Ship transportation cost
Assessment Task
A Belgian chocolate maker, part of bigger multinational food company, is relying on third party ship-owners to import their cocoa from western Africa. The company executives hope a “vertical integration” (i.e. purchasing their own ship) will reduce the overall cost of their products by eliminating the middleman.
They are currently considering purchasing a small bulk carrier or a small general cargo ship. The latter would enable them to occasionally transport processed foodstuff belonging to the parent company on the return trip.
Your task is to produce a preliminary report in order to help the company executives decide which option is the most favourable.
You will have to consider the yearly costs for 2 handysize vessels (bulk & general) operating on the Abidjan-Antwerp route. A list of costs is available in Stopford’s Maritime Economics 3e (chapter 6); some of these costs can be quantified using Drewry’s Ship Operating Costs Annual Review and Forecast; both available from the university library. Other costs will have to be researched (e.g. port fees) or calculated (e.g. bunkering); when information is not available it must be forecast. You must provide adequate references and justify your calculations when data is not directly available.
You must remember that the company executives are not shipping specialists; you have to help them make an informed decision. Thus your report is expected to classify shipping costs employing appropriate management accounting methods, and to summarize them in a table spanning a single page, for easy and comprehensive comparison.
Based on this compilation of costs, as well as the capacity of each ship, you should determine the transportation cost per ton for each option. Your report is expected to conclude with a recommendation based on said cost comparison. Additional recommendations are of course welcome (provided adequate referencing/justification.
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