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Optimizing voyage charterparty (VCP) arrangement: Laytime negotiation and operations coordination

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  • Sun, Qinghe
  • Meng, Qiang
  • Chou, Mabel C.

Abstract

Voyage charter(VC) is a shipping arrangement between a shipowner and a charterer for the carriage of specific cargo from one port to another port on a per-ton or lump-sum basis. In this paper, we present innovative applications of operational models to optimize voyage charterparty (VCP) arrangement for commercial shipping from the contract negotiation stage to its execution stage. We develop novel models to support decision makings of stakeholders, charterer (he) and shipowner (she), under established admiralty law, considering essential terms such as laytime, demurrage and despatch. Firstly, we consider a risk-neutral charterer’s optimal laytime decision under uncertain berth availability and weather conditions. Following that, we study the impacts of speed adjustment on the related profit of the two parties. We show that under some circumstances, a shipowner can speed up to the extent that the increase in demurrage revenue compensates the extra cost of bunker fuel expenditure. Operations coordination leads to the mutual benefits of stakeholders.

Suggested Citation

  • Sun, Qinghe & Meng, Qiang & Chou, Mabel C., 2021. "Optimizing voyage charterparty (VCP) arrangement: Laytime negotiation and operations coordination," European Journal of Operational Research, Elsevier, vol. 291(1), pages 263-270.
    • Handle: RePEc:eee:ejores:v:291:y:2021:i:1:p:263-270
    DOI: 10.1016/j.ejor.2020.09.032
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