IDEA:
L1-56 - Analyzing labor cost drivers in the Belgian inland navigation sector

PILLAR:
C - Waterborne

RESEARCH AREA:
RA4 - Freight Transport and Logistics

TEAM NAME:
Costing in inland navigation

TEAM MEMBERS:
Osama Al Enezy (Team leader)


UNIVERSITY:
Universiteit Antwerpen

COUNTRY:
BELGIUM

ABSTRACT:
The costs of inland waterway transport are subject to various factors, such as the ship type, with regard to the type of cargo carried, the dimensions of the vessel or push-tow, or the tonnage of the ship or convoy operating on a waterway. These factors affect the different cost components, which inland shipping businesses need to take into account when making decisions, on aspects such as the self-employment of the ship owner, or the salaries paid. Similar to other transport modes, the costs of inland navigation can be divided into fixed and variable components. While the costs of fuel change depending on the shipping activity, and are thus considered variable, capital and labor costs are considered to be largely fixed.
The amount of labor costs depends on minimum wage regulations, or standard tariffs, established in the industry, as well as on regulations governing the minimum number and composition of the crew. Other major factors affecting labor costs include the type of operation, concerning the number of sailing hours per day, as well as the equipment standard of the ship, depending on a range of different technical parameters. The different drivers of labor costs in inland waterway transport are discussed in this study, based on data applicable to shipping operations in the Rhine corridor and Belgium.
After a review of literature and applications on cost modeling in inland navigation, a new cost simulation model, currently in development for the sector, is introduced. Its basic functionality is presented, before the computations of its labor cost module are explained in detail.
The model, which expands upon another model by Beelen (2011), relies on updated values for minimum salaries and compensations, and includes a number of differently-sized convoy formations as input parameters, not considered in the original model. As a first application, it is used to analyze how changes to a number of key parameters affect the labor cost of push-tow operations on inland waterways. Each push-tow formation is defined by different manning requirements, which specify the number and composition of the crew, based on different professions required aboard. The analysis particularly focuses on cost reductions through the self-employment of ship owners as members of the crew. Systems and strategic analyses are used to determine the degree to which costs can be saved through different approaches to self-employment. The analysis reveals that labor costs can be noticeably reduced through the self-employment of ship owners as boatmasters in the case of small push-tow formations. With increasing dimensions of the convoy, however, the savings through self-employment compared to operations with a completely hired crew, decrease continuously. Moreover, the work required for entrepreneurial activity is likely to prevent owners of larger fleets from sailing as a crew member.
The model used for this research project will later be assembled with calculation modules for other cost components of inland waterway transport, and converted into an interactive web-based cost-calculation tool. This tool is expected to assist inland shipping businesses in determining the cost of their service, based on the calculation of out-of-pocket costs.
