Literature Review

According to Pacione (2013) in the recent years maritime industry has developed a great focus on maintaining risk management within supply chain and maritime logistics context of dealing with risk in a better manner. Moreover, the marine operations have certain risk problems those have an impact on the people along with the environment. Reduction or dealing with all type of risk factors is needed to be ensured through employing suitable risk management processes. Considering the same the literature review will focus on explaining the risk management process in maritime logistics along with evaluating the likely risks those are faced by the maritime industry.

In marine industry there has been a considerable growth toward security, safety along with risk assessment-based strategies like marine insurance and regulations. This is in order to deal with the risks related with damage causing to properties and the environmental aspects. The steps taken by the maritime logistics industry is observed to be very sluggish and particularly the risks associated with the decision-making processes and the business functions (Merk and Notteboom 2015). The literature review will also focus on analysing that in marine industry most of the perceptions, methodologies and frameworks of dealing with risks, hazard, safety and security risks faced are for evaluation rather than proper management.

Keeping this into consideration, the concerned section tries to conduct an extensive and elaborate review of the existing literary evidences and scholarly works present in this respect. This is in order to discuss the different scholarly opinions present regarding the above-mentioned issues, in relation to the maritime industry, globally as well as with respect to Australia. Moreover, it also facilitates in analysing the steps and policies recommended by the literary evidences to mitigate the concerned risks in the industry.

With the increase in the waterways transport activities across the globe, with the years, the notion of maritime logistics has been becoming increasingly popular across the globe and its importance can also be seen to be felt all over the world, especially by the industrial and commercial sectors of the countries, setting up trade and economic relations with other countries in the contemporary period of Globalization and trade liberalisations (Song and Panayides2012). In this context, it becomes immensely crucial to understand the meaning of the term “Maritime Logistics” and the perceptions or notions present across the globe regarding the same, in order to discuss the challenges and risks faced by the concerned industry. Keeping this into consideration, the following section of the review tries to discuss the different definitions and opinions regarding risks faced in maritime logistics operations and related risk management approachesput forward by the scholars across the globe in order to explain the concerned notion and the debates existing in this domain.

Maritime Logistics in a Global Context

Songand Panayides (2012), defined the term “Maritime Logistics”, to primarily imply transportation of different raw materials, intermediate commodities as well as final commodities from one geographical location to another, in a global scale, so as to primarily cater to the industrial demands as well as the demands of the consumers and households across the globe (Songand Lee2012). However, this definition of the notion of maritime logistics is countered in the work of Lange, RinneandHaasis (2012), who discard this perception of the same, and proposed a definition that Maritime Logistics is more of a traditional one, only encompassing the aspects of transports of commodities across the globe, particularly focussing on the industrial and commercial needs.

Research conducted byPawlik, Gaffronand Drewes (2012), explained that maritime logistics, in the contemporary period, is not only concerned with the transportation of goods between two or more sea ports (maybe of same country or different countries across the globe), but also deals with the aspects of transportation of passengers (both leisure as well as work-related commuters) across different places. Augmenting this perception, Meersman, Van de VoordeandVanelslander (2012), put forward a much broader and multidimensional explanation of the term “Maritime Logistics”. As per the assertions of the authors, maritime logistics maritime logistics is also a crucial part of the supply chain logistics of the businesses across the globe, participating in supplying the raw materials and intermediate products and requirements to them and also acting as a bridge between the companies and their clients (Grammenos2013). The assertions of YercanandYildiz (2012), augment that of the previous authors and they also add to the discussion by arguing that the in-land transportations, that is the transport and logistic activities taking place within the different ports, are also parts of the maritime logistics industry in the global framework (Yercanand Yildiz2012).

VitsounisandPallis (2012), in this context suggest that the concept of maritime logistics, in the centre of its principles itself, contains the concept of physical and economic or strategic integration along with that of organizational integration (constituting od people, relation and process) which in turn collectively contribute in the attempt of creating greater values both for the stakeholders as well as for the consumers across the globe.

Thus, from the above definitions and opinions found to be present in the global scenario, it can be concluded that in the contemporary period, the notion of Maritime Logistics, for most of the scholars can be seen to be surpassing its traditional definition. Maritime logistics can be understood astransportation of goods or passengers between two or more seaports. Moreover, logistics in maritime industry is also the function of maintaining flow of materials to supplies to companies through operations in seaports. This can also facilitate inmarking its presence and significance in the entire journey from the initial raw material suppliers to the final customers of the commodities produced by the businesses.

The Types of Maritime Cargoes

The notion of maritime logistics being a widespread one, there are different activities and crucial roles played by the participants of the concerned industry as highlighted by different scholars across the world, at different points of time. The principle activities of maritime logistics can be seen to be as follows:

• Transporting raw materials (both inter-nodal and normal) between two or more sea-ports (which can be situated within the same country or in different countries)
• Acting as one of the primary components of the supply chain frameworks of different companies, especially those commercial ones having theiroperations, suppliers or sales across different markets in diverse geographical locations
• Contributing in the cost effectiveness, productive efficiency and allocative aspects of goods and services as well as intermediate materials across the globe, thereby catering industrialisation (Min2012)

GuerreroandRodrigue (2014), in their elaborate research paper emphasizes on the primary function of the maritime logistics, of that of transport of materials from suppliers to the producers and from the producers to that of the final consumers. Waltersand Bailey (2013), in this context, provide a detailed description of the types of maritime cargoes which are usually of the following types:

Figure 1: Types of Maritime Cargo

(Source: Hoffmannand Kumar2013)

Break Bulk- The break bulk cargo are those types of commodities which are required to be loaded individually and not by intermodal containers or in bulk and are transferred from one mode of transport to another, usually in bags, crates, drums, barrels, boxes and others (Rodrigue2012).

Example: Crates, Cartons, Sacks, Bags, Drums, Pallets and others.

Neo Bulk- This sub-category of general cargo comprises of commodities which are pre-packaged and are loaded or unloaded and transferred at ports as units. These are not stored in containers as opposed to the previous form of cargoes.

Example: Steel, Paper, Lumber, Autos and others (Ducruet, Jolyand Le Cam2014).

Containerized Cargo- Laxe, Seoaneand Montes (2012), define the process of containerization, in context of maritime logistic activities as the process of intermodal transport of freights with the help of containers (which are also known as shipping containers or ISO containers), which usually have globally conventional and standardized dimensions. The containerized cargoes are loaded, unloaded, transported and stacked for long distances and can also be transferred from one transport mode to another (Bellet al. 2013). The handling of containerized cargoes is usually mechanized with numbering and tracking systems for each of crates with the help of computerized systems.

Example: Lift on Lift off containers, Roll on Roll off containers

Liquid Bulk- These types of cargoes are liquid in nature and are usually transported in bulk or large quantities in unpacked manners, that is, in their crude forms.

Example: Petroleum, LNG, Chemicals, Vegetable Oil, Molasses and others.

Dry Bulk- The maritime logistics not only deal with liquid forms of bulk cargoes but also involve in transporting dry forms of commodities in bulk.

Example: Grains, Gravel, Scrap, Sand, Clinker, Fertilizer, Coal, Metal and others (Lee and Lee2016).

The Activities and Challenges of Maritime Logistics

The increase in the industrialisation has led to the need for transporting huge bulk freight across the globes, which primarily include both dry as well as liquid bulk freights which can be minor as well as major bulks, as can be seen from the ton-miles shipped by the Maritime Transportation across the globe (Acciaro 2013). This can be seen from the following figure:

Figure 2: Ton-Miles of different cargoes which have been shipped by Maritime Transportation (In Billions) (1970-2005)

As is evident from the above figure, among the different commodities, substances like oil, iron and coal accounts for the majority of the ton-miles which are shipped in the domain of maritime logistics, over the years, in the contemporary global scenario.

Thus, from the above discussion, it can be evidently seen that the maritime logistics, apart from being a considerably crucial component of the supply chain logistics, also plays active roles in transporting different types of cargoes from one place to another for facilitating production, industrial development as well as global consumption over the years.

Over the years, the international trade for commodities and services has increased considerably, much of which can be attributed to the increasing integration and inclusiveness of the global commercial framework and the technological and infrastructural progress. This can be seen from the following figure, which shows the total global trade volume over the years:  

Figure 3: Dynamics in the global commercial scenario and trade volumes over the years

(Source: Epa.gov2018)

As is evident from the above figure, over the years, the world merchandise trade volume has increased significantly and more or less stably, barring the period between 2007-2008. Eatonet al. (2016), attributes this temporary slowdown of both the global merchandise trade as well as the global GDP dynamics to the Global Financial Crisis of 2007-2008, which led to an international slowdown and recessionary situation across the world. Both the dynamics, however, can be seen to be gaining pace post-recession. In context to this, the global sea-borne trade can also be seen to be increasing at a rapid rate, with the pattern of growth of the sea-borne trade being similar to that of the dynamics of the global merchandise trade (Athukorala2014).

MaurerandDegain (2012), in their empirically evidenced paper, highlights another important dynamic in the global maritime logistics in the aspect of vessel capacities. According to the authors, with time, not only the trade volumes by waterways increased, but also the capacity of the container ships in the sea-borne trade rose significantly, which can be seen from the following figure:

Environmental Risks in Maritime Logistics

Figure 4: Capacity of the container ships in the sea-borne trade over the years (1980-2017) (In million dwt)

(Source: Statista 2018)

As is evident from the above figure, over the years, the container ships have upgraded their capacity of containing materials substantially which also can be seen to be positively contributing to the volumes of trade by sea-routes, thereby increasing the dynamics in the maritime logistics(Athukorala 2014). Apart from the increase in the transportation of goods across the globe by ships, the number of passengers across the world, travelling by ships (both for the purpose of business or pleasure) has also increased cumulatively and considerably over the years, as is opined in the work of Weintritand Neumann (2013). This assertion can be seen to be empirically supported by the increase in the number of global cruise passengers over the last few years, as can be seen from the following figure:

Figure 5: Increase in the number of passengers by cruise across the globe over the years

(Source: Cruisegid.ru, 2018)

Together all these factors, including the increase in the transportation of merchandise related cargoes, machineries, finished products as well as passengers across the global framework can be seen to have contributed immensely in the increasing dynamics and activities of the maritime industry as a whole and in the maritime logistics.

With the increase in the maritime logistics, the aspects of safety in international shipping transports can also be seen to be gaining immense significance and has been explored and discussed by different scholars across the globe over the last few years. As rightly highlighted by Weintritand Neumann (2013), with the international maritime transports dealing with nearly 80% of the global trade (in terms of volume) and approximate 70% of international commerce (in terms of value), the aspects of vessels safety has become a critical aspect for the global economy.

Li, Yinand Fan (2014), in their paper, points out the dynamics in the number of losses which can be seen to be experienced by the maritime industry over the years. As per the authors, the losses in the maritime industry, have declined to some extent over the last few years. According to the authors, with the ten-years average loss in the industry being 123, the same can be seen to be decreasing considerably in 2014 (with the losses being 88 in total) and further in 2015 (with the losses being 85 in total). The losses, especially in case of large shipping vessels can be seen to be declining by 45% over the last decade, much of which can be attributed to the increasing safety protocols, regulations and of that of the creation of a safer operational framework (Chang, Xuand Song2014).

Risk Management Processes in Maritime Logistics

The total losses over the last decade (2006-2015), region-wise can be seen to be as follows:

Figure 6: Total losses of maritime industry in different places (2006-2015)

(Source: Agcs.allianz.com 2018)

As shown by the above figure, in spite of the increase in the safety protocols in the maritime industry, the number of losses in different places, over the last few years, can still be seen to be considerably high, which in turn poses as one of the aspects of crucial importance and is thus treated as a serious issue in the context of maritime logistics.

The statistics regarding the losses in the maritime industry, over the last few years, in turn, indicates towards the fact that the concerned industry experiences several types of risks in their operational framework, which in turn contributes to the losses and damages which both the demand side as well as the supply side participants in the concerned industry face in the contemporary period. These aspects are discussed, with reference to the existing literary opinions and empirical evidences in the following section of this chapter.

Nget al. (2013), in their elaborate literary evidence highlights the fact that there exist different types of risks in the operation framework of maritime industry and in the aspects of maritime logistics, which in turn have considerable negative implications, especially for those operating in the supply side sector of the industry. Based on the assertions of the authors and of the other literary evidences, the primary types of risks experienced in the aspects of maritime logistics are those of human safety risks, financial risks as well as environmental risks. Keeping into consideration the objective of the concerned research, the following section of the literature review tries to take into account the literary and scholarly evidences which deal with the aspects of different of environmental risks in the maritime logistics industry, both in the global context as well as in the concerned industry in Australia.

One of the most important aspects of consideration in Maritime Logistics is that of the aspects of environment, the ways in which the environment is affected and the implications of maritime operations on the aspects of environmental preservation (Davarzaniet al.2016). As Lindstad,Asbjørnslettand Pedersen (2012), argue, in their elaborate research paper, with the rising concern regarding environmental degradation and pollution and its considerable negative implications on the international domains (like that of global warming, scattered rainfall, changes in climatic patterns in different parts of the globe, high air, water and land pollution as well as different problems faced by the human beings across the globe due to the same), considering the same in the domain of operations of maritime logistics have become even more important in the contemporary period of increasing worldwide commercial activities and transport dynamics (Psaraftisand Kontovas2013).

Australian Case Studies

In this context, there exit different perceptions and literary works regarding the environmental risks which occur in the domain of operations of the maritime logistics industry across the globe and these opinions and perceptions vary across time, places and types of maritime activities. As per the assertions of SchinasandStefanakos (2012), the environmental impacts and risks which occur in the operational framework of the maritime logistics industry, in a global framework can be broadly classified into the following types:

1. Risks from the ships- This broad type of environmental risks are those which are caused by the sailing of the ships and by the calling of the ships at different ports in the different parts of the globe.
2. Risks from the ports- These include the risks of environmental damages which are probable to occur at the ports by the activities of the ports themselves (Zhu, Erikstadand Nowark2014).
3. Other risks- This category can contain different types of risks which can arise in other aspects of operations in the maritime logistics, like that of emissions from the inter-modal transport networks which serve the hinterland of the ports and other similar operations which fall under the domain of maritime logistics industry (Oecd.org 2018).

On the other hand, Bichou (2014), points out the general environmental risks which occur in the domain of maritime logistics industry, across the global framework to be as follows:

• The increasing changes in the climatic patterns and the level of increase in the unpredictability of the same, in many places, as asserted by the author, can be seen to be one of the primary factors contributing to the increasing risks in this domain, as the same has been leading to increasing number of accidents over the oceans as well as that of increased instances of damages of cargo ships’ hardware (McKinnonet al. 2015).
• The environmental damages which the cargo ships and other maritime activities make, include that of water waste materials and emission of GHG, which in turn leads to increased sediments in the seashore of the different port regions, which also hamper the activities of the ports, which include arrivals and departure of the ships (Kwesi-Buor,Menachofand Talas2016). The waste sedimentation also damages the ships by sticking to the blades of the same.

Environmental Risks in Maritime Logistics in Australia

There has been severe change in climatic conditions in Australia in the past few decades. The most common disasters in the nation include cyclones, flood and drought over the last few years. Due to increase in these calamities, the overall risks of the ports in Australia have increased heavily with the passage of time. The most inherent phenomena include storms and cyclones in Australia, which have caused severe damage on the ports. The cyclone track is situated in the south-eastern Australia and this area is highly prone towards sea storms and cyclones (Hofmannand Lampe2013). The environmental factors constitute of greenhouse gas emissions and waste materials in water. The waste materials in water comprise of the sediments situated in the seashore of the ports. These pose problems for the ports at the time of arrival and departure of cargo ships.

The waste materials in water are congested in the ship blades, which are causing damages to the ships. This increases the risk of damage for the nearby ports. The strategies of risk assessment have been initiated in the cities for eliminating the risks engaged in maritime logistics as well as ports (Lam 2012). The government reports have been used regarding climatic change, which has enabled in developing strategies for eliminating problems. Due to this, the government of Australia has appointed various geologists and researchers for understanding the Australian climatic conditions. The government is involved in reviewing the climatic change in the nation, which has attracted attention towards the risks. The rise and fall in the sea level exposure have led to certain risks for the ports.

Risk management in maritime logistics has been a significant component in the logistics industry. The ports are confronted with various types of risk that take into account environmental risks. It has been evaluated that the risks comprising of storms and cyclones have been the significant risks in this regard. The methodology and processes related to risk management have been enforced so that the risks and hazards in maritime logistics could be mitigated(Pacione 2013). The shipping and offshore industries that take into consideration the gas and oil sectors have maintained strategies for managing risk so that the port-related hazards and risks could be minimised. In this context, the process of qualitative risk management deserves special attention, as the risks could be assessed properly and accordingly, they could be eliminated with the help of mitigation methodology (Berg, Storgårdand Lappalainen2013).One of the significant risk management issues is to be integrated and it needs to be embedded in the organisational functions so that the decision-making strategies could be improvised.

Conclusion

Figure 7: Suggested risk management framework for maritime industry

(Source: Zhanget al. 2014)

The identification of risks is the initial phase of the framework related to risk management. In this context, Talley(2013) cited that the framework contains all the internal and external activities of the organisation, which are prone to the other risks. From the perspective of the maritime sector, the risk factors primarily rely on the environment. The common risk factors are associated with natural calamities comprising of floods, cyclones and storms. The ports could incur financial losses because of severe damage to them and goods available on the same. Pollution and oil spilling are the most significant risks in maritime logistics because of hardware damage. Thus, the risk management strategies need to be used in the port, which would enable to mitigate the overall risks (Berg 2013).

Risks could take place as natural calamities and accidents. However, the process of risk evaluation takes into account qualitative as well as quantitative techniques, which help in assessing different kinds of hazards and risks. There are two risk parameters comprising of frequency and impact. Therefore, risk could be obtained by multiplying frequency with impact(Bergqvist and Egels-Zandén 2012). Therefore, certain tools and techniques are utilised for assessing the risks engaged in the context and they are listed down under:

• Failure modes and effects analysis (FEMA)
• Event tree analysis (ETA)
• Preliminary hazard analysis (PHA)
• Fault tree analysis (FTA)
• Human reliability analysis (HRA)
• Cause-consequence analysis (CCA)

Risk mitigation takes into consideration different strategies, which might assist in resolving and maintaining the risks associated with the maritime sector. The strategies constitute of the utilisation of various systems and techniques able to maintain the risks in the maritime sector. The significant risk in the maritime sector is oil spilling, which is the primary reason behind water pollution (Nget al. 2013). Hence, the ports could use different containers so that oil could be transferred to the other ports for minimising the level of risk inherent in the sector.

Different projects have realised that suitable management needs the support from the stakeholders of the organisation. Hence, in this case, the involvement of the stakeholders in the process of risk management is crucial. The current knowledge regarding risks in maritime logistics has assisted in formulating strategies to eliminate risks in maritime logistics sector. The stakeholders have undertaken initiatives to maintain hazards and risks associated with the port(Merk and Notteboom 2015). The enforcement of scientific information regarding risks and port-related information might generate report about the strategies of risk assessment. The Australian ports are disseminated with environmental risks, which have caused damage to the resources as well as containers (Chang, Xuand Song2014).These constitute of Engineers Australia, the Maritime Union of Australia, Shipping Australia, Transport and Logistics Industry Skills Council and National Transport Corporation. Some other groups have been provided with adequate information in Victoria that includesSouth East Councils Climate Change Alliance and Port of Hastings Corporation.

The process of risk monitoring includes the tools of monitoring for executing the strategies of risk mitigation. The risk monitoring assists in maintaining the risks in the maritime sector of Australia. These strategies help in maintaining and checking the risk levels involved in the sector(Talley 2014). This assists in eliminating strategies for the associated risks in the maritime sector of Australia.

There are certain risk management components in the maritime industry of Australia, those can address the types of identified risks faced by maritime logistics globally and these components are summarised briefly as follows:

New building and scrapping:

Scrapping denotes the action of segregating a ship into portions for disposal or reuse by reprocessing the same. New building signifies the formation of new ships by utilising the scrapping parts. The shipping policies intend to minimise the risk negative influence on environment, which would lead to rising amount of scrapping and new building. It is possible to minimise the environmental effect by adopting these risk management practices by using an enhanced hull design through the segregation of old ships by developing new ones with advanced technologies (Li, Yinand Fan2014). With the help of new hull design, it is possible to minimise environmental effect through reduction of the operational emissions by lower consumption of fuel and accidental pollution arising due to lower oil spills and exposure to other hazardous materials during accidents. In addition, enhancement in the quality of structure, outer coatings, design along with working conditions for passengers and staffs would need scrapping. The intention is to increase new building for raising the ship longevity and minimal future scrapping(Shi and Li 2017).

For instance, the new ship scrapping risk management approach in Australia has allowed faster demolition of the old vessels so that new and efficient vessels could be formed. A subsidy was announced by the Transport Ministry of the nation for the shipping organisations to be provided into two halves, which include once after scrapping and once after formation of the new vessel. This would minimise the risk of pollution from single-hull and old ships along with increasing the overall vessel efficiency (Hornell 2015).

Linear alliances and conferences:

Linear conferences denote the associations of ship owners served on the part of a secretariat providing global services on a specific route within particular geographical boundaries under agreement. These could fix common rate of freight along with regulating carrier capacities(Song and Lee 2012). On the other hand, linear alliances signify cooperation among the workers in liner ships for avoiding competition so that the price along with trade efficiency and stability could be improved. If there is imposition of additional environmental regulations on the services of liner shipping, they have to incur additional costs(Song and Panayides 2012). They switch to costly techniques of waste disposal generated from scrapping, building and other activities. In addition, they incur greater costs on maintenance for combating with environmental damage along with raising cost of capital and building costly and new technologies for formulating environment-friendly ships.

By taking into consideration all the situations, competition is intense in the liner shipping services sector paving the path for destructive price wars, declining profits and increased costs (Weintritand Neumann2013). Therefore, in addressing such identified risk the strategic alliances provide advantages to the shipping organisations by raising price stability along with profitability. For instance, a new shipping alliance O3 has been established by three organisations. These organisations are China Shipping Container Lines Co., CMA CGM and United Arab Shipping Co. Such alliance has assisted in minimising the cost of operations, raising effective resource allocation, increasing economies of scale by utilising large vessels along with diversifying the area of services and increasing profits (Riadet al. 2012).

Profitability of the shipping companies:

The sustainable shipping policies associated with the environment would raise the overall economic performance and therefore, the profit margin pertaining to the liner ship organisations would increase in tandem as well. However, in future, it is expected that the organisations would face risk of heavy pressure for minimising their emissions and pollution. As a result, they need to make additional investments for implementing green technologies in their business operations(Riadet al. 2012). Gradually, the effects of positive economic side would help in covering these costs along with generating profits for the organisations (Lange, Rinneand Haasis2012). By using the outdated and old vehicles rather than creating new ones, profits could be earned only in the short-term; however, the loss would be bigger in the long-run. The environment-related issues could be segregated into technical enhancements and operating policies.

For instance, risk management approach of enhancement in the technology of ship engine by the initiation of waste heat recovery systems like recovery of energy from hot exhaust gas for usage in fuel pre-heating could improve substantially the efficiency of the engine by placing lower load on power generators. This process finishes in savings of considerable amount of fuel. When all these factors are taken into account, it could increase the profitability of the shipping organisation by large amounts in the upcoming years (Maurerand Degain2012).

From analysing the existing research on the activities carried out in global maritime logistics and the risk management processes followed within the maritime industry, it has been observed that there exists a gap in evaluating the activities of the global maritime dynamics. Moreover, a gap has also been revealed in the literature regarding the risk-based activities elaboration in the maritime industry based on which risk management capabilities can be considered.In addition, most of the researches also had aa limitation in analysing specifiedtasks those require effective risk management policies and procedures. Considering such research gap, the current research will focus on addressing the same through elaborating on the types of risks faced by the maritime logistics operations in all its operations along with the new risk identification and monitoring policies implemented within the maritimelogistics operations.

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