Feasibility Study of a Maritime Jalur Pantai Utara (Java Northern Coast Line): an Economic Evaluation of a Direct Shipping Line Service Between Jakarta and Surabaya

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Feasibility Study of a Maritime Jalur Pantai Utara (Java Northern Coast Line): an Economic Evaluation of a Direct Shipping Line Service Between Jakarta and Surabaya Erasmus University Rotterdam MSc in Maritime Economics and Logistics 2017/2018 Feasibility Study of a Maritime Jalur Pantai Utara (Java Northern Coast Line): An Economic Evaluation of a Direct Shipping Line Service Between Jakarta and Surabaya By Gregory Alfred Sudjaka Copyright © Gregory Alfred Sudjaka Center for Maritime Economics and Logistics Erasmus University Rotterdam Declaration of Submission This thesis is completed and submitted in the fulfilment of the requirements for the Master of Science degree in Maritime Economics and Logistics from Erasmus University Rotterdam in the academic year 2017/2018. No part of the work presented in this master thesis has been submitted in pursuant of another degree or qualification in this or any other university or institute of learning. The author of this work is aware of the institution’s policy on plagiarism as described in the programme handbook, rules and regulations. Where this submitted work is not completely authentic or original, it makes a clear acknowledgement of the work of others, in accordance with the advice provided by the relevant persons or regulations. Where there is reasonable suspicion that the author has fabricated the work of others or have made unacknowledged use of another person’s ideas, words or work in this submitted work, the author is aware that this will be dealt with under the institution’s assessment irregularities procedures and may be subject to disciplinary action as determined by the registrar in accordance with the institution’s disciplinary procedures. Upon the approval of this work, the author authorises the MEL office to make this thesis publicly available via the university library of Erasmus University Rotterdam. i Center for Maritime Economics and Logistics Erasmus University Rotterdam -BLANK PAGE- ii Center for Maritime Economics and Logistics Erasmus University Rotterdam Acknowledgements First and foremost, I would like to thank my personal academic thesis supervisor, Mr. Martijn Streng of the Erasmus Centre for Urban, Port and Transport Economics at Erasmus University Rotterdam, who has always given undivided attention and support in completion of this thesis. He allowed this research to be of my own work, however, have always assisted me in guiding the study towards the right direction whenever he thought I needed it. All his useful comments, support and contributions during our discussions to the progress of this master thesis is deeply acknowledged. Next, I would like to thank Dr. Simme Veldman of Ecorys who has provided the support in the proposition and early stages of this thesis. Despite him being unable to continue the entire supervision of this thesis, this study could not have been accomplished without his kind help and continuous support. Furthermore, I would also like to thank my friend and colleague, Mr. Muhammad Luqmanul Hakim, who in conjunction has supported me with the information and data needed to complete this thesis, which is also an indirect joint- research paper that supports his master thesis. Through his useful input, discussions and continuous support, the validation of this research has successfully completed and yielded the anticipated valuable outcomes. I am also grateful to all my friends and colleagues I have met and had the pleasure to study and work with during this Maritime Economics and Logistics (MEL) 2017-18 academic year at Erasmus University Rotterdam. I thank them for all their hard work, continuous help and support that has contributed to the success of this fruitful year, and I wish them all the best in their future work and career. I would also like to acknowledge the MEL office staff who has always given me undivided attention help and guidance whenever I needed it, and I am truly grateful for their valuable support and assistance throughout this successful year of study. Finally, I must express my very profound gratitude to my parents, sister and my girlfriend for providing me with unfailing support and continuous encouragement throughout my years of study and through the process of writing and finishing this thesis. This great accomplishment would not have been possible without them. Thank You Gregory Alfred Sudjaka September 2018 “It always seems impossible until it’s done…” Nelson Mandela (1918-2013) iii Center for Maritime Economics and Logistics Erasmus University Rotterdam -BLANK PAGE- iv Center for Maritime Economics and Logistics Erasmus University Rotterdam Abstract Within the subject of maritime and transport logistics networks, shipping transport costs are one of the main deciding factors in the proposition of a shipping liner service route. In order to counter the problems and issues faced by existing road transport services such as congestion, traffic and delays in lead times, – particularly within the island of Java in Indonesia – this thesis attempts to propose the feasibility of a direct shipping liner service that exclusively serves between the Port of Tanjung Priok in Jakarta and the Port of Tanjung Perak in Surabaya. Overall, the study looks at how such a service may bring an added value to the existing transportation system, in supplement to the Maritime Toll Road (Tol Laut) initiative proposed by the Indonesian government under the presidency of Joko Widodo, which aims to utilise the concept of short-sea shipping to provide effective and efficient connectivity between ports. In the analysis to propose such a service, this thesis constructs three scenarios with different quantities of cargo transport demand between Jakarta and Surabaya. The first scenario is set with a predefined expected annual transport demand of 24,000 TEU, – which attempts to capture the existing volume of sea transport between the two cities – and two additional hypothetical scenarios of 100,000 TEU and 200,00 TEU are also observed in the anticipation for a significant increase in cargo demand. The different cost components of these scenarios are optimised to achieve the lowest transport cost per TEU possible, which is derived by varying ship sizes, the number of vessels deployed to the service, ship speed and other corresponding factors that make up the total transport costs. The underlying theory and methodology utilised in this study incorporates the concept of decision making in an operational level which aims to minimise total costs using the general formulation of the transportation problem – given the pre-set constraints and limitations. In conducting the analysis of the problem, five cost components, namely capital costs, operational costs, bunker costs, port dues and terminal handling charges are optimised, where each of these components have a direct relationship to the time spent at each point of the entire proposed service. It is further conceivable that the only directly controllable variable which can be adjusted is the ship sailing speed, which is in direct connection to the bunker or fuel costs. The results yielded from this study shows evidently that the proposition of a direct service between Jakarta and Surabaya would, in fact, bring an added value to the existing transportation network. The analysis carried out that a service lead time by ship of 2.5 days between Jakarta and Surabaya yields to an optimised transport cost of USD 254.48 per TEU, which is deemed to be viable for proposition under the existing transportation conditions. It is proven that the optimised transportation costs by sea is lower than that incurred by the existing transport services, while at the same time providing short and competitive lead times as compared to other modes of transport. v Center for Maritime Economics and Logistics Erasmus University Rotterdam Table of Contents Declaration of Submission ..................................................................................... i Acknowledgements ................................................................................................ iii Abstract .................................................................................................................. v List of Equations .................................................................................................. viii List of Figures ........................................................................................................ix List of Tables .......................................................................................................... x List of Abbreviations ..............................................................................................xi Chapter 1 – Introduction ........................................................................................ 1 1.1 Background to the Study ......................................................................... 1 1.2 Research Objectives ................................................................................ 2 1.3 Research Design ...................................................................................... 4 1.4 Research Limitations ............................................................................... 5 1.5 Thesis Structure ....................................................................................... 6 1.6 Note on Currency Exchange Rate ........................................................... 7 1.7 Joint Thesis Effort .................................................................................... 7 Chapter 2 – Theoretical Concepts and The Existing Transport Situation .......... 9 2.1 Route Planning Optimisation and Network Design ..............................
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