Shipping lines need greater discipline
Give a big hand to the Boston Consulting group which has recently published a report that fairly and squarely lays many of the container shipping industry’s woes at its own door.
Boston Consulting doesn’t pull any punches when it says more discipline is required by carriers along with greater selectivity about where they choose to compete and a bigger focus on the bottom line in order to achieve and sustain profitability.
To arrive at this destination the company says commercial management should be strengthened with what it calls a value-based perspective, which involves demonstrating the value of both commodity and premium services to customers, monetising all services, using a strong market position to raise rates and securing greater operational efficiency.
To achieve this, essentials are seen as:
– Good IT infrastructure.
– Better business and market intelligence, and
– Management talent and metrics that incentivise employees to pursue business objectives and measure performance assiduously.
Boston Consulting notes that today, liner operators operate in a challenging marketplace negatively impacted by the global economic downturn, spiralling bunker costs and distorted competition. As a result, it is very important to exercise greater discipline – “Carriers should not be willing to accept the volatile financial performance they have experienced in recent years.”
The company further forecasts that applying this greater discipline will become all the more important as container liner operators will have to get used to what it calls ‘the new normal’, namely lower growth rates in the order of 5%-7% as opposed to the higher growth rates experienced in the first decade of this century.
Will there be industry consolidation as a path to a better position overall? The company thinks not and cites the probability of the structural status quo that fosters price competition continuing.
If a major failure of a container shipping operator does occur – a scenario backed by some, i.e. let market forces do their work and don’t bring companies back from the brink by government subsidies – then this too is seen as a problem for all. The knock-on effects of such a failure will be felt by the whole industry, says Boston Consulting.