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Analytics at Spetses Shipping: Navigatin...

Biggs, Max, Klopfe...

Case

Analytics at Spetses Shipping: Navigating the Waves of Uncertainty

Biggs, Max; Klopfenstein, Amy

QA-0977 | Published August 22, 2024 | 6 pages Case

Collection: Darden School of Business

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In this case, a shipping broker must decide where to relocate his tanker to find new cargo. The ship is currently based in the United Kingdom, and he can either send it to the Baltic or the Mediterranean seas. Due to the short time frames involved in tramp shipping, the broker does not know what cargo the ship will retrieve at its next destination, which creates considerable uncertainty about the ship’s future trajectory. The broker must consider factors such as the length of time to reach each destination, each route’s time charter equivalent (TCE) rates, and the tanker’s daily operating costs. At the conclusion of the case, the broker must select the destination that has the highest probability of yielding the most profitable outcome. This case contains an accompanying spreadsheet with historic shipping logs for Aframax tankers that students can use to estimate the probability of the different destinations.

- Appreciate the role of uncertainty and analytics in the tramp shipping market, which is vital to the transportation of oil and global supply chains. - Learn how to use data to estimate probabilities of events occurring within a decision tree framework. - Understand how multistage decision-making problems can be approximated using smaller two-stage or three-stage decision trees. - Trade off different criteria for evaluating a decision under uncertainty. In addition to expected value and risk considerations, the profit is realized over different time spans in this problem. - (Optional) Motivate dynamic programming using the connection to simple decision trees. - (Optional) Apply steady-state Markov chain analysis to choose an optimal policy using average rewards over time.