Cost Effectiveness Analysis in Short Sea Shipping: Evidence from Northeast Asian Routes

Abstract

Nowadays, roll-on/roll-off (Ro-Ro) is an important mode for short sea shipping (SSS) due to its advantages of fast and convenient load and unloading system. Despite the advantages, the market share of Ro-Ro is insignificant compared with lift-on/lift-off (Lo-Lo) in the Northeast Asian region that is geographically suitable for fostering SSS. Therefore, it is of utmost importance to have a better understanding of the effectiveness or Ro-Ro and Lo-Lo in the regional SSS market. For this purpose, this paper develops a model to estimate the total logistics cost of the two transportation modes. The total logistics costs of Ro-Ro and Lo-Lo are calculated on three major SSS routes between Korea and Japan. The results show that Lo-Lo outperforms Ro-Ro on most routes in terms of the cost effectiveness, and Ro-Ro is competitive only for high-priced and time-sensitive cargo. However, it is also documented that Ro-Ro transport has a significant impact on reduction in the total logistics costs when companies integrate the supply chain and improve the cooperative relationship to a high level.