Shipping Logistics and Accounting

Revenue vs Income
Revenue is a top line measure, while income is lower down an income sheet. When analyzing a financial statement, revenue is just the money that was earned from sales, but income takes into account the different costs that went into gaining those sales (Boyte-White, 2017). There are actually many different types of income when analyzing financial statements, including gross income, operating income and net income. Net income is the bottom line measure once all the different expenses have been accounted for. So costs are the key differentiator between the two. In theory – and it happens often enough – a company can increase its revenues but lower its income, if costs rise faster than revenues do.
Capital vs. Expense
When considering a company's cost structure, there are two main types of cost. These are capital and expenses. So capital expenditures are outlays for major items that have a long life span, are one-off items, or will be amortized (or depreciated). These expenses include things like the purchase of land or large equipment. An expense is more of a smaller, recurring expenditure in a business. For example, if you buy the land and building you occupy, that is going to be a capital expenditure. If you rent it, then the rent is an expense.
Another view of the difference is that a capital expenditure is when the company has to finance something (Investopedia, 2015). This view essentially equates major purchases with financing, though the reality is a little bit more complex than that because a company can use financing to operating expenses. That is actually quite common for early-stage companies. Thus, financing might not be the best way to differentiate between these two concepts, but rather the best way is really whether the item is large, non-recurring, and especially if it will be subject to amortization or depreciation, then it will be a capital expenditure.
Income Statement vs. Balance Sheet
Probably the two most important types of financial statement are the income statement and the balance sheet. Both are used to help evaluate the financial health of a company, but they are quite different in the information they convey. The first and most obvious difference is the time element. An income statement covers a specific period of time, such as a quarter or year. The balance sheet is, in contrast, just a snapshot of a moment in time, such as the last day of a quarter or a year.
Beyond that, these two statements convey very much different information about the company's finances. The income statement covers a period of time, and is entirely concerned with that time period. It is the record of the revenue, expenses, and income for the company over that particular period of time (Scilly, 2017). The income statement starts with the revenue, then drills down to the various categories of expense. After the last expenses, usually interest expense and tax expense, the company will have its net income.
The balance sheet conveys something else entirely. The balance sheet conveys the financial health of the company. It is at a moment in time, the end of each quarter, but more than that the balance sheet is cumulative. An income statement starts fresh each quarter, but the balance sheet does not – it carries over.
The balance sheet shows the assets on one side, and the liabilities and equity on the other. The concept of the balance sheet is that in accounting, every transaction balances, so whatever the organization is worth in terms of its assets is spoken for, either through debt or equity. In essence, the value of the equity is the value of the assets less the value of the liabilities.
The balance sheet is a great tool for determining the overall health of the company, and can be used to examine the overall liquidity and solvency of the company in particular. Accountants often use balance sheet measures to analyze a company, because they are current and cumulative. By contrast, an income statement can show that last quarter was terrible, but the next quarter is great – it tells less about the company.
So for business leaders, the two statements convey entirely different things. A business leader will appreciate the income statement for giving a pulse on how the company has been performing lately, but the balance sheet is a more accurate of the overall financial health of the company. So a business leader can use income statement information to set tactics that will cut expenses, or increase revenue. But the same leader will want to use balance sheet information to make decisions about expansions, financing and that sort of thing.
Transportation Company
Any publicly traded company will have its financial statements published as part of this annual report. They can be examined online. So for example, the FedEx 2017 Annual Report will have these statements contained within. It can be downloaded here:
http://s1.q4cdn.com/714383399/files/oar/2017/AnnualReport2017/AnnualReport2017flat/docs/FedEx_2017_Annual_Report.pdf
The income statement can be found on page 49 and the balance sheet on page 48.
Intermodal Transportation
Intermodal transportation is the movement of a good via multiple different types of transportation. This will typically be done using a shipping container. An example would be a good is produced in Shenzhen, packed into a container, trucked to port, shipped to Los Angeles on a freighter. There, is might be unloaded, put onto a train, sent to Chicago, and then offloaded. At that point, it might be placed on a truck, and sent to a warehouse in Minnesota. On that journey, three different modes of transport were used to get the good from the manufacturing facility to the buyer. The use of different modes is the defining characteristic of intermodal transportation. Bektas and Crainic (2007) use the chain analogy, where different modes are different links in the chain that spans from starting point to endpoint.
The definition of intermodal transportation should therefore be any transportation that uses more than one mode. A more refined definition specific to logistics would be that goods are loaded into a container. The container facilitates intermodal transportation. But basically, the term intermodal transportation pertains specifically to logistics, and is not commonly used in other fields.
The container is the key element in intermodal transportation. The container is the packaging that is used for a wide range of goods. The container can hold a lot of different things, dry goods usually. Whatever is packed into the container, the key is that the container is a standardized unit, and the different modes are designed to carry this standardized unit. A freighter might carry hundreds, a truck just one, but each will be designed to carry containers, rather than any one specific good. This standardization allows the container to be passed from one mode of transportation to another easily, without the need to unpack the container. This system allows for significant time savings, in particular in the packing and unpacking stages. It also has the further benefit of allowing for different modes to be used. Combined, allowing for one container to transfer from one mode of transport to another makes it much easier to move goods around.
Container Standards
The International Standards Organization (ISO) is the organization that sets the size, shape and construction of shipping containers. This organization plays the role of ensuring that all companies buy into these sizes, around the world. It is not that there is an enforcement mechanism – there is not – but ISO sets the standards, and most parts of the world agree that it is more efficiency if everybody just uses the same standard. There are a number of different standards for containers (Container Solutions, 2015).
Strength standards are also set by the ISO. They do this in order to ensure that anybody who wishes to use a shipping container is aware of the specs. That organization can then make the determination for itself how to pack the container, but if it knows who much a given container to hold in terms of weight, or what types of materials, that guidance is incredibly useful.
The different standards are set to be global. In many cases, however, there are different domestic standards used, and this is done for a variety of reasons pertaining to domestic infrastructure. This is the case in the US, the EU and in Australia as well (Herr, 2013). For example, in the US, domestic shipping containers are designed to hold two pallets side-by-side, which is not necessarily the case with the international standard. There are not many changes to container specs, in part because most of the transport infrastructure around the world is now designed for the ISO standards. The ISO standards therefore, if they changed, would require that all of this infrastructure be retooled. It is no surprise that the US, EU and Australia have domestic standards as well, as those industrialized nations would have had their own standards prior to the ISO setting the international standards back in the 1960s (Herr, 2013).
That said, there are sometimes needs to update the standards, for matters like safety. Or standards need to be refined, like if the ISO wants to set standard shipping containers for wet goods, or different classes of dangerous goods. Then, the ISO would have to revisit the issue, and there would be along consultative process that engages a wide range of stakeholders in order to determine the best course of action. As any change means billions spent on updating infrastructure, no decision regarding changes to the ISO standards is taken lightly.

TEU Measurement
TEU stands for twenty-foot equivalent. The two most common international shipping containers are the twenty foot and the forty foot. Thus, the TEU is developed as a means of explaining container capacity (Logistics Glossary, 2017). The most common usage for TEU is in shipping, where freighter's capacity is described in TEUs. Approximately, a ship's TEU capacity is the number of TEU containers it can hold. The TEU is also the measure for container terminals.
The basic calculation for a TEU is to take the length of the container, and divide by twenty. So you have a 53' container, you will do the following:

53 / 20 = 2.65 TEU

That container would be 2.65 TEUs in capacity.

As the above calculation illustrates, the TEU is based on the assumption of a standard height and width. If you have a high cube container, the height is not the same as an ISO 20' container. Thus, the TEU calculation has to be modified in order to account for the greater height of the high cube.

The high cube is a foot taller than a regular container, but that will affect the TEU calculation, because that extra space will also be used, and will take up space on a freighter, for example. The thing about TEUs is that they are not a precise measure, but rather a colloquial one. This means that there is no calculation for a TEU on a high cube; it is just the length, and the extra height is not really accounted for. If you have a 10' high cube, that will still be 0.5 TEU, regardless of the extra height; remember that the TEU is not the volume, but rather a proxy for volume.

Liner Service vs Liner Conference
A liner service is a liner that runs a route. The service is simple - the liner will take goods along that route for a specific price. This can be negotiated by the shipper, or it might be a standardized price for the liner service, but regardless the key is that it is just a run that one company does.
If there are multiple companies that do the same service, they might engage in a liner conference. So for example, if there are several companies that ship from Singapore to Vancouver. These companies would, if they wanted to form a liner conference, set a common set of prices, terms and conditions, and other attributes. The service between Singapore and Vancouver would then be entirely standardized between companies. Thus, there would not be price competition between them, but rather all customers would pay the same price regardless of which company they shipped with.
The role of the conference is to ensure that the services do not compete against one another on price. By doing so, the conference ensures that a) all the firms in the conference can remain profitable and b) that any competition between the firms for business is not economically destructive. So the conference works like a cartel in that respect, but it does allow independent operators to run their business profitably.
The liner service is a simpler system where a company makes a run, often to a schedule but not always, and then companies that wish to ship on that run would get their shipment on that freighter. An example might be a situation where an American company is sending some widgets to China. It might only have two containers' worth of widgets, because it operates in something of a niche market. But they could get space on the next boat going to Shanghai, because there is a liner service going there. If there were more than services going there, that would be a conference, but it wouldn't matter moneywise and the widgets would probably just end up on the next available boat.
These two business models are the most common in shipping, and as such are ones that exporters and importers alike are going to have to deal with at some point in time.




References

Bektas, T. & Crainic, T. (2007) A brief overview of intermodal transportation. CIRRELT. Retrieved September 16, 2017 from https://www.cirrelt.ca/DocumentsTravail/CIRRELT-2007-03.pdf

Boyte-White, C. (2017). What is the difference between revenue and income? Investopedia. Retrieved September 16, 2017 from http://www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-income.asp

Container Solutions (2015) Specifications. Container Solutions. Retrieved September 16, 2017 from http://containersolutions.net/specifications/

Herr, B. (2013). Standard ISO and non-standard shipping container sizes. Container Auction Retrieved September 16, 2017 from https://containerauction.com/read-news/standard-iso-and-non-standard-shipping-container-sizes

Investopedia (2015). What is the difference between an operating expense and a capital expense? Investopedia. Retrieved September 16, 2017 from http://www.investopedia.com/ask/answers/042415/what-difference-between-operating-expense-and-capital-expense.asp

Logistics Glossary (2017). TEU: Twenty Foot Equivalent Unit. Logistics Glossary. Retrieved September 16, 2017 from http://www.logisticsglossary.com/term/teu/

Scilly, M. (2017). Difference between income statement and balance sheet. Houston Chronicle. Retrieved September 16, 2017 from http://smallbusiness.chron.com/difference-between-income-statement-balance-sheets-55419.html