What is container leasing ?

Container leasing is a process of renting containers to operators by a leasing company, who owns containers , basis the agreements entered into by both the parties. Both the supplier and the customer will also agree to other terms and conditions required by applicable laws, and any other negotiations made between the two entities. The leasing company agrees to deliver a minimum number of containers to the operators for a specified time, basis terms and conditions documented in the lease agreement.

A liner operator assess the demand for containers by forecasting the volume of business expected to take place for a period, both on strong and weak legs, on all locations. The demand also depends the turnaround time ( the time gap required for a container to perform a complete cycle) of the containers in various areas. Having determined the fleet size, the demand could be met either by buying containers from manufacturers or leasing them from the leasing companies, or a combination of both.Liners always require empty containers to be placed at the right place at the right time, to meet customer demand.

Generally the container fleet of liners consists of owned and leased containers, although the proportions vary from operator to operator. The fleet of a relatively new operator will have a high proportion of leased container where as the established operators will have a high proportion of owned containers.

Advantages

1. Outright purchasing of containers requires huge capital financing, which will not be viable for the shipping

    companies, by leasing capital funding could be avoided.

2. It will be easier to adjust the fleet size depends the demand fluctuations.

3. It is possible to enter into lease agreement in such a way that the repair and maintenance expense is on

    lessor’s account . This reduces the overhead expense of the liner.

4. To reduce equipment imbalance cost by leasing containers at the deficit area and returning them at surplus

    area.

5. By lasing special equipments, whose demands fluctuate very often, can avoid dead capital investments on

    buying them.

Types of Leases

Though the operators make ‘tailor made’ agreements with the leasing companies, there are 3 broad type of leases widely in practice

1. Long term leases

In this method the operators commit to lease a fixed number of containers for a fixed period of time, which varies from 1 year to the life span of containers. The longer the period of lease the cheaper the rate is likely to be as the leasing company is guaranteed a fixed income for a long period.

However , from the liner’s point, long term lease reduces the flexibility of resizing the fleet size by redelivering the lased units during slack period. To overcome this, some operators include a clause of redelivery before term period a penalty.

2. Short term or Trip lease.

As the name indicate , this is hiring of containers on an ad-hoc basis , just for a trip without any long term commitment. This leasing method gives operators maximum flexibility on fleet size adjustment depending demand.

For leasing companies, this is not that a good option as the hire charges will be for short period and then will have to find fresh customers for the containers. Also they will have to maintain a good stock of containers readily available for leasing and will have to incur high RnM and on/0ff hire expenses.

Trip lease generally is an expensive affair , often the rate will be more than double of the long term lease. This is due to the risk/ uncertainty involved in this business.

3. Master leases

In this type of leasing , the lessee guarantees to lease a fixed minimum number of containers for a defined term with a provision to on hire additional containers and off hire excess containers at listed locations . However, the total number of containers on hire at any given time should not be below the agreed minimum.

The lessee pays a fixed daily rental for all the containers on hired . The rate generally is on higher side consider to the term lease of equal period. This method helps operator to regulate fleet size according to requirement . Also , with suitable on /off hire clause in the agreement , the operator can avoid unnecessary empty container moves from one point to another.

Container leasing companies

There are many established leasing companies available to cater to the requirements of the operators. Cronos, TAL, Box, Cap etc are few among them. To provide the required services to operators, the leasing company should have a wide network of local depots and offices and large fleet of containers. Many of the medium / small leasing companies identify the requirements of the type of containers in their area of presence and ensure to meet their customer’s requirements.

In short, container leasing is a service as a financial business.

Supply Chain in Container Transportation

What is supply chain management?

Supply chain is the logistics network of suppliers, manufacturers, warehouses, distribution centres and retail outlets. Logistics, which is  an aspect of military science, evolved as a business concept in the 1950s to deal with the complexity of supplying materials and shipping out products in a globalised supply chain management system.

In other words, business logistics is the supply chain process that plans, implements, and controls the efficient, effective flow of goods, services, and related information from the point of origin to the point of use or consumption in order to meet customer requirements.

Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all other logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third‐party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies

Effect of containerisation in Supply chain

Huge waves of changes have been taking place in shipping industry , particularly in the container shipping trade, globally and in India too.Containerisation has brought technological benefits to supply chain such as door-to-door delivery , speedy intermodal transfers, low handling costs, reduced breakage and pilferage , lower insurance cost etc.

Containerisation of goods is a key technology in making multimode transport in supply chain more effective and efficient.


Multimodal transport, which is an integral part of supply chain management,  refers to the transportation of goods using more than one mode of transport in an integrated and seamless manner from the origin to the destination.

Containerisstion–Future opportunities for supply chain management

1. Automobile Industry requirements

 Automakers in India are the key to the supply chain and are responsible for the products and innovation in the industry. As the Indian automotive sector is booming like never before, the relevance of logistics and the supply chain have become all the more important. The automotive industry in India is one of the largest in the world and one of the fastest growing industries globally.

India's passenger car and commercial vehicle manufacturing industry is the sixth largest in the world and the car plants of Maruti Suzuki and Hyundai in India have figured in World’s top 10 list. Several global auto firms like Hyundai, Nissan, Scoda , BMW etc invested in car factories in India.

The supply chain of automotive industry in India is very similar to the supply chain of the automotive industry in Europe and America. 

2. Retail Trade reforms

India’s growing domestic market is one of the major strengths for containerisation. The India Retail Industry is gradually inching its way towards becoming the next boom industry and there is great potential for the organized retail industry to prosper in india. In November 2011, India's central government announced retail reforms for both multi-brand stores and single-brand stores and these market reforms expect to pave the way for retail innovation and competition with global multi-brand retailers as well single brand majors.

3. Increasing Industrialization

India is becoming the most preferred destination for manufacturing outsourcing in the world, offering greater potential for containerisation. The growing industrialisation in India will boost containerisation in the country.Original equipment manufacturers (OEM) such as Samsung and LG Electronics and electronics manufacturing services (EMS)providers such as Solectron, Flextronics and Jabil already have well-established facilities in India

For the past couple of decades, Taiwan and China have been world leaders in the OEM sector, but gradually with the improvement in road infrastructure and better supply chain management, India also begun to gain a foothold in the sector.

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