Quotation Huisman, Roy, Schramm, Hans-Joachim. 2021. Loyalty and retaliation in container freight tender management - an agent based approach. WCTRS SIGA2 Maritime and Ports, Antwerp, Antwerpen, Belgien, 02.05-04.05.


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Abstract

The aim of this study is to provide deeper insights into tender management strategies of a typical freight forwarder dominated market like container shipping. There, freight forwarders serve as an intermediary between shipper and carrier and face pressure to find their way between low freight rates and high capacity availability. To cope with this market environment, they often exert opportunistic behavior, which results in bypassing contracts and other disloyal actions. Carriers often retaliate by rolling shipments and increasing freight rates after periodic loyalty assessment. A pragmatic mixed method research approach was employed. Firstly, carrier representatives were interviewed about their tender management practices. These structured interviews were processed using thematic analysis and served as input for an agent based simulation model in R, dealing with the tender management process and subsequent decision-making regarding bypassing and retaliating actions. Finally, several scenarios were created to understand more about the effects of disloyalty and impact of strict or lenient retaliation practices by the carrier. According to the interviews, carrier representatives perceived opportunistic behavior by freight forwarders as a problem. However, contract forms such as fractional price contracts are regarded as too complex to be feasible and option contracts are developed but not in use. Furthermore, quantity discounts are not seen as a pricing policy but as an outcome of market power. Instead of such pricing mechanisms, retaliation is considered as the most effective method to decrease opportunistic behavior by their customers. In the agent based simulation study, it was discovered that disloyalty does not always lead to lower cost for the freight forwarder in situations with low capacity. Furthermore, it shows that strict retaliation can lead to less opportunistic behavior by disloyal customers but punishes loyal customers unreasonably hard.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Loyalty and retaliation in container freight tender management - an agent based approach
Event WCTRS SIGA2 Maritime and Ports, Antwerp
Year 2021
Date 02.05-04.05.
Country Belgium
Location Antwerpen
URL https://www.uantwerpen.be/en/conferences/siga2-2021-conferenc/

Associations

People
Schramm, Hans-Joachim (Details)
External
Huisman, Roy (WU Wirtschaftsunversität Wien, Austria)
Organization
Department of Global Business and Trade DP (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5300 Economics (Details)
5332 Transport economics (Details)
5336 Commodity science (Details)
5337 World trade science (Details)
5344 Foreign trade (Details)
5354 Business logistics (Details)
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