Over the last five years, the shipping container industry has been exceedingly unprofitable. To make matters worse, profits have been highly variable. Several variables are to blame, including trade’s sluggish rebound from the global financial crisis and corporate clients’ increased attempts to minimize costs.
These issues are real and substantial and are essentially beyond the scope of any single corporation. However, shipping container industry businesses cannot afford to give up and accept their fate. Another set of obstacles that shipping companies can easily take on is hidden behind these concerns (and, to some extent, driving them). Shipping lines have chances to enhance performance across the organization, including commercial, operations, network, and fleet activities.
In many aspects, container transportation has not altered much since the first crane lifted the first box in 1956, making this a challenging problem. Carriers who accept change will be better positioned than their competitors to capitalize on the present business cycle and prosper in the future.
The gloomy economics of the industry
Transport is sometimes regarded as a forerunner of the more excellent economy. It played that role during the current economic downturn, as the company went off a cliff. However, the shipping container industry has become a lagging signal, reflecting the more comprehensive, irregular global recovery.
The fact that the industry continues to build capacity contributes significantly to the problem. Not unexpectedly, carriers have made hurried judgments to fill this capacity and reduce their transportation cost. As a result, earnings have become highly variable. In 2009, record losses were followed by substantial gains.
Signs of some issues
Significant issues include the imbalance between supply and demand, the bigger boats, which will further exacerbate inequality, and earnings instability. However, we contend that these are signs of these more severe issues:
- Since the market has already reached its maximum capacity, the industry is competing for market share.
Smaller businesses are being squeezed out in the race for market share, which has also sparked a new round of pricing wars. Shipping container industry businesses are opting not to uphold customer contracts and abandoning their pricing policies, including spot charges and general rate rises.
- Cost-management techniques are inefficient in many shipping enterprises.When they reduce their prices, they do so at a fraction of overall expenses, for instance, many charters only factor in a portion of the fuel cost. In essence, businesses are transferring to customers all of the cost reductions they have realized in recent years.
- Service offers occasionally innovate.
No of the customer’s requirement, the majority of carriers provide the same or a similar level of service. Couriers cannot profit from innovations and are missing out on possibilities to charge more for value-added services (such as intermodal and assured delivery times). Such problems can be solved by using advanced technology and artificial intelligence, as cargo businesses can use their own software to calculate their shipping cost.
- Network designs have become obsolete due to fleet modifications.The networks of most businesses fall short of maximizing revenues. For instance, introducing the new, extremely huge container vessels has already impacted smaller ships. Mid-size Panamax ships and other boats have been forced out of this trend, even though feeder ships are profiting from it. The Shipping container industry, whose financial sheets include a sizable proportion of Panamax boats, will be significantly impacted by this.
- Subpar business decisions are being made due to conflicts between investment firms and shipping businesses.Conflicts between carriers and the owners of the ships are common. Owners aim to maximize the value of their assets, whereas carriers want to run the transportation industry for profit. Many businesses suffer from such problems due to such conflicts. Apart from that, container industries should use some innovative technology and materials to reduce the overall weight of their containers, as it will reduce the fuel cost and shipping companies can use more containers for their shipment at a time.
Despite surviving five years of extreme volatility and loss, container transportation is still in bad condition. We anticipate that the difficulties will continue, especially as more capacity comes online, but we contend that shipping container industry lines should not give up in the face of market difficulties. They may and must begin extensive reforms that tackle organizational and mentality issues and technological ones.