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CONTAINER TRANSPORTATION COMPANY

BAI Xiaodong, Richard C$.$H$.$ Lee and Michael Zhang wrote this case under the supervision of Professor Peter Bell solely to provide

material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation.

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Copyright $2008,$ Richard Ivey School of Business Version: $2011-11-09$

In July $2007,$ Thomas Young, regional manager of the Container Transportation Company $($CTC$),$ and his

colleagues were looking for a new strategy to allocate containers for transportation from Korea and China

to the Middle East. Challenged by top management, which had urged all business departments to optimize

their revenues and profit, Young wondered whether he could improve pricing or apply other revenue

management $($RM$)$ techniques to enhance revenues.

CONTAINER TRANSPORTATION COMPANY

The Container Transportation Company $($CTC$),$ based in Taiwan and founded in the early $1980$s$,$ had

grown to become one of the world$$s largest multi$-$modal marine transportation companies, commanding

more than $100$ ships, as of January $2007.$ The fleet included full container carriers, liquefied natural gas

$($LNG$)$ carriers, oil tankers and bulk carriers, among others. CTC employed approximately $5,000$

personnel: $1,000$ domestically, $2,000$ shipboard and the others overseas. The company had four

headquarters, $20$ overseas subsidiaries and approximately $100$ offices and branches all over the world.

CTC overcame the hard times that had struck the shipping industry as a whole from the early to mid$-1990$s$,$

by diversifying its businesses, investing in new ships and rationalizing its management processes. Most

recently, the company had been proactive in meeting customer demands and was dedicated to ensuring

customer satisfaction. The customer$-$oriented management team was committed to high ethical standards

and was constantly pursuing innovation and service expansion for customer benefit. CTC embraced the

vision of becoming one of the most competent shipping and logistics companies in the world by the year

$2020.$

For the exclusive use of L$.$ SPASOVIC, $2019.$

This document is authorized for use only by LAZAR SPASOVIC in $2019.$

Page $29$B$08$E$005$

CONTAINER TRANSPORTATION

Container transportation was initiated by the American shipping giant Sealand in the early $1950$s$,$ when it

found that conventional bulk transportation no longer sufficed for the post$-$World War II increased trade

volume. Sealand invented the container: a steel box available in standard lengths of $20$ feet or $40$ feet, and

in standard heights and widths of approximately $8$ feet. The container could be stowed on board vessels

and on trucks for land transportation, thereby making it highly efficient. Furthermore, the use of containers

significantly reduced damage to cargo. When calculating the container vessel capacity, space was

measured in terms of the $20-$foot equivalency unit $($TEU$).$ A container $20$ feet in length had a capacity of $1$

TEU, and a container $40$ feet in length would occupy the space of $2$ TEU.

Container transportation was the core business of global shipping companies, and CTC was no exception.

CTC shipped on trans$-$Pacific routes, to Europe and the Mediterranean, and around Asia. A major growth

area for CTC was the container trade from Korea and China to the Middle East.

KOREA$/$CHINA$-$MIDDLE EAST SHIPMENTS

In the $1990$s$,$ CTC started shipping containers from Korea and China to the Middle East to take advantage

of the booming trade between these countries. Dubai, in particular, was playing a very important role as the

transshipment hub port for the region. CTC had gained a strong reputation for having the fastest transit

time from Asia to the Middle East. Consequently, for many years, several big companies, such as Sony,

Nike, Epson and LG$,$ had used CTC for their shipping needs. Shipping on these routes was now the most

profitable part of CTC$$s business.

CTC had dedicated a fleet of five container vessels to the Korea$/$China$-$Middle Eastern routes, each with a

maximum container capacity of $2,000$ TEU and a weight limit of $24,000$ tons. When westbound, vessels

called on ports in Asian countries where cargo was loaded, and the loaded vessels then sailed to Dubai.

After unloading at the Dubai container hub, the containers were shipped to their final des