 one-cycle route costs, split up into activities, are shown. In this case, loaded containers go from one port to another, but on the way back - they are empty. Additionally, it is assumed that foldable containers are being folded and unfolded in a terminal. 1,500,00 / 10 years / 12 month = 12,500won per month, there are two cycles in one month - 6,250won per one cycle.
The share of movement costs of empty containers in total chain costs is 24.17%. The most expensive activity of an empty container handling is sea transportation - 16.23% of total chain costs.
Table
5 shows that costs for sea transportation of an empty container can be decreased notably, from 16.23% of total chain cost to just 4.32%. The share of folding/unfolding fee in total chain costs is 3.77%. The share of a standard container exploitation costs in the total chain is 1.01%; in the case of foldable containers, the share is 2.36%.
The potential chain savings in this concept are 85,425 won per one cycle for one container.
According to Table
6, in 2010-2015, there were 101,955 empty containers on JMCR. So, the chain savings in 2010 could be 883 million won; in 2011 - 1.181 billion won; in 2012 - 1.201 billion won; in 2013 - 1.611 billion won; in 2014 - 1.891 billion won; in 2015 - 1.943 billion won.
Table 6
Jeju - Mokpo Container Traffic (consolidated), in 2010 - 2015 years (Unit: 8-ft. container)
Table
6 clearly shows that the quantity of containers is growing over the years. The JMCR is obviously actively developing and in demand. Along with the increase of container traffic, the number of empty containers increases as well. However, the share of empty containers remains almost the same (23% on the average).
In Table
7 we can notice a remarkable full/empty container imbalance. There are only few outgoing empty containers from Jeju (3% at average), most of the containers leaving Jeju were loaded. Many more (42% on average) empty containers come from Mokpo. So, it leads us to another angle on chain cost - Table
8 shows the one-way cost of a single container.
Table 7
Jeju and Mokpo Container Traffic (by directions), 2010 - 2015 years (Unit: 8-foot container)
Table 8
One-way route cost (Unit: won)
The one-way route is the Jeju - Mokpo (or Mokpo - Jeju) route; it is half of a one-cycle route and consists of the following activities step by step, but varies in term of laden or empty containers, standard or foldable containers: “Transportation: depot-terminal”, “Unfold container”*, “Cargo loading”**, “Container handling cost”, “Sea transportation”, “Container handling cost”, “Cargo unloading”**, “Fold container”*, “Transportation: terminal-depot”, “Depot receipt”, “Depot storage 5days”, “Exploitation costs 1/2 of cycle”. The unfold/ fold container fee was omitted for standard containers. The cargo loading/unloading fee was omitted for empty containers.
Hence, in the case of a “FULL<->EMPTY” route in which full containers go from one port to another, and return empty, a foldable container provides a more cost-efficient return journey. On the contrary, the case of a “FULL<->FULL” route in which the full containers on a round trip, can lead to additional expenses.
The benefits from foldable containers can be calculated by years and by directions (Table
9). In this table, we assumed that if 100% of all containers on the JMCR were foldable.
Table 9
The amount of savings from using foldable containers (Unit: million won)
As discussed above, the benefits on Jeju - Mokpo route cannot be achieved, because most of the containers are being shipped full. Notwithstanding, the benefits for the opposite direction (Mokpo - Jeju) are substantial enough to cover the losses. Thus, the chain savings could be: in 2010 - 356,512,140 won; in 2011 - 729,596,357 won; in 2012 - 628,782,945 won; in 2013 - 1,153,826,278 won; in 2014 - 1,252,658,337 won; in 2015 - 1,112,945,967 won.
Optionally, the seasonal fluctuation can be examined on Fig.
4. We assumed that foldable containers are valid when the average number of empty containers on route exceeds 500 units per month (Table
10).
Fig. 4
Number of empty containers on Mokpo - Jeju direction
Unit: 8 ft. container
Source: Authors’ calculation
Table 10
Average number of empty containers from 2010-2015 (Unit: 8-foot container)
For other months, standard containers are more preferable due to the number of empty containers being minimal.
The seasonal pattern suggests that from January till March and from September till December - 100% of all containers must be foldable. From April till August - 100% of all containers must be standard.
The abovementioned pattern could have reduced the annual costs of the supply chain by 2.2% in 2010, 3.5% in 2011, 2.6% in 2012, 4.7% in 2013, 4% in 2014 and 3.3% in 2015
1). The total annual cost for all cases is given in Table
11.
Table 11
The comparison of seasonal costs and benefits (Unit: million won)
Table
11 also shows the amount of savings from the seasonal usage of foldable containers: 517 million won in 2010; 830 million won in 2011; 713 million won in 2012; 1.260 billion won in 2013; 1.397 billion won in 2014 and 1.376 billion won in 2015.
The seasonal pattern could have saved additional 160 million won in 2010; 100 million won in 2011; 84 million won in 2012; 106 million won in 2013; 144 million won in 2014 and 263 million won in 2015.
Considering the aforementioned, it was decided to analyze a mixed percentage of foldable and standard containers on the route. Following from the number of empty containers on the route and taking into account the seasonality pattern, we assume the percentage of foldable containers in Table
12.
Table 12
Percentage of foldable containers on the route
All of the received data was summarized in Table
13. If we compare the amount of total annual cost and the amount of savings in the case of a mixed container pool with seasonal patterns included, against 100% foldable or 100% standard container pools, more positive results can be achieved.
Table 13
Costs and benefits of mixed percentage of foldable and standard containers on the route, considering the seasonality. (Unit: million won)
A mixed percentage of foldable and standard containers would allow us to reduce the annual cost of the supply chain by 3.4% in 2010, 4.5% in 2011, 3.8% in 2012, 4.8% in 2013, 4.5% in 2014 and 3.4% in 2015
2).
The current analysis may be extended by a sensitivity analysis; it allows us to explore the impact of uncertainty on our findings. This sort of consideration is found to be reasonably valid for studying how measured quantities vary when our model’s parameters are varied within a specified range.
First, we define a parameter to vary: exploitation cost (1) of a foldable container; folding/unfolding charge (2), and empty container share (3) - Fig.
5. The range of values, within which the parameters will vary: increase by 50%, decrease by 50%.
Fig. 5
Sensitivity analysis
Units: Korean won
Source: Authors’ calculations
The results show that the benefits from using foldable containers actually depend on variation of these parameters. The most sensitive variation is “empty container shares” (3). In the case of a significant decrease of this parameter’s value, the benefits from using foldable containers will disappear. Changes in the folding/unfolding charge (2), undoubtedly, give significant effects. The benefits from foldable containers usage depend on all types of additional costs, including the abovementioned parameters. Additional costs should be reasonable enough so that the benefit can cover them. As for the exploitation cost (1), when foldable containers are produced on a larger scale, their purchasing price should decrease substantially.