U.S. patent application number 10/667994 was filed with the patent office on 2004-05-13 for maritime freight option.
Invention is credited to Bains, Jatin S., Bains, Surinder S., Davies, Livingston.
Application Number | 20040093313 10/667994 |
Document ID | / |
Family ID | 28041568 |
Filed Date | 2004-05-13 |
United States Patent
Application |
20040093313 |
Kind Code |
A1 |
Bains, Jatin S. ; et
al. |
May 13, 2004 |
Maritime freight option
Abstract
A maritime container booking process delivered via the Internet
for pricing, routing and confirming freight bookings and associated
options on ocean going container ships loading and discharging in
the United States of America and ports of call worldwide. By
following this program the shipper can secure freight bookings,
without paying for services in advance or committing to any minimum
cargo volume. Pricing of the freight will be sensitive to loading
ports, discharge ports, type of equipment required, type of service
required, transit time and type of commodity.
Inventors: |
Bains, Jatin S.;
(Lawrenceville, NJ) ; Bains, Surinder S.; (South
Windsor, CT) ; Davies, Livingston; (Duxbury,
MA) |
Correspondence
Address: |
LIVINGSTON DAVIES
12 MIDWAY RD.
DUXBURY
MA
02332
US
|
Family ID: |
28041568 |
Appl. No.: |
10/667994 |
Filed: |
September 23, 2003 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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10667994 |
Sep 23, 2003 |
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09305021 |
May 4, 1999 |
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6625584 |
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Current U.S.
Class: |
705/401 ;
705/409 |
Current CPC
Class: |
G06Q 10/08 20130101;
G06Q 30/0283 20130101; G06Q 30/06 20130101 |
Class at
Publication: |
705/401 ;
705/409 |
International
Class: |
G06F 017/00 |
Claims
1. A data processing machine for determining the price of
containerized freight online, comprising a central controller
including a CPU and a memory operatively connected to such CPU; at
least one terminal, adapted for communicating with such central
controller, for transmitting to the central controller container
pricing information including but not limited to some or all of
loading port, discharge port, transit time schedule, service
category, commodity type and equipment requirements; the memory in
such central controller contain a program, adapted to be executed
by said CPU, for calculating a freight rate of containerized cargo
within a future period, for a particular freight rate, a container
shipper shall be said to satisfy loading port, discharge port,
transit time schedule, service category type, commodity type, and
equipment requirements; wherein said central controller receives
such information from said terminal and calculates the freight rate
based upon the information provided.
2. The machine according to claim 1, wherein said program in said
memory is adapted to receive a customer request input via said
terminal to purchase the option and further adapted to perform a
credit check on the customer.
3. The computer according to claim 2, wherein said program in said
memory is adapted to receive a customer request input via said
terminal to exercise a containerized freight booking and further
adapted to generate a booking form (consistent with relevant
standards) to book containerized freight in accordance with the
container carriers unique bills of lading, terms and conditions on
file with the Federal Maritime Commission, Washington, D.C.
4. A method of determining the price of containerized freight and
booking same using a central controller including a CPU and a
memory operatively connected to said CPU and containing a program
adapted to be executed by said CPU for determining the price of
containerized freight, and a terminal adapted for communicating
with said CPU, the method comprising the steps to: enter loading
port parameters to the controller via the terminal; enter discharge
port parameters to the controller via the terminal; enter transit
time and routing parameters to the controller via the terminal;
enter service category parameters to the controller via the
terminal; enter commodity type parameters to the controller via the
terminal; enter container equipment type parameters to the
controller via the terminal; And calculating the freight rate of a
container that gives the customer a right to ship within a defined
shipping period for a particular freight rate a container filled
with lawful cargo satisfying the load port, discharge port, transit
time, service category, commodity and equipment requirements by
having the CPU execute said program; and outputting the freight
rate to the terminal
5. A data processing machine for determining a freight rate to
engage a container space, comprising a CPU and a memory operatively
connected to said CPU, said memory containing a program adapted to
be executed by said CPU and said CPU and memory cooperatively
adapted to receive container pricing information, and to calculate
a price of a container to engage such shipment within a future
period, for a particular freight rate, satisfying the cargo
transport information submitted.
6. The platform according to claim 5, wherein said program is
adapted to receive freight pricing information comprising the load
port, discharge port, transit time, service category, commodity
parameters and equipment requirements
7. The platform according to claim 5, wherein said program in said
memory is adapted to receive at least one of first information
describing a desired load port, second information relates to
desired discharge port, third information relates to required
transit time and routing, fourth information concerning service
category, fifth information relates to commodity description and
sixth information relates to class of equipment and wherein said
platform is adapted to use such information to calculate the
freight rate.
8. The platform according to claim 5, wherein said program in said
memory is adapted to receive an indication that a customer has
engaged a container space and is further adapted to update a
database to reflect a unique container carrier booking.
9. The platform according to claim 5, wherein said program in said
memory is adapted to calculate the container price based at least
in part on the number of similar container bookings confirmed,
using information stored in an option database.
10. The platform according to claim 5, wherein said program in said
memory program is adapted to calculate the container price based in
part upon pricing information that is satisfied by all of the
sensitive data input.
11. The platform according to claim 5, wherein the said program in
said memory is adapted to calculate the container freight rate
based at least in part on the formula: Freight
Rate=O.timesF.timesC.timesV.timesE.timesS- . Where O is a ocean
freight rate for the container, F is the standard option factor, C
is a factor related to the commodity type, V is the factor related
to volatility, E is a factor related to the equipment type and S is
factor related to service category.
12. A method of determining the price of a container shipment,
comprising the steps of: receiving cargo transport parameters
relative to the future booking of a container; calculating the
price for a container booking within a defined shipping period for
a particular price, a container shipment satisfying the cargo
transport parameters; and outputting the freight rate.
13. The method according to claim 12, wherein the step of receiving
option pricing information includes receiving load port, discharge
port, transit time, equipment type, commodity type and service
criteria.
14. The method according to claim 12, further comprising the steps
of: receiving at least one of first information describing a
desired category of service, second information concerning the
expected cargo volume on voyages that satisfy the load port
criteria and the transit time criteria, and third information
concerning the cyclical nature of container prices, and wherein
said calculating step further includes utilizing at least one of
said first information, said second information, and said third
information to calculate the option price.
15. The method according to claim 12, further comprising the steps
of receiving an indication that a customer has purchased the option
and updating a database to reflect the sale of the option.
16. The method according to claim 12, further comprising the step
of receiving option sales information from an option database
indicating a number of similar options that have been previously
sold, and wherein the calculating step uses the option sales
information in determining the option price.
17. The method according to claim 12, further comprising the steps
of receiving a customer request to purchase the option, receiving
tender of the purchase price from the customer, performing a
transaction to sell the option to the customer, and storing
information regarding said option.
18. The method according to claim 17, further comprising the steps
of receiving a customer request to exercise an option, performing a
transaction to engage container space for the customer in
accordance with the terms of the option, and modifying the database
to reflect the sale of the container space pursuant to the
option.
19. The method according to claim 13, wherein the calculation of
the option price is based in part upon option pricing information
that is satisfied by more than one criteria of the intended
shipment.
20. The method according to claim 12, wherein the calculating step
includes calculating the option price based at least in part on the
formula: Freight Rate=O.timesF.timesC.timesV.timesE.timesS. Where O
is a ocean freight rate for the container, F is the standard option
factor, C is a factor related to the commodity type, V is the
factor related to volatility, E is a factor related to the
equipment type and S is factor related to service category.
21. Computer executable process steps operative to control a
computer, stored on a computer readable medium, for determining a
price of an option to engage a container space, comprising: a step
to receive load port terminal criteria; a step to receive discharge
port terminal criteria; a step to receive transit time and routing
criteria; a step to receive service category criteria; a step to
receive commodity type criteria; a step to receive container
equipment criteria a step to output the option price. a step to
calculate the price for an option to purchase, within a Laycan
(shipping period), for a particular price, a container space
satisfying the load port terminal criteria, the discharge port
terminal criteria, transit time and routing criteria, service
category criteria, commodity type criteria and the container
equipment criteria.
22. A method of pricing an option to engage container space,
comprising the steps of: Inquiring on a freight rate for a
container space; Receiving said container price; Receiving an offer
to purchase for a given price an option to engage within a laycan
(shipping period), for a particular freight rate, the container
booking; and Purchasing said option at said option price.
23. The method according to claim 22, further including the step of
using said option to engage the container space or an equivalent of
said container booking.
24. The method according to claim 22, wherein said step of
inquiring on a container price includes providing shipment
information including load port terminal, discharge port terminal,
transit time and routing, service category, commodity type and
container equipment criteria.
25. A data processing computer for selling an option to engage
container space, comprising: A terminal adapted to communicate with
a central controller that calculates a price of an option to engage
a container space within a Laycan (shipping period), for a
particular container price, said terminal adapted to transmit to
the central controller option pricing information comprising load
port terminal, discharge port criteria and transit time and routing
criteria, service category criteria, commodity type criteria,
container equipment criteria and further adapted to receive from
the central controller a price of an option satisfying the load
port terminal criteria, discharge port criteria, transit time and
routing criteria, service category criteria, commodity type
criteria and container equipment criteria.
26. The apparatus according to claim 25, wherein said terminal is
adapted to transmit a customer request to purchase the option and
further adapted to perform a shipping engagement utilizing a
booking note (consistent with relevant standards) to book
containerized freight in accordance with the container carriers
unique bills of lading, terms and conditions on file with the
Federal Maritime Commission, Washington, D.C. and to such option to
the customer.
27. The apparatus according to claim 27, wherein said terminal is
adapted to transmit a customer request to exercise an option and
further adapted to confirm a booking note in accordance with the
carriers unique bills of lading, terms and conditions on file with
the Federal Maritime Commission to the customer in accordance with
the terms of the option.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] Not Applicable
STATEMENT REGARDING FEDERALLY SPONSORED RESEARCH OR DEVELOPMENT
[0002] Not Applicable
SEQUENCE LISTING
[0003] Not Applicable
BACKGROUND OF THE INVENTION
[0004] The present invention relates to the field of option pricing
and contracting of shipping space. Container freight rates, in the
US import/export trade are highly cyclical due to the participation
of foreign flag carriers with lower operating costs who are
constantly setting rates, negotiating volume discounts, changing
rates of container shipping space based on availability, changing
rates of shipping container space often based on commodity. For
example, when carriers have shortage of container space and
equipment they routinely increase freight rates. Similarly they
routinely lower rates when they have surplus equipment in one
region of the world to reposition their container equipment; this
process is routinely used to tackle container imbalance and is the
container carriers' form of yield management.
[0005] Through Apr. 30, 1999 the Federal Maritime Commission,
Washington D.C. based on the 1984 Shipping Act was responsible to
ensure that the container carriers do not increase freight rates
arbitrarily and without due cause. The US Government has
deregulated the container ship industry, which operated within
conferences since 1916 and had modified itself in 1984. Now the
Ocean Shipping reform Act of 1998 will allow the carriers to
negotiate privately. This shall allow shippers of large cargo
volumes to enjoy advantageous freight rates by negotiating
privately. The small shipper will seek to attain economies of scale
by booking their container cargo through third party
"Infomediaries" in order to become part of a larger buying block
for lower prices, because only limited number of shippers will
enjoy deeply discounted container rates. Until now there was no
suitable way to minimize these drawbacks and enable the shipper to
enjoy competitive freight rates without cargo volume. The shipper
is requesting container space at a certain price from the platform
referred to as "Maritime Freight Option" and the carrier bids on
the cargo volume not knowing the cargo source. The shipper does not
compromise their relationship with any carrier who may dominate
particular trade and fear any form of reprisals.
[0006] Option contracts ("options"), are known in other fields as a
way of locking in a particular purchase price for a given
commodity. Because of this, buyers to minimize the risk of rising
prices can use options. One of the most widely known types of
options is the covered option to purchase stock. The issuer of this
type of option owns a number of shares of a particular stock. The
buyer of this type of option has the right to purchase, from the
issuer of the option, a predetermined number of shares of the
stock, at a predetermined price, at any time before the option
expires. For example, if A owns 1000 shares of UVW stock, A can
sell an option to B that gives B the right to buy A's stock for $50
per share at any time before a predetermined expiration date. If
the option is exercised, the seller receives the pre-agreed
purchase price in exchange for the stock. If the option expires
unexercised, the seller retains the stock and can sell another
option on the same stock.
[0007] Covered options are not limited to the stock market--they
have been used to purchase various other commodities as well. For
example, if A owns an ounce of silver, A can sell an option to B,
for $0.50, which gives B the right to buy A's ounce of silver for
$5. If, before the option expires, B decides that he wants to buy
A's silver B exercises his option and pays A $5 for the silver. If
B decides that he does not want to buy A's silver, B does nothing.
Because B is not bound to buy A's silver, if the market price of
silver falls below $5, B will not want to exercise his option he
will buy the silver on the open market No matter what B does,
however, A retains the $0.50 purchase price of the option.
[0008] Options are often used in areas where the price of the
underlying commodity (such as the stock or the silver) is volatile.
The option purchaser benefits by obtaining a guarantee that he will
be able to buy the commodity at a price that he can afford. The
option seller benefits by receiving the purchase price of the
option.
[0009] Until now, however, there has been no acceptable way to
minimize the risk of fluctuations in containerized freight rates.
In particular, as far as we are aware, booking options to engage
container space have never been sold on an auction platform.
Moreover, no systems have been developed for determining prices for
options on container space, and keeping track of the sale and
exercise of those booking options.
SUMMARY OF THE INVENTION
[0010] The present invention advantageously fills the
aforementioned deficiency in the prior art by providing a method
and program for pricing, selling, and exercising options to engage
shipping container space.
[0011] The invention advantageously enables shippers, for a cost
transaction fee, to lock in a guaranteed price at which they can
engage container space, without financially committing themselves
to irrevocably engage the container space, without accepting any
responsibility for delivering minimum volume, without making any
payments for the container space engaged and without putting the
full tariff rate of the container space at risk in case the
customer's commodity is not ready for shipment
[0012] The invention also advantageously provides the seller with
an opportunity to profit by selling options to engage shipping
container space worldwide utilizing the power of the Internet to
offer global shippers real-time results. The international shipping
industry like the global financial markets is functioning 24 hours.
When the US markets close, Asia is opening, when Asia closes,
Europe is still working. The Internet is able to deliver real-time
yield management to the sellers and simultaneously provide
real-time price/inventory management to the advantage of the global
shippers. The American industry is going global as marketplaces are
consolidating, NAFTA is an example of such continued consolidation
and companies such as Home Depot are entering new markets.
[0013] A shipper has diversified markets. For example, Home Depot
will expand to embrace new markets and will ship containerized
cargo worldwide. However, it is reasonable to assume they will be
unable to safely commit substantial cargo to any one carrier. There
are thousands of such shipper transactions worldwide that shall
benefit from the service.
[0014] In particular, one aspect of the present invention is
directed to a method of pricing options to engage container space.
This method includes inputting information specifying where a
customer wishes to load from and where he wishes to discharge at,
type of equipment required, type of commodity required, type of
service sought and at least the minimum transit time that the
customer desires. A price for an option that gives the customer a
right to engage container space to ship cargo from the origin to
the destination within a desired time is calculated and output. The
purchase price of the space engagement is one of the terms of the
option.
[0015] Other aspects of the present invention are directed to a
computer program and an apparatus corresponding to the method
previously described and to an embodiment using a central
controller and a number of agent terminals.
BRIEF DESCRIPTION OF THE DRAWINGS
[0016] FIG. 1 is an overall system block diagram of a preferred
embodiment of the present invention.
[0017] FIG. 2 is a block diagram of the central controller.
[0018] FIG. 3 is a block diagram of the agent terminal.
[0019] FIG. 4 is a flow chart depicting initiation of a transaction
in the agent terminal.
[0020] FIG. 5 is a flow chart depicting the operation of the
central controller and the final phase of operation of the agent
terminal.
[0021] FIG. 6 is a flow chart depicting the operation of the system
when an option is exercised.
DETAILED DESCRIPTION OF THE INVENTION
[0022] The present invention is directed to a system for
determining an appropriate price for options to engage container
space, and facilitating the sale and the exercising of those
options.
[0023] Traditional methods of determining prices for options on
stocks and traditional commodities are not suitable in the
container ship industry, due the unique nature of shipping
containerized cargo to multiple destinations. To begin with, (1)
the product (i.e., a container space) is only supplied by a select
group of container carriers; (2) the product is not completely
fungible, because certain shippers may prefer shipping on a
particular carrier, or through certain loading ports predominantly
served by one or two carriers; and (3) the supply of the product is
small, because only a limited number of container space is
available on any given voyage.
[0024] FIG. 1 is an overall system block diagram of a preferred
embodiment of the present invention. In this embodiment, a central
controller 20 is linked up to at least one agent terminal 30. Three
agent terminals are depicted in FIG. 1, but any number of agent
terminals can be used. The link between the agent terminal 30 and
the central controller 20 does not have to be a physical link. It
can, for example, be a link via modem, as described in the
subsequent description, or any other link. An option transaction
can be initiated from any one of the agent terminals 30. The
information required to implement the transaction is passed between
the agent terminal 30 and the central controller 20, until the
transaction is complete. The central controller keeps track of all
transactions, including option transactions, in the system.
[0025] The system depicted in FIG. 1 may be embodied in hardware
specifically provided to implement the present invention.
Alternatively, the system may be implemented using the
infrastructure that already links the customers to the agents. The
hardware and communication links of existing Internet or other
systems may be used as an infrastructure for the present invention.
Changes to the existing central controllers to incorporate the
subject invention may be accomplished in various ways such as by
reprogramming an existing file server or by adding an additional
file server (with or without a CPU dedicated to option
transactions). Alternatively, the subject invention may be
implemented using existing hardware entirely, making appropriate
software updates.
[0026] FIG. 2 is a block diagram of a preferred central controller
20. The central controller includes a CPU 21, which performs the
processing functions of the controller. It also includes a read
only memory 22 (ROM) and a random access memory 23 (RAM). The ROM
22 is used to store at least some of the program instructions that
are to be executed by the CPU 21, such as portions of the operating
system or BIOS, and the RAM 23 is used for temporary storage of
data. A clock circuit 24 provides a clock signal, which is required
by the CPU. The use of a CPU in conjunction with ROM, RAM, and a
clock circuit is well known to those skilled in the art of CPU
based electronic circuit design.
[0027] The central controller 20 also includes a communication port
25, which enables the CPU 21 to communicate with device external to
the central controller 20. In particular, the communication port 25
facilitates communication between the modem 26 and the CPU 21, so
that information arriving from the modem 26 can be processed by the
CPU 21, and the CPU 21 can send information to remote locations via
the modem 26.
[0028] While the illustrated embodiment uses a modem 26 to
communicate with devices outside the central controller 20, it
should be understood that other methods of communicating with
external devices may be used instead of a modem. These other
methods include hard-wired connections, radio communications,
optical communications, and the like.
[0029] The CPU 21 can also store information to, and read
information from, the data storage device 27. This data storage
device 27 includes an option database 27a and a customer database
27b, which are described below. In addition, it includes
transaction processor instructions 27c which can be read by and
executed by the CPU 21, thereby enabling the CPU 21 to process
transactions. While FIG. 2 depicts separate option and customer
databases, a single database that incorporates both of those
functions can also be used.
[0030] FIG. 3 is a block diagram of a preferred agent terminal 30,
which can be located at a shippers warehouse, a custom agents
office, a shipping desk or office (located at or distant from a
port), a membership service provider or a private home, by way of
example. As discussed above, there can be any number of agent
terminals 30 linked up to one central controller 20. Like the
central controller 20 described above, the agent terminal 30
includes a CPU 31, ROM 32, RAM 33, and a clock circuit 34. The
agent terminal 30 also includes a communication port 35 which
interfaces with a modem 36 that facilitates communication between
the agent terminal 30 and the central controller 20. Of course,
instead of the modem 36 depicted in the figure, other ways of
communicating can be used, as described above for the central
controller 20. A standard computer, such as an IBM PC or an Apple
Macintosh, running appropriate custom-designed software, may be
used as the agent terminal. Existing terminals may also be used,
Alternatively, a dedicated, stand-alone agent terminal may be
used.
[0031] The agent terminal 30 also includes an input device 40 to
receive input from an operator. Any of a wide variety of input
devices would be suitable for this purpose, including, for example,
keyboards, mouse, touchscreens, and the like. The input device 40
may interface directly with the CPU 31, as shown in the figure.
Alternatively, an appropriate interface circuit may be placed
between the CPU 31 and the input device 40.
[0032] The agent terminal 30 also includes a video monitor 39 for
conveying information to the operator. While the most preferred
video monitor 39 is a CRT, other video display devices, including
LCD, LED, and thin film transistor panels, may be used as well.
Individual indicators may also be used to convey information to the
operator, including, incandescent and neon lamps, LED's, and the
like. A video driver 38 interfaces the CPU 31 to the video monitor
39 (or to any other type of video display device).
[0033] The agent terminal 30 also includes a data storage device
37, in which transaction processor instructions 37a are stored.
These instructions can be read by and executed by the CPU 31,
thereby enabling the CPU 31 to process transactions.
[0034] FIG. 4 is a flow chart depicting the initiation of a
transaction using an agent terminal 30. The steps of the process
shown in FIG. 4 may be implemented in a computer program that may
be installed at the agent terminal from, for example, a computer
readable medium (such as floppy disks or CD-ROMS) which is then
stored in a memory, in this case the data storage device 37 (shown
in FIG. 3). Alternatively, although not so described below, the
computer program may be installed at the central controller 20 from
a computer readable medium and then stored therein in one or more
of ROM memory 22, RAM memory 23 and data storage device 27, for
access and use by agent terminals as required.
[0035] The process starts when a customer contacts shipping agent
in step S1. The customer selects the cargo transport information in
step S2.
[0036] This information comprises six components: load port
criteria, discharge port criteria, transit time criteria, equipment
criteria, service criteria and commodity criteria. The load port
criteria define the set of ports from which the customer is willing
to send his shipment. This set may consist of a single port, or it
may consist of a plurality of ports. For example, for a customer
shipping out of New York City who insists on shipping out of Port
Elizabeth, N.J., the set would include only Port Elizabeth. For a
second customer who is more flexible, the set would include all
facilities in the Port of New York area. Similarly, the discharge
port criteria determines the set of ports to which the customer is
willing to send material. The transit time criteria determines the
voyage to be estimated via the Panama Canal or the Suez Canal or a
combination of rail and ocean freight such as New York to Osaka can
be shipped by the carrier by sea via Panama Canal or by sea via
Suez canal or via Conrail to Seattle then further by ship this
criteria will determine time sensitive cargoes such as garments
versus cost sensitive cargoes such as woodpulp. The equipment
criteria determine the type of container requested. Please refer to
the classification list of Container types utilized on
international routes.
1 TEU Twenty Foot Equivalent Unit FEU Forty Foot Equivalent Unit
Domestic 48 ft and 53 ft specialized high cube containers for
volume cargoes. High Cube Specialized containers with extra ceiling
height for garment trade. Flat Rack Specialized container with
floor and corner posts only Open Top Specialized Container with no
roof, (Tarpaulin used to cover cargo) Composite Specialized
composite containers which are lightweight Reefer Specialized
container with insulation and refrigeration plant. Tank IMO 1
specialized container, steam heated, insulated Tank IMO 1
specialized container, electrically heated Tank IMO 2 specialized
container, steam heated, insulated
[0037] STANDARD CONTAINER SPECIFICATIONS: Twenty Foot, Dimensions
in mm and feet, All containers are designed for resistance to
damage and corrosion. ISO dimensions followed throughout Forklift
pockets provided on 20' units to minimize handling damage. Floor
forklift test to 7,260 kg (16,000 lbs.)
2 Internal Length 5897 mm 19 feet Width 2350 mm 7 feet Height 2392
mm 7 feet Door Opening Width 2341 mm 7 feet Height 2277 mm 7 feet
Allowable stacking weight on bottom 192,000 kgs 423,283 lbs box:
Weights Tare 2250 kg 4960 lbs Max gross 30480 kg 67200 lbs Cubic
capacity 33.1 m.sup.3 1170 cu ft
[0038] The service criteria determines if the shipper seeks a door
to door service which shall include trucking or a pier to pier
service or an inland delivery such as cargo shipped from Hartford
to Beijing (both inland points) such parameters shall guide price
sensitivity and Finally the commodity criteria determines the value
premium on the cargo so a container of fragile electronics (of
greater commercial value) has greater price sensitivity than a
container of cotton.
[0039] Either the customer enters the cargo transport information,
or an agent, into the agent terminal 30 in step S3. Customer data
such as the customer's name, address, and telephone number, must
also be entered into the agent terminal 30 in step S3. The
transport information and the customer data are then transmitted to
the central controller 20 in step S4.
[0040] Returning to FIG. 3, each of the steps S1-S4 described above
are executed by the CPU 31 which is executing transaction processor
instructions 37a stored in the data storage device 37. The
communication with the central controller 20 takes place via the
communication port 35 and the modem 36. The cargo transport
information (and customer data) from the agent terminal 30 is
received by the central controller 20.
[0041] FIG. 5 is a flowchart of the operation of the central
controller 20 after receipt of cargo transport information from the
agent terminal 30. The steps of the process shown in FIG. 5 may be
implemented in a computer program that may be installed at the
central controller 20 from a computer readable medium and then
stored therein in one or more of the ROM 22, the RAM 23, and the
data storage device 27 (shown in FIG. 2) The central controller 20
calculates the price of an option in step S1O based on the cargo
transport information received from the agent terminal together
with information from the option database 27a.
[0042] When the cargo transport information includes multiple legs,
the price of the option may be simply the lowest price selected
from a set of individual options on each of the legs, which the
customer may ultimately use. Alternatively, that price can be
discounted below that level by a predetermined percentage depending
on the amount of material being shipped as included in the cargo
transport information. A more sophisticated model could determine
the probability of a container on any one of a given number of
voyages, and compute the price of the option accordingly.
[0043] The calculation of the option price may be determined by
multiplying a base option price by those factors that will affect
the value of the option. The base option price may be a fraction
(in this example called F, the Standard Option Factor) of the cargo
shipment price for which the option is being purchased. In this
example F is set at 10%. Generally, the fraction will decrease as
the shipment price for which the option is being purchased
approaches the full historic rate price. The variables used to
calculate the option price from the base option price might be
continuously or discretely variable. One combination of suitable
discretely varied variables along with select continuous variables
is described in the following table, which assumes the option base
price is 10% of the full shipment price.
3 Value Example Variable Name and Description Sub-Category Range
Value O: Ocean Rate Std 35 day voyage $1000 $1000 Premium 21 day
$1400 F: Standard Option Factor continuous 10% C: Commodity type -
E.g. paper products, electronics, Type 1 0.8 1.2 finished plastic
goods, etc. Type 2 1.0 Type 3 1.2 V: Volatility - Factor related to
the historic volatility sigma 1.0 0.8 1.0 of containerized cargo
prices serving the relevant sigma 2.0 1.0 market as well as current
general market conditions. sigma 3.0 2.0 Among other things,
volatility is a function of historic price variability, contracts
of affreightment, flexibility of customer need in ship date,
container repositioning, and bunker surcharges (sigma) E: Equipment
type - Type of container equipment 20 ft Standard 1.0 1.0 used in
the handling and transport of cargo. 40 ft Standard 1.8 20 ft
Refrigerated 2.1 S: Service category - Premium or discount
associated Type 1 1.0 1.0 with particular ports as well as for
general categories Type 2 1.5 of customer needs
[0044] Using these variables, a sample suitable algorithm for
calculating an appropriate option price is as follows:
Option Price=O.timesF.timesC.timesV.timesE.timesS
[0045] While this equation uses a simple product of all of the
aforementioned parameters, more sophisticated formulas may be used
to arrive at a suitable option price. Once the option price
information has been calculated, it is transmitted to the customer
in step S11. This option price information may be a single price
for an option to buy, for a particular price, a container space
engagement that matches the customer's shipment information.
[0046] As an example, assume a customer wants to purchase an option
to buy the standard $1000 container space. Further assume that the
ship date is 30 days out, a medium load factor is expected, it is a
prequalified customer, he has 48 hours of flexibility, and the
shipment's standard deviation of historic price volatility is 2.
The base option price is, in this example, $1000.times.10%=$100,
and the final option price is $120, calculated as follows:
Option Price=$1000(O)times %
10(F)times1.2(C)times1.0(V)times1.0(E)times1.- 0(S)
[0047] After the price information is transmitted to the customer
in step S11, the customer decides whether to purchase the option in
step S12. If he decides to purchase the option, the system can
process the sale by billing the customer's freight account
(established previously), in step S13. Of course, alternate methods
of payment may be used instead of a freight bill, including payment
by electronic check debit, debit a pre-established credit line,
freight payable at destination, cash accompanied with a large
currency transaction form, Fedwire, Pre-authorized auto debit,
Cashiers check, and the like. Alternatively, the shipping company
may simply invoice the customer for the price of the option to be
paid in full prior to issuance of a clean on board Freight Prepaid
bill of lading.
[0048] If the customer decides not to purchase an option during
step S12, the customer is given a chance to revise the cargo
transport information in step S15. By adding more flexibility to
their shipment, the customer may be able to find an option that is
suitably priced. After the shipment information is revised, the new
shipment information is processed by the system in the same way as
the original shipment information in order to generate a new option
price. The freight payment transaction may be carried out by the
central controller 20. Alternatively, the freight payment
transaction may be carried out by the agent terminal 30.
[0049] Transactions processed through the agent terminal 30 may be
carried out using the same modem 36 that is used to communicate
with the central controller 20. Alternatively, an additional modem
(not shown) may be included in the agent terminal 30 to process the
credit card transactions when subject facility is available to the
customer via American Express freight account.
[0050] After the sale is completed, the option database (27a in
FIG. 2) is updated in step S14 to reflect the fact that a
particular option has been sold. The number of options sold for a
particular voyage may be used by the system as a factor in
determining the price of options to be sold in the future. More
specifically, when the number of options outstanding for a given
voyage rises, the price for subsequent purchase of similar options
may be raised to compensate the shipping company's for the
additional risk of having to sell a large number of containers for
a particular voyage. The customer database (27b in FIG. 2) may also
be updated to indicate that a particular customer has purchased a
given option. This customer database may be used for various
purposes including billing and marketing.
[0051] FIG. 6 is a block diagram depicting operation of the system
when a customer exercises an option. The steps of this process may
be stored on a computer readable medium which in this case would be
the data storage devices 27 and 37 (shown in FIGS. 2 and 3) First,
in step S20, the customer contacts the agent and indicates that he
wishes to exercise a previously purchased option and engage a
container space. After the operator of the agent terminal 30 enters
information describing the option, the agent terminal 30 transmits
the option exercise information to the central controller 20 in
step S21. The central controller 20 then confirms that the option
contract does in fact exist, and is current, as shown in step S22.
The customer's freight account (pre-established) is then billed for
the container space specified by the option being exercised in step
S23. The specifics of charging the customer for the container space
are similar to the specifics of charging him for the original
purchase of the option. The option database 27a in the central
controller 20 (shown in FIG. 2) is subsequently updated to show
that the option has been exercised, as shown in step S24.
[0052] While the above description contemplates the sale of an
option with a fixed expiration date at a particular price,
alternative-pricing configurations may also be used. These could
include, for example, options that can be extended each month for a
monthly fee. Part or the entire option price may also be credited
towards the container space. After an option is issued by an
shipping company, the shipping company can reserve a container on a
shipment covered by the option, and cancel the booking when the
option expires.
[0053] Alternatively, the shipping company can do nothing until the
option is exercised, and at that point reserve the customer on a
shipment that matches the specified cargo transport criteria. If
this reservation results in overbooking of the shipment, the
shipping company can resort to traditional methods of dealing with
overbooking, such as compensating customers that miss the shipment.
Alternatively, the shipper can add an extra shipment to provide the
customer with the desired service.
[0054] The description above contemplates the use of options that
are issued by the shipping companies themselves, which are capable
of issuing the appropriate container space when the option is
exercised. It should be recognized, however, that the option need
not be issued by the shipping company's themselves. A third party
can issue the option, provided that the third party is willing to
go out into the market and purchase container space if and when the
option is exercised. This latter situation corresponds to a party
that does not own shares of a given stock selling "naked" options
on that stock.
[0055] In an alternative embodiment, the option may be replaced by
an insurance policy that insures the policyholder that he would be
able to buy a container space at a given price. The policy would
indemnify the policyholder against part or all of the additional
prices that he might need to pay to buy the ticket. Pricing the
insurance policy would be similar to pricing the options described
above, and selling the policy could also be similar to selling the
options described above.
[0056] While the present invention has been described above in
terms of specific embodiments, it is to be understood that the
invention is not limited to the disclosed embodiments. On the
contrary, the present invention is intended to cover various
modifications and equivalent structures included within the spirit
and scope of the appended claims.
PRIOR ART REFERENCES
[0057] Sheldon Natenberg, Option Volatility & Pricing,
McGraw-Hill, New York, 1994.
4 U.S. Patent Documents 4766539 August 1988 Fox 364/401 4885685
December 1989 Wolfberg et al. 364/401 5203620 April 1993 McLennan
312/334 5483444 January 1996 Heintzerman et al. 364/401 5797127
August 1998 Walker et al 705/37
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