1 When considering a new business venture, Great Lakes Carriers (GLC) will need to gather vital marketing data to support the transition. Issues to consider would include: will the current market support a new waterway carrier? What percentage of the market will support fixed shipping and receiving schedules and do not require express shipments? How many containers are needed to support this new business for front and back haul service? Would GLC better serve the market with intermediate origin-destination pairs better than weekly sailing schedules? What percentage of the market is interested and has a need for the transportation of high dollar freight and would support the implantation of RFID tag systems? Are most companies equipped to load and service waterway vessels?2 When considering entrance into the new market, there are several initial and long term costs that should be explored. Because the current vessels cannot be converted to container vessels, an additional fleet will be necessary. In addition to the vessels and cranes, other equipment may need to be added to the company’s inventory.
Some fixed costs on the waterways associated with the new vessels may increase due to the size and function of these new vessels. Labor rates and contracts may also change with the nature of the new business. Variable cost is also a factor when considering new bulk materials that involve, for example, the transportation of hazardous materials and containment.3 With the geographical location of GLC, weather may pose a problem to the logistical supply chain.
Ports may be denied access due to ice and possible high winds that affect the water level and the docking of container vessels. Union labor, namely long-shore men, may on occasion become an issue. If working conditions and labor disputes become an issue, a vessel may sit for hours or days before the unionized workers allow the container ship to be serviced. This may prove to be a costly hindrance to providing an on-time service to awaiting customers.
4 The utilization of RFID tags are a competitive advantage to the new business. If potential customers see the added value in all of the features that are associated with these devices, market share should boom. Although there is an initial investment for the customer, Port Authority and GLC, the long term benefits of global position tracking, temperature monitoring, theft prevention and real time monitoring and reporting to name a few, should far exceed the initial cost. It is known that the Port Authority is already on line with the idea and comfortable in supporting the costs associated with initiating the new technology.5 With the blessings of the Port Authority and the need for additional bulk cargo business, a new container operation should prove to be a golden opportunity for Great Lakes Carrier. After the initial investment associated with the start up costs, GLC should steadily see an increase in market share.
Although the company may see an increase in the fixed cost associated with the new use of RFID tags, the customer benefits and logistical aid to the supply chain should outweigh any doubts for this move.Case Summary: With the unfortunate inability to retrofit the current vessels owned by GLC, the company will have to invest in new container vessels and equipment. It is likely the company will initially, have no waterway competitors and will have to slowly build market share and compete with the existing rail and truck companies that service the customers in that market. The long term forecast shows a decline in the grain and ore market. GLC will need to move into this new market to sustain business and keep its doors open.
While costly in the short term, the initiative to pioneer this new undertaking may prove to be a great idea in the longevity of the company. Having the support of the Port Authority is a plus and should make the transition a bit easier to operate.
