Container Interchange: the 6 R Model Approach Lalith Edirisinghe CINEC Maritime Campus Dalian Maritime University-China Malabe, Sri Lanka lalith.edirisinghe@cinec.edu Zhihong Jin College of Transportation Management, Dalian Maritime University Dalian, China jinzhihong@dlmu.edu.cn A. W. Wijeratne Sabaragamuwa University of Sri Lanka Po Box 02, Belihuloya 70140 Sri Lanka. awwijeratne@yahoo.com Abstract— The effectiveness and efficiency of container shipping service predominantly depends on the carriers’ ability to identify, satisfy and anticipate exporters’ demand for containers profitably, better than the competitors in a social responsible manner. The ‘Container Interchange Matrix’ (6 R model) would provide an effective guidance to carriers in the container inventory management decision making process. Carriers can simulate their individual cases using this model and administer the container exchange mechanism thus strike the right balance between the exporters’ demand and the carriers’ ability to supply. Keywords—Container; 6 R model; maritime; exporter; carriers I. INTRODUCTION Container Shipping Lines (CSL) continue to face serious challenges due to container inventory imbalance (CII) since invent of containers. This is primarily caused by the variations of worldwide trade distribution patterns. With the introduction of multiple types and sizes of containers that were developed to ‘best suit’ the variety of cargos container inventory (CI) became more complex thus problems it created. However, this is an additional service component relevant only to container shipping. In contrast carriers (i.e. break bulk, bulk, tanker etc.) could offer services if the ships/space are available. Container shipping has a fundamental difference compared with other shipping types. Ship space (slots) and containers are complimentary to each other without which the “Container shipping service” cannot be rendered to its customers unless both components are available simultaneously at a given location. This is a unique feature in container shipping and it makes huge disadvantage to carriers managing their container supply chain unlike in other ship types. The world shipping fleet is mainly comprised of oil tanker bulk carrier general cargo ships, container ships, gas carrier, chemical tanker, offshore, ferry and passenger ships. The influence of container shipping industry on the global supply chain is gradually increasing. The percentage share of container shipping shows a sharp growth in the global supply chain. According to Maritime Review 2016 from 1980 to 2016 the container share in the world fleet by ship type has increased from 1.6 % to 13.5 %. The containers added an additional cost to carriers and there are 5 key components in the total cost namely, Capital (32%); Repair and refurbishment (25%); Imbalance (22%); Clearing and maintenance (11%); Insurance (10%) (Alderton, 2004). Accordingly, research and development in each area would be highly beneficial to the industry. Apart from the direct cost of empty container repositions it also increases the carbon footprint through excessive transport (Edirisinghe, Zhihong, & Wijeratne, 2016(a)) A balanced inventory may be realized only when the exporters’ demand for containers are equal to the laden containers imported into the country. This equality in gross number of containers is not sufficient to have a ‘balanced’ container inventory. It should satisfy the criterion of ‘right type’ and ‘right size’ of containers. Essentially, the quantity of right type and size of container imported should be equal to the demand of its exports. In certain cases, the ‘right quality’ of containers also matters because, cargos that are sensitive in nature need certain ambitious standards of quality as prerequisite of stuffing such exports. For example, a container that is imported with construction materials may not necessarily be suitable to load an export shipment of tea or garments. Thus, the mere ‘seaworthiness’ of containers is not sufficient to determine a balanced CI. Even if all the conditions are balanced the ‘right’ CI should be available at the right time and right location. Accordingly, it is very unlikely that carriers always have ‘balanced’ CI given the above circumstances and CII usually become a common phenomenon in the container liner shipping industry. The container imbalance primarily occurs due to recurring variance consequent to the trade imbalance that the carriers have no control of. Fundamentally, interchange between those who have excess and those who have shortages at a specific location is the simplest way of balancing container inventories (Edirisinghe, et al., 2015). Researchers noted that there are provisions in certain joint agreement between container carriers allowing them to exchange containers but the resistance particularly from shipping agents have impede carriers’ right of taking the commercial advantages of collaboration. The primary objective of the research is to define a systematic approach namely, the 6 R model. It consists 6 components that help carriers evaluate container exchange possibilities and align the exporters demand with carriers’ ability to supply. The overall outcome of CE minimizes container imbalance thus reduce transportation cost. Therefore, the paper also evaluates and discuss as to what extent the container exchange method is feasible. 4th IEEE International Conference on Logistics Operations Management-GOL'18 Le Havre, April 10-12, 2018 10