Ship chartering in supply chain – explained

The process of renting a ship is called ship chartering. People can also rent a ship based on their requirements, just as they can rent an apartment or a car. Shipping and logistics companies can use ship chartering. But besides cargo, this service can be used for transporting passengers. Today we gathered a guide and an explanation on how ship chartering in supply chain works.

What is ship chartering?

Chartering a ship begins with an agreement between the shipowner and a third party. The charterer is the person taking the ship on rent. This is a very important service that makes logistics Saudi Arabia function.

A cargo ship within ship chartering in supply chain
Chartering a ship is nothing more than renting or leasing, though the latter term is not commonly used in this context

For instance, this involves three parties:

  • shipowner, a person that owns the vessel and whats to ear by renting
  • charterer, who’s in a need of a ship to rent
  • and the person who brings the shipowner and the charterer together, an important party for ship chartering in supply chain- a shipbroker

Ship chartering in supply chain

Global supply chains are in distress, no doubt about it. If a company is shipping container from Canada to Saudi Arabia, they can choose between three types of vessels. By using them, suppliers and distributors will be able to reach their customers and the supply chain management will be more functional and cost-efficient.

Demise Charter

The charterer’s crew and vessel management staff operate and manage the vessel in demise or a bareboat charter. Shipowners will be responsible for only technical management and port operations. The charterer is responsible for the ship’s safety and all financial settlements with outside parties during the charter period.

Time charter

Time charters may be based on deadweight tons per daily or monthly rate. We call chartering a ship for a specific period of time– time chartering. Cargo transport companies often use this type of vessel. You can rent a vessel along with the crew, but only for a specific period of time, as with other types of charter. Charter parties will clearly state the terms and conditions of the voyage. Furthermore, you will find out when the vessel will be available for hire, what type of cargo will be transported, etc.

Cargo boat on sea
Ship chartering in supply chain is important as it can reduce the price of transport

Voyage ship chartering in supply chain

Ship chartering of this type is the most common. Chartering a vessel and its crew for a voyage involves hiring the vessel as well as the crew for a particular voyage between two or more ports. Rent may be based either on shipment weight or quantity. It may be a fixed amount, depending on the agreement between the parties.

We hope that we explained how ship chartering in supply chain works and how it affects the supply chain and its parties in a good way. If you are in need of shipping and logistics assistance, make sure to contact us and find out more information.

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