Running Head: Research Methodology 1

😂THE CARIBBEAN MARITIME UNIVERSITY

How Has Freight Rates Affected Two Major Manufacturing Companies In Jamaica?

Submitted by

20180528

20181036

20180520

In partial fulfillment of the requirement for the Degree of Bachelor of

Science in Logistics and Supply Chain Management

2022
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ACKNOWLEDGEMENTS

We are really grateful that we managed to complete this project on time. It could not

be completed without the effort and cooperation of the group members. The success and final

outcome of this project required a lot of guidance and assistance from many people and we

were extremely fortunate to have got this. We are highly indebted to Ms. Walker for her

guidance and constant supervision and for providing us with the necessary information and

support regarding the project.

We also want to expand our deepest gratitude to all those who have directly and

indirectly guided us in writing this assignment. Many people, especially our classmates and

team members, have made valuable comments and suggestions on this project, which

inspired us to improve on it.

Finally, we have to thank Seprod and Grace for participating in this study. Their

willingness to share their work experiences as it relates to the change in freight rate has

contributed greatly to the finalization of this project.

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Table of Content

1. Abstract

2. Chapter 1 - Introduction
· Background to the study (Context of the Research)
· Statement of the problem (Definition of the Problem)
· Research Question/s
· Research Objectives
· Rationale/Purpose of the Study
· Significance of the study
· Assumptions & Delimitation of the Study
· Definition of terms (as used in the research)

3. Chapter 2 - Review of Literature

4. Chapter 3 - Research Design

· Research Design Type & Justification
· Methodology
· Population/Sample
· Sampling Technique & Procedure
· Data Collection
· Instruments
· Data Analysis (explain how tools will be used to do analysis)
· Reliability and Validity (quantitative papers)
· Trustworthiness (qualitative papers)
· Ethical Issues

5. Chapter 4 - Findings & Discussion

· Presentation of Results
· Graphical presentation of data (where necessary)
· Discussion of Results (This entails analysis and interpretation of results via
engagement of the existing literature review, theoretical/conceptual
frameworks, researchers’ perspectives, cross-tabulation tables, etc.).

2. Chapter 5 – Conclusion, Implications and Recommendations

· Conclusion
· Implications (Theoretical, Practical & future implications of the study)
· Recommendations
3. References

4. Appendices
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History

Freight rates have been an integral part of shipping operations since the first horse

was used to transport goods from one place to the other. In an article written by Harkey

(2015), it was highlighted that horse drawn wagons were one of the first methods of

transporting goods which were deemed slow and sometimes dangerous. Flatboats, as well as

canoes were also used in the efforts to transport goods which were manned with a paddle

crew. Steamboats came along in the 1700s which made the process more efficient and

allowed more cargo to be transported.

Robinson (2018) mentioned that in 1832 Matthias Baldwin created the first set of

locomotives that travelled up to 30mph which was fast for its time. He outlined that in the

1900s cars and trucks became prevalent as the first car with an internal combustion engine

was developed. This led to the development of more land-based transport that was able to

move cargo inland at a faster speed or where trains could not be used. Transport went up

another level with the invention of the first sustained powered-airplanes by the Wright

brothers in 1902 (Robertson 2019). “Earlier, an unmanned helicopter powered by a steam

engine was developed in 1877 by Enrico Forlanini”, but it was the Wright brothers invention

that pioneered air transport up until present day.

With all these developments enabling the means to transport cargo the costs of such

transport had to be factored in to ensure a surviving economy. The prices at which cargo

moves from one point to the other are called freight rates. These rates were highly subjected

to changes based on weight, volume, as well as supply and demand of cargo. The pricing

index is formulated using factors such as type of cargo and the mode of transportation. In

more detailed computation, distance weight and size as well as points of pick up are also

factored in to generate the freight price/rate.

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Background to the Study

Jamaica has long imported more than it exports. Nevertheless, based on its geographic

location and strategically located natural harbours, it has become one of the ideal places for

transshipment and freight transport. In an article written by Japan times (2020) emphasis was

placed on the fact that Jamaica moves more cargo than any other Caribbean country and is

well on its way to become a global logistics hub alongside giants such as Dubai, Singapore

and Rotterdam. The Jamaican economy would truly benefit from such business, but what can

be said about local manufacturers and shipping changes?

In further news The Jamaica Gleaner (2021) highlighted that:

The cost of moving goods across the world has increased significantly over the past

year, and shipping companies are warning that customers and consumers will likely feel it in

their pockets soon. With an estimated 80 per cent of global trade being moved by sea, general

costs to Jamaicans are expected to increase as shipping rates climb.

Statement of Problem

The impact of freight rate changes has emoted major upset in the manufacturing industry.

This has matriculated into economic drawbacks as well as constant price increases, resulting

in escalating operating costs.

Research Questions

1. What are the factors that impact the change in freight rate?
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2. How does freight rate impact operation?

3. How does freight rate impact consumer price?

Goal / Objective of the Study

1. To assess how changes in freight rates have affected Jamaica’s manufacturers.

2. To determine how manufacturers have responded to the freight rate changes.

3. To ascertain how changes in freight rates affects end user demand

Purpose of the Study

In recent times, there has been constant fluctuation in freight rates due to several

factors on the international landscape. This research seeks to ascertain how the high freight

rates are affecting two major manufacturing sectors in Jamaica.

Significance of the Study

Over the years freight rates have been of great significance to logistics, supply chain, a

country’s economy and society as a whole. Changes in freight rate are likely to have

significant economic implications. Cost-cutting or better freight service, or both. The act of

transporting freight has a favorable impact on all businesses that are involved in the

manufacturing process, distribution, retail sale, and/or commerce of tangible items. Reducing

the cost of goods carrying per mile entails that any dissemination or production of the

manufacturing industry can service a larger market. It is hoped that by analyzing the impact

that freight rate has on two major manufacturing companies in Jamaica clear ideas can be

gleaned as to what manufacturers expect in order to adapt to the constant changes in freight
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rate. It is hoped that this investigation will enlighten the consumers as to how shipping

companies and manufacturers calculate their rates in accordance with the ever-changing

freight rate. This will help them to determine if they are willing to adjust to the changes or

find alternatives and if there are reasons for drastic changes. The study will also try to

ascertain the impact of an increase in productivity on the economy. This will definitely help

manufacturers and consumers to better understand shipping agencies and how to effectively

address them.

Assumptions

It has been quite difficult for the researchers to obtain information on the freight

prices offered by other shipping lines. Data collection from Grace Foods and Seprod Ltd was

sometimes difficult due to the fact that some information could not be made public. The

researchers attempted to obtain information on changes in freight rates, including the effects,

in a step-by-step manner. However, due to a paucity of data, this study had to be constrained.

Limitations

The anticipated restrictions, which are common in any research investigations, such as

funding, time, and access to respondents and their biases, may be impending. However, the

financial issue has been addressed because the research is confined to Grace Foods and

Seprod Ltd, rather than the entire population of manufacturers in the country.

The lack of time is a significant stumbling barrier in any research, yet as researchers, time

management is a critical component of successful research. As a consequence, this research

has not been carefully budgeted in terms of time and time scale in order to fulfill the school

authorities' requirements. The study was not well-planned, so there have been delays that

could possibly jeopardize the study's conclusion.

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Another constraint is the problem of privacy. Access or topic views are frequently only

feasible if confidentiality is guaranteed. This condition made it difficult for the researchers to

communicate the genuine picture, as well as make it difficult to collect data. As a result, it is

expected that some employees may have been hesitant to participate in the research.

Furthermore, using a survey instrument to collect data has inherent limits because it is

confined to those who answer. Because the number of replies has a statistical effect, the rate

of response restricts the amount of data obtained in the research. The information gathered

may not be accurate in other regions, and the study's findings may not be indicative of other

areas.

Delimitations

● This research will be limited to closed-ended and open-ended responses in the survey.

● This study will be conducted with a limited amount of time framework and financial

resources.

Definition of Terms

Freight rates- this is the cost of transporting goods from one location to another. The cost is

determined by the type of cargo, mode of transportation, cargo weight, and distance to the

delivery location.

Flatboats- a boat with a flat bottom and square ends that is designed to transport large cargo

in shallow waters.

Transport- the act of carrying from one place to another.

Economy- this is the mechanism by which a country's or region's money, industry, and trade

are organized.
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Supply- this is the total amount of a certain commodity or service available to consumers,

which is a fundamental economic notion.

Demand- this is a consumer's desire to buy goods and services, as well as their willingness to

pay a price for such products and services.

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Chapter 2

Review of Literature

Introduction

Freight rates are notoriously volatile, since they are heavily reliant on the interaction

between supply of available transport capacity and demand for transportation services

(Stopford, 2008). Freight rates are at the heart of the shipping industry, since they determine

whether a company will succeed or fail. The changes in freight pricing describe shipping risk,

depending on the ownership arrangement of the ship fleet between cargo owner and ship

owner. The chance of cargo owners increasing their ship fleet grows, whereas the danger of

ship owners increasing their hiring from the spot market increases (Stopford, 2008). To

guarantee a seamless cargo flow, shippers, carriers, and/or other transport and logistics

service providers participating in this sector, must negotiate and fix transportation contracts

(typically forward freight agreements) well in advance. Furthermore, in the shipping industry,

immediate choices such as chartering a ship, which are frequently made over the course of a

week, are largely reliant on freight rate forecasts. Shipowners' decisions on acquisition, sale,

newbuilding, and scrapping are also heavily influenced by freight prices (Jeon, Duru, & Yeo,

2020). As a result, accurate forecasting of future freight rate development is critical for

significant parties involved in cargo movement planning and execution to make well-

informed and lucrative decisions.

Theoretical Framework

According to Rattner (2006), the’ Theory of Constraints’ (TOC) is a strategy for

improving processes that stresses the importance of determining the system constraint or

bottleneck. It was first discovered by Dr. Eliyahu Goldratt. It is said that an organization's
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change method focused on maximizing profit. The Theory of Constraint consists of three

concepts: Five Focusing Steps, Throughput Accounting, and Thinking Processes, although

they are always evolving and developing to be used in different businesses, in different eras it

is always the same concept.

Five Focusing Step focuses is a method used for detecting and removing roadblocks.

It involves identifying, exploiting, subordinating, synchronizing, elevating the performance

of the constraint, and repeating the process.

The Thinking Processes a collection of methods for assessing and addressing issues. It

is developed as an experimental "cause and effect" instrument, with the aim of identifying the

root causes of negative impacts and removing them without causing new ones.

Throughput Accounting is a method for assessing performance and influencing

management decisions. It aims to eradicate negative limitations introduced by modern

accounting methods and distortions that encourage activities that are incompatible with the

long-term objective of increasing benefits.

This theory relates to our topic of the current freight rate and how it has impacted the

shipping and supply chain industry. It would show what could be done to lower freight rates

and be less expensive for not only businesses but also consumers.

According to ("Channel coordination in supply chain management – Tutorial," 2020)

Theory of channel coordination focuses on improving supply chain efficiency by improving

operational enterprise plans and priorities. In dispersed inter-company environments, it

typically focuses on inventory management and ordering decisions. Inaccuracy of

information when reviewing the data could result in double marginalization. The theory's
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theoretical foundations were based on the Contract theory. Ananta Subramania Kumar was

the first to develop and analyze the problem of channel coordination in 1992.

This theory is related to this research whereas it could improve the planning and

management of the flow of goods in the relative supply chain. This could drastically improve

the stock out and how to deal with the demand and cost.

Theoretical Framework

According to (Rattner, S. 2006), the Theory of Constraints (TOC) is a strategy for

improving processes that stresses the importance of determining the system constraint or

bottleneck. It was first discovered by Dr. Eliyahu Goldratt. It is said that an organization's

change method focused on maximizing profit. It cannot be predicted and is a continuous

process in which punishment could result in the prevention of continuous improvement.

Accuracy, when the constraint is identified, needs to be managed properly and the quickest

path to meaningful change and serve as the foundation for long-term development would be

found. Theory of Constraint consists of three concepts: Five Focusing Steps, Throughput

Accounting, and Thinking Processes, although they are always evolving and developing to be

used in different businesses in different eras it is always the same concept.

Five Focusing Step focuses is a method used for detecting and removing roadblocks.

It involves identifying, exploiting, subordinating, synchronizing, elevating the performance

of the constraint, and repeating the process.

The Thinking Processes a collection of methods for assessing and addressing issues. It

is developed as an experimental "cause and effect" instrument, with the aim of identifying the

root causes of negative impacts and removing them without causing new ones.
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Throughput Accounting is a method for assessing performance and influencing

management decisions. It aims to eradicate negative limitations introduced by modern

accounting methods and distortions that encourage activities that are incompatible with the

long-term objective of increasing benefits.

This theory relates to our topic of the current freight rate has impacted the shipping

supply chain. It would show what could be done to lower freight rates and be less expensive

for not only businesses but also consumers.

Freight rate

Dry-bulkers and containerships have differing magnitudes and trends, which is

understandable given the sectors' differences. Dry-bulkers are utilized for commodities that

have a lower per-tonne value and are less time-sensitive than manufactured items delivered

by containerships. Dry-bulk shipping markets are structured as decentralized spot markets, in

which trading businesses rent a ship for a specific route on the spot market, similar to how a

taxi is hired. Freight rates across destinations are widely dispersed in this industry. It

originates from the severely unbalanced nature of commodity exchange. As a result, nations

with big net imports face much higher 'incoming' freight rates than 'outgoing' freight rates,

with many 'outgoing' boats traveling without a cargo, i.e. ballast (Brancaccio et al., 2021).

Brancaccio et al. (2020) used Clarksons Research data from 2010 to 2016 to show

that the imbalance and unobserved heterogeneity in dry-bulk freight rates have significant

implications for international trade and beyond. To begin with, it diminishes comparative

advantage and shifts manufacturing from exporters to importers. Second, there is a network
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effect. When one of the major importers slows down, some ships reallocate to other nations

and regions, lowering freight prices and increasing commerce in other areas.

Demand volatility and unpredictability, as well as a slow reaction in supply due to

time to build and convex operational costs, impact freight prices over time (Kalouptsidi,

2014).

The non-declining containerized freight rates, according to Hummels (2007), are due

to rising input costs such as fuel, ship expenses, and port charges. Due to the time it takes to

build a new ship, the sector has considerable entry delays from a market structure standpoint.

The lack of a major drop in freight prices, according to Bridgman (2021), is due in part to

strong worker unions at ports. Even though containerization resulted in tremendous labor

productivity increases, port-related labour costs did not decline much due to their

considerable negotiating strength. Finally, demand for international commerce and

transportation services continues to rise.

The majority of the open island economies in the Caribbean are tiny and specialized,

and they import the majority of their consumer products. Additionally, the import of raw

materials and unfinished pieces is crucial for any local manufacturer of goods and services. In

1996, the Caribbean saw a level of international trade that was 78% of GDP, compared to

25% for Latin America during the same time period (Hoffmann, 1997). These numbers

suggest that Caribbean nations are more reliant on international commerce than other areas.

The main means of commercial transportation in the Caribbean is by sea. Trade in products is

carried out by air or water for island states like these. Nevertheless, from an economic

perspective, only some items can be transported by air, therefore shipping by sea continues to

be the primary option for moving the majority of commodities. This suggests that Caribbean

nations are more reliant on marine transportation than other regions. Only a few products,
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like bananas, sugar, or bauxite, are exported by the majority of Caribbean nations; these

products are readily available from alternative suppliers for buyers. This implies that nations

in the area must accept pricing for their export goods that are established by the global

market. Additionally, the low value and high transportation expenses of these goods have a

big influence on local exporters. Any commerce in commodities will be hampered by high

transportation costs once a rival nation can sell the same thing for less money overall,

including shipping charges. As a result, industries in a nation with high shipping costs find it

difficult to export their goods. Additionally, every dollar needed to convey a good straight to

the market lowers the exporter's income from the Caribbean, which may encourage

businesses in these nations to slash salaries in order to make up for greater transportation

costs and remain competitive on international markets and also raises the cost of imported

commodities and consumer items. Therefore, any savings that come from reducing the cost of

transportation would benefit a nation's whole economy. In conclusion, it can be asserted that

expensive transportation directly hinders commerce and foreign investment. A recent World

Bank study (1994) found this connection. Similar findings were reached by Radelet and

Sachs (1998), who noted that "countries with lower transportation costs have seen quicker

manufactured export growth throughout the previous thirty years than nations with higher

shipping costs." Costs associated with marine transit are relatively expensive when compared

to those in other nations, particularly for the Caribbean. According to Hoffmann (1997),

nations in the Caribbean area have transportation and insurance expenses that are up to three

times higher than the global average. Higher transportation costs can be attributed to a variety

of factors, including economies of scale in ports and ships, the level of competition, port dues

and taxes, port wait times, and insurance premiums. It is crucial to understand the potential

influences on these expenses.

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Freight Costs: Measurements and Determinants

Obtaining good data is one of the most difficult aspects of analyzing maritime freight

costs. Several attempts to directly or indirectly assess international freight costs have been

made in contemporary economic literature. As a proxy for freight costs, several authors

employed cif/fob ratios (Radelet and Sachs 1998, Baier and Bergstrand 2001, Limao and

Venables, 2001). Because most importing countries report trade flows that include cost,

freight and insurance (cif – 'cost, insurance, and freight') and most exporting countries report

trade flows that do not include freight and insurance (fob – 'free on board'), freight costs,

including insurance costs, can be calculated as the difference between the two flows for the

same aggregate trade. However, according to Hummels (2001), importer cif/fob ratios

derived from IMF sources are poor proxies for cross-sectional change in freight costs and

give little information regarding time series volatility. Oguledo and Macphee (1994)

questioned the use of IMF cif/fob ratios as a proxy for freight costs.

To get around these constraints, Hummels (1999, 2001) uses data on international

freight costs from a variety of primary sources, including shipping price indices obtained

from shipping trade; air freight prices gathered from survey data and freight rates (import

freight expenditures) collected by customs agencies in the United States, New Zealand, and

five Latin American countries: Chile, Argentina, Brazil, Uruguay, and Paraguay. Limao and

Venables (2001) utilize shipping industry quotations for the cost of shipping a conventional

container (40 feet) from Baltimore to 64 locations, as well as the IMF's cif/fob ratios for a

sample of 103 countries. Their study was based on data from 1990. The researchers also

pointed out that it's unclear how Baltimore's experience with data in 1990 can be applied to

other cities. Martnez-Zarzoso et al. (2003) use data on freight costs gathered from interviews

with Spanish logistics companies. The reference year was 1999. Although the selection of
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countries and the year of research differ, they discover import elasticities with regard to

freight costs that are similar in size to those found by Limao and Venables (2001).

Adland et al. (2016) review studies of microeconomic factors of freight rates (e.g., see

Alizadeh and Talley, 2011) and reveal that capesize rates are primarily influenced by

macroeconomic market dynamics, route relevant variables, and the characteristics and

interactions of charterers and owners. One of the most crucial aspects appears to be the proxy

for market circumstances.

Hübner (2016) recognizes world GDP as the most significant economic driver of the

shipping industry (without undertaking empirical investigation), but notes that the association

between trade growth and GDP growth has still not been scientifically confirmed.

Papapostolou et al. (2014) develop dry bulk market mood indicators. The index components

and variables were chosen only on the basis of theoretical analysis. Market expectations,

value, and liquidity are reflected in the proxies used. Papapostolou et al. (2016) gave

statistical proof suggesting shipping sentiment is an efficient predictor of stock returns in

another investigation. According to their findings, it outperforms the US consumer mood

index. However, the data set employed in our analysis solely takes into account

characteristics related to the dry bulk market's economic climate.

Global industrial production represents economic industrial activity. Manufacturing,

mining, energy power, and utilities are all included. According to Beenstock and Vergottis

(1989, 1993) and Stopford (2008), global industrial activity is a major predictor of seaborne

commerce. Stopford (2008) presents historical evidence for this link as well. Tsioumas and

Papadimitriou (2015) discover a statistically significant association between Chinese steel

output and freight rates of various sizes of bulk carriers in another investigation. Overall, it is

well documented that the amount of seaborne trade is directly related to the level of industrial
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exploitation of the raw materials transported. As a result, a rapid drop in industrial activity is

likely to pull freight rates down.

Lim et al. (2019) applied panel regression on implied volatilities (IV) of freight

choices to investigate the factors of freight market volatility. The regressors were separated

into demand and supply components, with elements relating to the economy's financial

circumstances, ship second-hand and freight markets, as well as economic conditions in the

Forward Freight Agreements (FFA) market rounding out the picture. The findings implied

that the Organization for Economic Co-operation and Development (OECD) industrial

output, China's industrial production growth, and China's metallurgical coal imports are the

most important economic variables in the dataset utilized in this study. Despite the fact that

the authors state that they employed delayed regressor values, it should be remembered that

commodity imports represent current demand rather than future demand.

According to the related empirical literature, the variables chosen to demonstrate

maritime freight costs are: geographical factors; product characteristics and requirements (i.e.

product unitary value, refrigerated transport), economies of scale, number of maritime service

providers, shipping opportunities-described as the number of direct regular services offered

between countries I and j within a month, ship characteristics, and use of open registries

(Wilmsmeier 2003, Clark et al. 2004, Wilmsmeier and Pérez 2005, Márquez-Ramos et al.

2006a, Martínez-Zarzoso and Nowak-Lehmann 2007).

In the instance of 35 port destinations in Northern Europe, Slack and Gouvernal

(2011) investigated the factors influencing freight prices. Their research revealed that

distance has no impact on freight rates, and that regional and temporal variances have no

bearing on shipments' costs. They also discovered that there is no link between distance and
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Bunker Adjustment Factor (BAF), as well as no link between freight rates, imports, and the

size of big vessels.

Some writers have used alternative autoregressive models to account for the nonlinear

relationships between the many factors impacting freight rates and their interrelation. The

link between six bulk freight rates connected to distinct commodities and routes was

investigated by Veenstra and Franses (1997) using the Multivariate Cointegration technique.

A vector error connection (VEC) model was created after finding cointegration between five

of the model's variables. The stochastic trend of all variables indicates that a significant

portion of the freight rate pattern cannot be anticipated. The VAR model was used by

Veenstra (1999) to investigate the relationship between spot and period freight prices in the

ocean dry bulk shipping industry. The findings revealed that the industry had a term structure,

and that all departures from the current value relation are only temporary. Chi 7 (2016) used

the Autoregressive Distributed Lag (ARDL) technique to create export and import models for

commerce between China and the United States. The findings showed that GDP was the most

important factor of bilateral freight flows, whereas real income is closely linked to bilateral

freight flows. They also discovered that transportation costs can have a significant impact on

Chinese commodity inflows to the United States.

Effects of Freight Rate

Stopford (2009) discovered that freight prices had an impact on the carrier's

investment choices, including whether to buy rival companies or add more boats to its fleet.

The freight rate, according to research by Luo & Fan (2011), encouraged carriers to make

investments in order to increase operational effectiveness and expand their market share.

The market has consolidated, but there have also been more ships and more global

TEU capacity, according to Drewry Maritime Advisors' (2017) . According to Saxon & Stone
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(2017), the expansion of TEU (Twenty Foot Evquivalent Unit) capacity has helped to drive

out the less well-established rivals. The use of economies of scale by Cullinane & Khanna

(1999) and Malchow (2017) results in a decrease in the overall shipping cost per TEU,

increasing containership profitability and putting pressure on rivals to further their own

optimization efforts in order to remain competitive. Though theoretically economies of scale

should improve revenues per TEU, other scholars contend that these benefits are merely

theoretical.

To take advantage of the momentarily increased freight prices, shipping corporations

aim to time the ordering of new boats as efficiently as possible. Due to their lengthy

construction times, these boats frequently enter a saturated market with little demand for

them (Kalouptsidi, 2014; Stopford, 2009), causing a substantial amount of the fleet's capacity

to go unused since supply outweighs demand. Additionally, the cost of idle capacity is very

high. For instance, 8.86% of the global fleet seizes operations during the COVID-19

pandemic due to low demand (Clarkson's Research, 2020; Larsen, 2020), resulting in an

estimated loss to carriers of $23 billion, per a market report by Sea-Intelligence (2020, as

cited in Raun, 2020). By merging operations, the carriers would share their available

capacity.

According to Bloomberg (2021), the rising cost of shipping items around the world

may affect your wallet sooner than you think, from your morning cup of coffee, to the toys

you were planning to purchase for your kids. Shipping a 40-foot steel container of freight by

sea from Shanghai to Rotterdam now costs a record $10,522 USD, up 547 percent from the

seasonal average for the prior five years. Freight-cost hikes threaten to raise the price of

everything from toys, furniture, and vehicle parts to coffee, sugar, and anchovies, adding to

fears in global markets already bracing for rapid inflation.

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Globalization and regional inequalities’ effects on freight prices, according to Behrens

and Picard (2011), are exaggerated. The existence of empty containers is the most important

factor in asymmetric freight pricing. Lun et al. (2013) employed Path analysis in Structural

Equation Model (SEM) to investigate the causation between the following variables:

container trade, total fleet, freight rate, new building vessel price, second-hand vessel price,

and demolition vessel price. Clarkson Research (the leading provider of data and intelligence

for shipping, trade, offshore and energy) collected the data on a weekly basis over a period of

twelve years. The findings indicated that there was substantial association between total fleet

size and seaborne commerce, but no such relationship existed between freight rate and

seaborne trade. The expenditures and revenues of the top 25 container operators were studied

using multiple regression by Tran and Haasis (2015). They discovered that the market freight

rate affects revenue, and capacity affects the operators' overall cost. Duru and Yoshida (2011)

employed the Ordinary Least Square approach to look at the components that went into

creating the Long Term Composite Freight Index (LFI) and the seaborne commerce.

According to their findings, life expectancy was substantial for both models, but fleet size

had little impact.

According to Jordi Espin (2021) at the retail level, vendors have three options: stop

trading, raise prices, or absorb the cost and pass it on later. All of which would result in more

expensive goods as cited by Strategic Relations Manager at the European Shippers' Council,

a Brussels-based trade group that represents about 100,000 retailers, wholesalers, and

manufacturers.

Companies are scrambling to find ways to avoid the higher prices. According to

Philip Damas, founder and operational head of Drewry Supply Chain Advisors (2021), some

have stopped exporting to particular places, while others are looking for items or raw
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materials from closer locations. The longer these high shipping freight prices persist, the

more corporations will adopt structural efforts to reduce their supply chains. "For

internationally traded items, few enterprises can withstand a 15% increase in total supply

costs."

Due to the fact that businesses have annual contracts with container lines, the prices

they have locked in are significantly lower than the attention-getting spot pricing.The

Hongkong and Shanghai Banking Corporation Limited (HSBC) Trade Analyst, Shanella

Rajanayagam remarked that "the longer-term rates are much considerably lower than the spot

rates, even if they are filtering through," despite the fact that the latest round of contract

discussions since the COVID-19 pandemic reflected the stronger spot market. Consumer

demand is likely to move from products to services once the lockdowns are lifted, but "the

risk is that higher shipping prices persist — especially given continued shipping interruption

— and that producers become more inclined to pass these higher costs on to consumers,"

(Rajanayagam, 2021).

According to Lauren Etter and Brendan Murray (2022), ocean shipping prices are

anticipated to remain high well into 2022, ensuring another year of record profits for global

freight carriers — but at the expense of smaller businesses and their customers from Spain to

Sri Lanka. In the year 2021, the spot fee for a 40-foot container from Asia to the United

States surpassed $20,000 USD, including surcharges and premiums, up from less than $2,000

USD just a few years earlier, and was recently hovering around $14,000 USD. Furthermore,

due to a lack of container capacity and port congestion, longer-term rates specified in

contracts between carriers and shippers are up to 200 percent higher than a year ago,

indicating that prices will remain high for the foreseeable future.
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The increasing demand for containers and space on vessels going from the Far East,

according to Neil Smith (2021), Managing Director of Regflo Agencies Limited Jamaica, are

important drivers to the price surge. He further asserted that fuel prices are at their highest

levels in five years”. "Rates for both LCL (less-than-container load) and FCL (full container

load) shipments from the Far East have risen dramatically." Back in 2019, we handled an

LCL shipment of truck parts for a client, and the freight charge was more than double what

an FCL cargo (40-foot container) from the same supplier cost. The order was placed in the

middle of 2020, however it was not filled and shipped until the beginning of 2021.

At least one major Jamaican company has warned of impending price hikes due to

rising costs and a scarcity of containers. "Shipping expenses have increased by over 300

percent. This is exacerbated by a paucity of containers, which has caused supply chain

logistics to be disrupted. Wheat, corn, sugar, edible oil, and feed additives for cows are only a

few of the commodities that are used as raw materials in our production processes,"

according to Seprod CEO Richard Pandohie (2021).

According to Neil Smith (2021), customers of maritime organizations should also

expect to pay higher customs duties, as these fees are "determined based on CIF (cost,

insurance, and freight), not just invoice value," Smith explained. This calculation is

frequently neglected, although it has a significant impact on product pricing.”

According to our findings, shipping costs will continue to have an inflationary effect

through the end of 2022. As a result, many central bankers will have to make difficult trade-

offs while dealing with rising inflation and still significant economic slack. Furthermore, the

conflict in Ukraine is expected to result in additional supply-chain interruptions, which might

prolong the rise in global shipping prices and their inflationary repercussions. The bottom

line of many shipping and freight enterprises may depend on lowering freight expenses and

maintaining low freight rates, but it is important to realize that a good ocean freight rate does
 24

not always mean the lowest one. In order to keep the participating shipping lines in business,

a good ocean freight rate must be one that is long-term viable for both the carrier and the

client.

Chapter 3

Introduction

This chapter shall discuss the research methods available for the study and what is

applicable for it to use in response to the statement of the problem in chapter 1 which is

directed towards how freight rate has affected two manufacturing companies of Jamaica.

Likewise, this chapter presents the assorted procedures and strategies for identifying sources

for needed information on the analysis and evaluation of the customer service.This part of the

study specifies the research approach, research design, data collection method, data analysis

plan as well as ethical considerations.

Research Design Type and Justification

This study was conducted with the use of quantitative research, and descriptive

design. Burns and Grove (1993) define quantitative research as a formal, objective,

systematic process to describe and test relationships and examine cause and effect

interactions among variables. Surveys can be used for explanatory, exploratory, and

descriptive research. A descriptive survey format was used. A survey is used to collect unique
 25

data for describing a population too large to have a look at immediately (Mouton 1996). A

survey obtains information from a sample of people by means of self-report, that is, the

people respond to a collection of questions posed by the investigator Polit & Jungler (1993).

In this research, the statistics were gathered through self-administered questionnaires

distributed personally to the subjects by way of the researcher. A descriptive survey was used

to gather additional data due to the fact that it provides an accurate portrayal or account of the

characteristics, for instance, behavior, opinions, abilities, beliefs, and knowledge of a selected

individual, situation, or group Burns and Grove (1993). This design was chosen to satisfy the

objectives of the study, namely to see the knowledge and views of employees and members

of Grace and Seprod in regards to how they are impacted by freight rates.

Methodology

The researcher decided to utilize a qualitative and quantitative approach to gather the

information required. The purpose of using two (2) forms of research approaches is that

qualitative and quantitative research provides a better understanding of our research problem

or issue. This method will ensure the data is objective, valid and reliable. It will be gathered

from workers at Seprod and Grace as well as online research. Both primary and secondary

sources of data were collected. The primary data will be derived through the structure of the

questionnaire consisting of open format and closed-ended questions. The secondary sources

for the data collection included the internet, books, articles, and journals. To collect our

primary data the interview technique will be used accompanied by an analytical questionnaire

which will be constructed to seek to gain answers to the relationships between the two

variables outlined in the thesis statement and to compare with published theories and

concepts on the topics.

Sample
 26

Sampling Technique

Data Collection

According to P. Bhandari (2020), data collection is a systematic process of gathering

observations or measurements. Questionnaires and interviews will be used as the method of

collecting data from the relevant demographic. They will be done both virtually and face to

face which will help to get a thorough grasp of people's perspectives on the subject and

answers to the question.

Instrument

Data Analysis

According to LeCompte and Schensul, research data analysis is a process used by

researchers for reducing data to a story and interpreting it to derive insights. For analyzing the

data acquired from the interviews and questionnaires the narrative analysis and discourse

analysis have been selected. The narrative analysis technique entails reformulating tales

provided by respondents, taking into consideration the context of each instance as well as

each respondent's unique experiences. In other words, narrative analysis is the process of a

researcher revising primary qualitative material. Discourse analysis is naturally occurring

speech and all forms of written material in order to make the interviewee feel at ease.

Reliability and Validity

The method used to conduct this research will be qualitative and quantitative research which

tends to base knowledge claims on pragmatic grounds and SOMETHING ELSE. It employs

strategies of inquiry that involve collecting data either simultaneously or sequentially to best
 27

understand research problems. The data collection also involves gathering both numeric

information as well as text information so that the final database represents both quantitative

and qualitative information. The researcher bases the inquiry on the assumption that

collecting diverse types of data best provides an understanding of a research problem. The

study begins with research in order to generalize results to a freight rate and then focuses, in a

second phase, on detailed qualitative, open-ended interviews to collect detailed views from

participants. This method allows for the data collected to be credible and reliable. To collect

the data the interview and questionnaire instrument was used. The advantages of

questionnaires used in this research allow for large amounts of information can be collected

from a large number of people in a short period of time and in a relatively cost-effective way,

Can be carried out by the researcher or by any number of people with limited effect to its

validity and reliability, thus allowing for the researcher to be flexible, The results of the

questionnaires can usually be quickly and easily quantified by either a researcher or through

the use of a software package. This allows the research to be analyzed more scientifically;

and objectively than other forms of research methods, the questionnaire also allows for when

the data has been quantified, it can be used to compare other research and may be used to

measure change, and last but not least allows for the data to create new theories or test

existing ones. Using the questionnaire as a tool has its advantages but there are also

limitations in using this as an instrument such as, is argued to be inadequate as people

sometimes find it difficult to understand some of the questions asked and lend itself to

questions being answered using emotions, behavior, feelings, etc. The questionnaire has been

found to lack validity as to how well the finding may be valued. Also in Using a

questionnaire as a collective tool there is no way to tell how truthful a respondent is being or

telling how much thought a respondent has put into answering the questions, also the

respondent may be forgetful or not thinking within the full context of the situation. People
 28

may read differently into each question and therefore reply based on their own interpretation

of the question such as what is good; to someone may be poor; to someone else, therefore

there is a level of subjectivity that is not acknowledged lastly there is a level of researcher

imposition, meaning that when developing the questionnaire, the researcher might be making

their own decisions and assumptions as to what is and is not important. Using the Interview

as a collection tool for gathering data it allowed for the weakness of the questionnaire to be

eliminated and provided more credible research findings.

The interview used as a research tool of choice in this research allows the face-to-face

interaction with the individual making the collection of data and possible the unearthing of

information that would otherwise be impossible with just the use of the Questionnaire. Per

Blaxter et al (2006: 172), it is worthwhile doing interviews because it offers researchers the

opportunity to uncover information that is “probably not accessible using techniques such as

questionnaires and observations”. Moreover, they add that interviewing is not merely a data

collection tool, it is rather a natural way of interaction that can take place in various situations

(ibid: 177). Additionally, Dörnyei (2007: 143) argues that with the presence of the

interviewer, mutual understanding can be ensured, as the interviewer may rephrase or

simplify questions that were not understood by his/her interviewees. As a result, more

appropriate answers and, subsequently, more accurate data will be reached. Additionally, this

data can be recorded and reviewed several times by the researcher (when necessary) to help

produce an accurate interview report (Berg,2007).

However, like many other research tools, interviews have their set of drawbacks.

Hermanowicz (2002: 498) remarks that “while interviewing is among the most central,

revealing and enjoyable methods that one can use in research, it is deceptively difficult”.

Besides, Hammersley& Gomm (2008: 100) add that researchers should remember that:
 29

“what people say in an interview will indeed be shaped, to some degree, by the questions they

are asked. Walford

(2007: 147) argues that “interviews alone are an insufficient form of data to study social

life”. That is, both interviewer and interviewee may have incomplete knowledge or even

faulty memory. Hence, this lets us question the appropriateness of using interviews as the

only transparent means of eliciting data that would inform understandings of the meanings

interviewees make of their lived experiences (Potter and Hepburn, 2005). Undoubtedly,

furthermore, large amounts of data are expected to be revealed via interviews.

Therefore, we should follow Scheurich (1995: 249) who stresses that it is important for

interviewers to“highlight the baggage they get out of the interview”. In addition, interviews

have also been criticized (Robson, 2002: 94) as being time-consuming with regard to both

data collection and analysis because they need to be transcribed, coded, and possibly

translated to report the findings.

In conducting this research and representing the finding careful consideration was taken

into choosing the tools and measurements, thus the use of the mixed method in

conducting the research. This method would allow for the data to clearly define the findings

and interpretation of the data collected despite the drawback of the various tools and to

ensure the research was conducted with the highest degree of validity

Trustworthiness

Ethical Considerations

Ethical observations will be of paramount importance to ensure the data collected is

not tainted by information gathered using unscrupulous means. Data analysis must follow a
 30

principled approach that will strengthen data validity and proper application to solutions

formulated. Participation in this research is strictly voluntary and any information collected

from participants is based on the grounds that there is full disclosure of the purpose and aim

of the research. Full consent from participants must be attained before and study is done for

analysis. No harm shall be encountered by any participants in their efforts to complete this

research. Integrity and objectivity will be closely monitored to counter any swaying of the

empirical data collected to ensure any biased narratives. All sources used to formulate this

research will be documented and referenced appropriately using the scholarly approved

documenting writing style APA 7th edition. These principles will be the foundation of the

research that all data is collected upon. Anything that deviates from these principles shall

cause this research to be unethical.

 31

Chapter 4

Presentation of results

Research Project Planner

Stages Activity Estimated Start Time End Time

 32

Duration

Research Develop 1 day February 25, February 25,

planning Research 2021 2021

question

Introduction Develop an 1 week March 1, 2021 March 8, 2021

introduction for

the research

question

Theoretical Research, 1 week March 25, 2021 March 31, 2021

Framework capturing and

synthesise

relevant

literature

Literature Research, 2 weeks April 15, 2021 April 22,2021

Review capturing and

synthesise

relevant

literature

Finalization Correcting 2 weeks April 18, 2021 April 29, 2021

Mistakes and
 33

reading over.

References
 34

Abdullah, A., & A. (2020, June 9). Exploration of the COVID-19 pandemic in

relation to the healthcare industry Supply Chain. Simple search. https://www.diva-

portal.org/smash/get/diva2:1436624/FULLTEXT01.pdf

Khot, U. N. (2020, April 22). Navigating Healthcare Supply Shortages During the

COVID-19 Pandemic. Circulation: Cardiovascular Quality and Outcomes.

https://www.ahajournals.org/doi/10.1161/CIRCOUTCOMES.120.006801.

Davidson, V. (2020, February 18). WHO, US Gov't PRAISE Jamaica's Covid-19 response.

Retrieved May 02, 2021, from https://www.jamaicaobserver.com/news/who-us-gov-t-praise-

jamaica-s-covid-19-response_189863?profile=1606

McLeod, S. (2019). Likert scale definition, examples and analysis. Study Guides for

Psychology Students - Simply Psychology.

https://www.simplypsychology.org/likert-scale.html

Ministry of Health and Wellness. (2021, April 28). COVID-19 clinical management

summary for Tuesday, April 27, 2021. Retrieved May 1, 2021, from

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2021/

Ministry of Health & Wellness Jamaica. (2021, March 8). Learn about the

coronaviruses.

https://www.moh.gov.jm/edu-resources/learn-about-the-coronaviruses/
 35

PAHO. (2020, December 3). Situation report COVID-19 Jamaica - PAHO/WHO |

Pan American health organization.

https://www.paho.org/en/jamaica/situation-report-covid-19-jamaica

Farooq, M. U., Hussain, A., Masood, T., & Habib, M. S. (2021, February 25). Supply

Chain Operations Management in Pandemics: A State-of-the-Art Review Inspired by

COVID-19. MDPI.

https://doi.org/10.3390/su13052504.

Vickers, B., Ali, S., & Zhuawu, C. (n.d.). The Commonwealth.

https://thecommonwealth.org/sites/default/files/inline/D17111_V5_TRD_Trade

Vorne. (n.d.). Focus improvement on the manufacturing constraint. Introduction to

Lean Manufacturing | Lean Production. https://www.leanproduction.com/theory-of-

constraints.html

World Health Organization. (2020, July/August). World Health Organization

COVID-19 Tracker. Retrieved May 02, 2021, from https://www.who.int/countries/jam/

 36

Questionnaire

1. What alternatives are put in place in the event surgical masks are limited?

2. Explain the change of communication process with suppliers before and after

COVID-19.

3. What has been done to manage increased capacity and conserve PPE in practices and

health systems?

4. Explain how your workplace was supplied with medical supplies during the

pandemic.

5. As the prevalence of COVID-19 continues to rise, what plans are put into place to

mitigate some of the risks being faced as it relates to the supply of PPE’s?