Exploring External Supply Chain Risk in Maritime Transportation

Open Access
Author:
Wu, David Z.Y.
Area of Honors:
Supply Chain and Information Systems
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Robert Alexander Novack, Thesis Supervisor
  • John C Spychalski, Honors Advisor
  • Saurabh Bansal, Faculty Reader
Keywords:
  • supply chain
  • transportation
  • piracy
  • maritime
  • risk
  • disruption
  • hijacking
  • pirates
  • tanker
  • cargo ships
Abstract:
This paper investigates the monetary impact modern piracy has had on the Oil, Automobile, and Food industries, and the implications for companies with operations in regions with piracy. By analyzing the monetary impact of piracy across different industries, one can gain a better understanding of how the costs of modern piracy trickle down to affect companies with import/export operations in the region. Factors taken into account for the purposes of this analysis include the monetary value of shipments, volume of shipments, product attributes, ship type, regional market share, as well as local market conditions. After conducting analysis using publically available information to estimate the relative monetary impact on revenue for companies from the aforementioned industries, the findings indicate that industries with high value shipments are most susceptible to piracy risk, and are impacted the most by pirate activity. Specifically, the Oil industry was affected to the largest extent by piracy, followed by the Food industry and the Automobile industry. However, on a company level, a firm’s expected piracy risk depended on their relative market share in the region more so than on their industry. Furthermore, the analysis indicates that the nature of the cargo and the standard deviation of piracy rates per ship type need to be taken into account before a firm can realistically determine the extent of piracy risk. Cargo insurance and risk minimization strategies are also discussed briefly in this paper.