Great Lakes Carriers

LOG 125

Case 8-1 Great Lakes Carriers

Case Summary:

With the demand of traditional commodities carried by Great Lakes carriers decreasing in recent years compared to years past President Ben Heuer and vice president Kate Weber decided to visit major ports along the great lakes and St. Lawrence Seaway to drum up business. While on the trip the two invited the notion that the introduction of container movement to their operations could help diversify and open a new area of revenue for the company. Presenting the thoughts along to different port authorities received warm support along with the added on innovation of RFID technology to further enhance visibility along the routes. GLC must now look into whether this new plan is a worthy investment and how to accomplish their goals.

Case Questions:

1. To get a good idea of the potential benefits of moving containers GLC must first look at the statistics of container movement along the great lakes seaway systems. A bi-annual report published by the St. Lawrence Seaway Management Corporation shows that only 21 tons of outbound container freight moved through the seaway in 2009 and that was the port of Erie. Inbound the same year only 49 tons moved from the port of Duluth and 180 from the port of Burns Harbour. Great Lakes Carriers would be pioneering the movement of containers along the seaways and has an opportunity to control market share. Another question that would need to be answered is if there is sufficient demand for container movement in the area to rationalize an investment in a container ship plus weekly routes and the costs associated with the operation.

2. The cost of a container vessel with a 1,000 carrying capacity should be the first cost associated with the business decision to include this new service. The costs for the ship and depreciation, taxes, etc. could be spread out for a long time as a fixed cost. Other costs to take into account would be fuel, implementation of RFID services and port fees, labor and other operating costs. What are the costs of container movement by rail and motor carrier for the same distances? The start-up costs associated with this venture might be too much at first considering the rates for rail would be 25% more than rail and 60% more than motor carrier. An estimate on revenue generated by container capacity to and from Duluth plus the possibility of an RFID charge should be weighed against the costs with this route.

3. There might be market for container service on the Great Lakes and Seaways but unless the company is within earshot of one of the ports another mode of transportation will have to get the container to one of the ports of call. With the cost of motor carrier service being so much cheaper and having a faster transit time what is the benefit of