System Dynamics Modeling for Determining Optimal Ship Sizes and Types in Coastal Liner Services

The problem of determining the required ship investment for deployment is an ongoing problem faced by governments and ship operators. The nature of ship investment is capital-intensive and the return on investment is often take long time. This paper attempts to establish system dynamics modeling (SDM) to simulate and solve this problem in order to help ship operators make effective strategic decisions. A case study of coastal liner services between Incheon and Baengnyeong Island in South Korea was performed. Using scenario analysis, the possible ship sizes (small: 350 tons; large: 2,500 tons) and types (new or used) were considered by comparing potential revenue with costs. The results indicated that putting a used large-sized ship into operation would accommodate the increasing passenger and cargo volumes, and improve customer services.