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Niver Lines: A System-Dynamics Approach to Tanker Freight Modeling

Aegean Speed Lines, Commercial Center "City Plaza," 85 Vouliagmenis Avenue and Antheon 16674, Athens, Greece
Department of Ocean Engineering, Room 5-207, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
Judge Business School, University of Cambridge, Trumpington Street, Cambridge CB2 1AG, United Kingdom
Eugenides Foundation, 387, Syngrou Avenue 175 64, Athens, Greece
gdikos{at}alum.mit.edu
hsmarcus{at}mit.edu
mpp26{at}cam.ac.uk
vpap{at}alum.mit.edu

Managers can improve their investment decisions in a cyclical market, such as the tanker market, by using system-dynamics models. We developed and implemented a system-dynamics model for the tanker market for Niver Lines. We combine entry, exit, and lay-up decisions, and determine the flow of transportation supply. Then, we compare supply and demand and calibrate the system. We derived time-charter rates from the interaction of supply and demand using historical data from 1980 through 2002. Our results reveal the key factors that affect tanker rates and unforeseen dynamics. The model is a powerful tool for modeling the impact of changes in various factors on time-charter rates.

Key Words: forecasting; ARIMA processes; transportation; freight; materials handling