The Grey Box Concept proposes that multiple container carriers transfer equipment assets to a jointly owned offshore holding corporation. This equipment would then be managed by a separate subsidiary to optimize utilization and reduce costs for shareholders. By maximizing equipment usage through shared pooled facilities, the Grey Box aims to lower carriers' overall fleet levels, repositioning movements, storage charges, and maintenance and repair costs. The main beneficiaries would be consortia, alliances, and large independent operators seeking to reorganize asset management.

1. The Grey Box Concept

2. Background Although the economic recession which has gripped the world is showing signs of easing, its disastrous financial impact on the global liner shipping industry will continue to be felt for years to come. Not all companies will survive and even those carriers which remain must still take drastic action to reduce their operating costs. The ‘Grey Box’ concept has been developed towards achieving this cost saving objective.

3. Concept Multiple container carriers transfer equipment assets to a jointly owned off-shore holding corporation. The units are thereafter, managed by a separate ‘leasing’ subsidiary of the corporation for the mutual benefit of the shareholders. The overall objective of the ‘Grey Box is to optimise equipment utilisation and to reduce shareholder expenses.

4. Cost Savings By maximising equipment optimisation through the use of shared pooled facilities, cost savings can be effected in: overall fleet levels reduced repositioning movements lower storage charges savings in M & R costs lower insurance premiums staffing levels

5. Additional Advantages Further indirect advantages of a ‘Grey Box’ pool include: potential for optimising ‘carrier haulage’ logistics improved input for pricing policies and revenue management systems healthier ‘balance sheet’ profiles

6. Main Beneficiaries The ‘Grey Box’ concept will be of most benefit to: Consortia and Alliance Groups Short and Near Sea Partnerships and for Large Independent Operators seeking to reorganise their Asset Management into ‘Profit Centres’

8. Ships

10. CY & MR

11. Hinterland logistics

12. IT SystemsRegion X Region Y Region Z Line A ---------Line B ---------Line C ---------

14. Sales

15. Commercial

17. Ships

18. Ports & Terminals

19. Equipment (via Grey Box Pool) Region X Region Y Region Z ‘Grey Box’ facilities Line A ---------Line B ---------Line C ---------

20. ‘Grey Box’ Structure Line B Line C Line A Asset Holding Corporation Grey Pool Management Region Z Region Y Region X

21. ‘Grey Box’ Methodology Carriers assign owned/leased units to Asset Holding Corporation Asset Holding Corporation designate equipment management to ‘Grey Box’ company Pool Equipment operated as ‘in house’ leasing facility Individual lines ‘pick up’ and ‘drop off’ equipment as required Lines only charged for equipment used Profits of ‘Grey Box’ pool, less management fee, returned to lines

22. Calculation of Per Diem Charges Per Diem consolidated container fees will be charged on the following basis: residual value (owned units) lease costs (rented units) M & R expenses (unrecoverables) insurance (TT Club) allocated system costs unit storage pool administration Fees will be weighted for average utilisation and seasonality

23. Additional Fees Carriers will also be charged for: pick up/drop off charges depot handling costs IT transaction charges identifiable repair expenses and ‘carrier haulage’ if outsourced to management company

24. Statistics Tracking and Tracing Accounting - Contracts Grey Box - Database Hosting Facilities Optimising Engines Schedules/ Vessel Allocations Booking Requirements Line A Line B Line C IT System Interfaces

25. Optimal Time Scales 1 – 6 months Analysis of each carriers’ existing equipment management operations, data elements and costs Evaluation of carriers’ systems and analysis of interface requirements Preparation of predicted ‘Grey Box’ cost savings and presentation to carriers’ senior management

26. Optimal Time Scales 7 – 12 months Testing of IT interfaces and staff training for each carrier Full audit of carriers’ equipment by type/location Reappraisal of existing contractual arrangements Provision of future trade flows

27. Optimal Time Scales 13 – 18 months Gradual implementation of ‘Grey Box’ application in each geographical region, leading to full operation by 18th month Outsourcing of ‘carrier haulage’ functions to ‘Grey Box’ management

28. Grey Box Management and Partners The ‘Grey Box’ senior management team have all had considerable experience in successfully operating previous ‘neutral’ equipment pools, whilst the IT partners in the venture have developed and hosted many similar applications

29. Attainable Cost Savings Experience has shown that the operation of ‘Grey Box’ pools can save carriers at least 15% in asset management costs. These have included ‘one off’ savings as well as ‘on going’ operational expenses. For further information contact: Invicta Management Services Ltd (email: imsuklimted@btconnect.com)