Ocean Shipping

Shipping cargo by ocean freight in small volumes less than container load (LCL) is usually done
through a freight forwarder on LCL rates. When the volume is larger, it may be cheaper to ship
directly through a shipping line's agent using full container loads (FCL). This may involve using
20-foot (FCL-20), 40-foot (FCL-40), or both kinds of container types. FCL does not mean that the
containers have to be full, since shipping a partially-filled container on FCL rates may be
cheaper than LCL rates.

Assuming that volume (not weight or other considerations) is the only constraint, the shipper,
given the volume to ship from an origin to a destination, has to decide how many (if any) of
each kind of containers to use. The volume that exceeds the capacity of the containers is
assumed to be shipped as LCL.

If, in addition, there is a constraint on the cargo weight, the approach has to be modified.
What would you do?

This exercise was written as a basis for class discussion. It illustrates neither the effective nor ineffective
management of the given situation. Data provided may be entirely hypothetical.

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 Ocean Shipping © 2009 Leong Thin Yin. All rights reserved.

USD/cntr 30,000 18,000 USD/cbm

Vol (cbm) 55.0 26.0 780
S/N Min Vol FCL-40 FCL-20
(cbm)
1 0.0 0 0
2 23.1 0 1
3 41.4 1 0
4 78.1 1 1
5 96.4 2 0
6 133.1 2 1

container (cntr) cubic metre (cbm) US dollar (USD) US dollar (USD)

Vol FCL-40 FCL-20 Total FCL LCL FCL LCL Total Cost
(cbm) Max Vol Vol Cost Cost Cost /cbm
15.0
25.0
45.0

Questions
1. Given the lookup table C7:E12, what are your recommendations for shipping volumes above?
2. How are the input values in cells C7:C12 of lookup table C7:E12 determined?

LeongTY 550441998.xlsx/Proto
 Ocean Shipping © 2009 Leong Thin Yin. All rights reserved.

USD/cntr 30,000 18,000 USD/cbm

Vol (cbm) 55.0 26.0 780
S/N Min Vol FCL-40 FCL-20 Total FCL LCL FCL LCL Total Cost
(cbm) Max Vol Vol Cost Cost Cost /cbm
1 0.0 0 0 0.0 0.0 0 0 0 0
2 23.1 0 1 26.0 0.0 18,000 0 18,000 780
3 41.4 1 0 55.0 0.0 30,000 0 30,000 725
4 78.1 1 1 81.0 0.0 48,000 0 48,000 615
5 96.4 2 0 110.0 0.0 60,000 0 60,000 623
6 133.1 2 1 136.0 0.0 78,000 0 78,000 586

container (cntr) cubic metre (cbm) US dollar (USD) US dollar (USD)

Vol FCL-40 FCL-20 Total FCL LCL FCL LCL Total Cost
(cbm) Max Vol Vol Cost Cost Cost /cbm
15.0 0 0 0.0 15.0 0 11,700 11,700 780
25.0 0 1 26.0 0.0 18,000 0 18,000 720
45.0 1 0 55.0 0.0 30,000 0 30,000 667

Documentation
USD per FCL-40 cntr D3 <Input>
USD per FCL-20 cntr E3 <Input>
Vol (cbm) of FCL-40 cntr D4 <Input>
Vol (cbm) of FCL-20 cntr E4 <Input>
USD per cbm G4 <Input>
Minimum shipping volume C7 <Input>
# of FCL-40 containers D7 <Input>
# of FCL-20 containers E7 <Input>

Shipping volume (cbm) C17 <Input>, validated ≥ 0.

# of FCL-40 containers D17 =VLOOKUP($C17,$C$7:$E$12,2)
# of FCL-20 containers E17 =VLOOKUP($C17,$C$7:$E$12,3)
FCL volume available F17 =SUMPRODUCT(D$4:E$4,D17:E17))
LCL volume used G17 =MAX(C17-F17,0)
FCL cost (USD) H17 =SUMPRODUCT($D$3:$E$3,D17:E17)
LCL cost (USD) I17 =G$4*G17
Total shipping cost (USD) J17 =SUM(H17:I17)
Shipping cost per cbm K17 =IF(C17=0,0,J17/C17)

Comments
The values in the first column of the lookup table is computed using Goal Seek to find the breakpoint
volume at which the cost for one row is the same as the next row.
The values in the column are then shifted down by one row to make them lower (instead of upper)
limits of the interval for lookup use.

If cargo weight may also be constraining, create the same model using weights. The results of the
two approaches are compared and the result with the higher cost of the two is taken.

LeongTY 550441998.xlsx/Model
the breakpoint

ead of upper)

LeongTY 550441998.xlsx/Model