Quantifying the impact of just-in-time (JIT) systems on freight rates

Abstract The maritime industry stands on the brink of a transformative era, driven by technological innovation. This study delves into the realm of JIT policies, exploring their economic impact. According to the findings of relevant studies, there are clear economic and environmental benefits arising from the just-in-time arrival of ships. However, a comprehensive assessment of how the implementation of JIT systems affects freight rates requires additional considerations. Focusing on the economic aspect, it is well documented that speed optimization reduces fuel expenses and port congestion. However, the relevant literature has not accounted for the combined impact of lower average speeds and shorter port waiting times on the expected earnings of ship operators. The present study addresses this gap by providing a quantifiable measure of this impact. For this purpose, a Random Forest model is built, with the Capesize freight rate on a key route serving as the dependent variable. The independent variables comprise the Capesize average sailing speed and the Port Congestion Index for this type of vessel. The model also includes control variables that correspond to supply and demand factors. Within this framework, we conduct scenario analysis for different levels of sailing speeds and port congestion, stemming from the implementation of a JIT system. The results indicate that freight rates can be reduced by up to 11%, revealing a threshold effect. The findings can help ship operators and other stakeholders conduct a more comprehensive assessment of the economic impact of JIT systems, taking into consideration the interplay of all pertinent factors.