Cargo Demand Sensitivity: Test the Sourcing Mix

Key takeaways

• Define the route-distance basis and quantity boundary before calculating transport work.
• Test the share assigned to each source rather than assuming an unchanged average distance.
• Examine quantity and sourcing changes together when both are uncertain.
• Keep the model separate from vessel counts, voyage duration and freight-price predictions.

The example below is an original fictional model. Its routes, distances, quantities and sourcing shares are invented. It is not navigational advice or evidence about any actual trade corridor.

Start with the question that tonnes alone cannot answer

A buyer can maintain the same physical requirement while changing where the cargo is sourced. If the analysis concerns the amount of material consumed, the unchanged quantity may answer the question. If it concerns the distance over which that material moves, the sourcing pattern becomes relevant.

The model should therefore identify the intended output. Here it is a defined quantity-distance measure, calculated by multiplying each route's cargo quantity by its model distance and summing the results.

Do not interpret that measure as a complete vessel-employment model. It does not include parcel sizes, scheduling, port activity, ballast positioning or vessel performance. Those matters require additional evidence before drawing conclusions about the number of ships or the timing of a programme.

The model remains useful because it isolates a particular mechanism. Its limits should be stated alongside the result rather than hidden after a broad shipping-demand claim.

Illustrative sourcing-share sensitivity

ILLUSTRATIVE — invented routes and cargo assumptions. A fictional programme moves 100,000 tonnes. Model route S is 1,000 nautical miles and model route L is 4,000 nautical miles. The baseline assigns 70% of cargo to S and 30% to L.

The baseline weighted distance is 70% × 1,000 + 30% × 4,000 = 1,900 nautical miles. Defined transport work is 100,000 × 1,900 = 190,000,000 tonne-nautical miles.

Moving the longer-route share from 30% to 50% increases defined transport work by 60,000,000 tonne-nm, or 31.58%, with cargo quantity unchanged. The share change is 20 percentage points; it is not itself the percentage change in transport work.

Understand the mechanism before adding complexity

The model's increase comes from assigning more cargo to the longer distance. It does not require a rise in the total cargo requirement. That distinction is the reason to show the sourcing sensitivity separately from a quantity forecast.

The weighted distance must be weighted by the relevant quantities. An unweighted average of route distances would answer a different question when the cargo shares are unequal. Retain the shares and route quantities so the calculation can be checked.

For a real programme, use an appropriate distance basis for the actual purpose and obtain the necessary route assessment. A fictional or straight-line distance should not be silently promoted into a verified voyage distance.

If the sourcing alternative changes other commercial conditions, keep those changes visible. The quantity-distance result alone does not establish that the alternative is feasible, desirable or less costly.

Illustrative combined quantity and sourcing change

ILLUSTRATIVE continuation — the same invented routes. Suppose total cargo falls to 90,000 tonnes while the share on route L rises to 50%. The weighted model distance is 2,500 nautical miles, so defined transport work is 90,000 × 2,500 = 225,000,000 tonne-nm.

Compared with the baseline, cargo quantity falls by 10%, yet transport work rises by 18.42% from 190,000,000 to 225,000,000 tonne-nm. The combined factor is 0.90 × (2,500 ÷ 1,900), not the simple addition of a quantity percentage and a distance percentage.

At the 50% longer-route share, the quantity that preserves baseline transport work is 190,000,000 ÷ 2,500 = 76,000 tonnes. That is 24% below the baseline quantity. This threshold is an arithmetic property of the fictional model, not a forecast of trade substitution or an operational target.

Recalculate combined cases instead of adding percentages

Quantity and weighted distance multiply in the model. When both change, their interaction matters. A shortcut that adds their separate percentage changes can misstate the combined result.

Use the complete inputs for each case and recalculate the formula. Then explain which assumptions produce the difference. This is clearer than presenting a large percentage with no bridge between the original and revised programme.

The cases should also be commercially coherent. If a sourcing change is assumed, identify whether the cargo quantity, product specification and receiving programme remain comparable. A mathematical case can be calculated exactly while representing an impossible or irrelevant commercial combination.

Where feasibility is unresolved, label the case as an analytical test and state the missing evidence. Do not present the output as an available transport programme.

Keep demand interpretation separate from rate interpretation

A higher defined transport-work result does not establish a particular change in freight rates. The model contains no supply, competing employment or commercial-response mechanism that would justify such a conclusion.

Likewise, it does not calculate vessel-days or completed voyages. Converting the result into those outputs would require additional assumptions about the actual service. Do not attach a new label to the existing total and treat that as a completed conversion.

The useful commercial conclusion is narrower: the sourcing mix is material to the shipping-work question and deserves evidence. The desk can then examine the relevant cargo programme and vessel requirements separately.

Turn sensitivity into targeted evidence requests

Use the following original checklist to decide what must be confirmed before relying on a sourcing-mix conclusion.

1. Confirm the total cargo quantity and its status as committed or forecast.
2. Establish the quantities assigned to each origin and destination combination.
3. Verify the distance basis appropriate to the analytical purpose.
4. Identify whether the sourcing alternative changes cargo or receiving requirements.
5. Recalculate combined quantity and share cases rather than assuming independent effects.

The model should help prioritise these tasks. If the conclusion is highly sensitive to a sourcing share that remains speculative, improving that evidence matters more than adding decimal places to the output.

Preserve the baseline and the reason for each change. A reviewer should be able to see whether the new result reflects an actual programme revision, an updated assumption or a correction to the calculation.

Common mistakes

Using tonnes as the only demand measure. Consider whether the commercial question also depends on distance and sourcing pattern.

Averaging route distances without quantity weights. Match the weighting method to the cargo distribution being analysed.

Adding percentage changes in a multiplicative model. Recalculate the full quantity-distance result.

Relabelling transport work as freight cost or ship count. Those conclusions require additional models and evidence.

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