SeaIntelligence Consulting

Liner Shipping 2025 How to Survive and Thrive

Lars Jensen, CEO SeaIntelligence Consulting

Agenda

• Is liner shipping going to be disrupted?

• Tactical versus strategic challenges

• The nature of business relations

• Exception management at the core

• Process management

• The impact of transparency

• The advent of yield management

• The complexities of network design

• The impact of consolidation and future for niche carriers

• Automation, digitization and Big Data

• Impact on ports and terminals

• Impact on cargo owners, freight forwarders and NVOCCs

• What should industry stakeholders do in 2017?

February 2017 © SeaIntelligence Consulting

Is liner shipping going to be disrupted?

We have a confluence of developments occurring at the same time

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Phase 1, start

Phase 2, growth

Phase 3, maturity

We are here

Tactical versus strategic challenges

Tactical challenges:

• Structural oversupply

• Reverting to profitability

• Integrating acquisitions

• Reducing costs

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New deliveries 2016: 1 Million TEU

2016: Record scrappings, 700.000 TEU

Which technology will prevail?

Tactical versus strategic challenges

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Strategic challenges

How can we make money in a

commoditized environment?

How do we deal with transparency?

How do we implement

automation and digitization?

How will this change the way

we run the company?

The nature of business relations

A key challenge is the un-enforceability of business relations – for both

shippers and carriers

This will change, with enforceability becoming the norm

…. And with new non-enforceable products also appearing

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Exception management at the core

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Automation

Resilience

Exception handling

Drives commoditization

Drives service quality

Exception

management will be

THE key to competitive

differentiation

Must be prioritized

almost above all else

Process management

Automation is not about IT

If you are frustrated about the paperwork,

just building an IT system won’t help

Get process management implemented

first and foremost

…but this takes time and effort, as process

management is not just the writing of

SOPs. It is a pervasive cultural change in

the company

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The impact of transparency

Transparency is already here – and it will become all-pervasive in the

shipping industry as well

Wrong question: How can we control/manage information?

Right question: How do we act in the face of full transparency?

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The advent of yield management

It is not just about the price!

The complete interlinkage of:

- Cost transparency

- Pricing

- Uptake management

- Capacity management

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Exogenous versus

Endogenous forecasting

Auto-rating engine

Dynamic reallocation

What to do with sales

KPIs?

2-5% improvement

potential

The complexities of network design

Weight optimization parameters:

• Total cost

• Vessel use

• Terminal synergies

• Customer focus

• Strategic weighting of:

• Transit time

• Service frequency

• Direct vs. transshipment

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The impact of consolidation and future for niche carriers

The consolidation in 2015-16 was

actually in line with the long-term

consolidation trend

Long-term prediction: 6-8 global

container lines by 2025

3 major alliances in 2025, but with

expanded geographical coverage

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Key question for main global liners:

Do you plan to be the acquirer or

do you plan to be acquired?

The impact of consolidation and future for niche carriers

Feeder lines to grow larger – 2-3

main feeder lines in each of the

major geographies

Space remains for niche carriers

provided they abstain from

competing on scale

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European feeders: US$250M in

hidden value from concentrated

feeder usage

Critical questions for niche carriers:

What will happen to your value proposition once the

market becomes fully transparent?

What is your plan for digitization and automation?

What are the key sustainable strengths you will build on

to counter the digitized products from the main shipping

lines?

Automation, digitization and Big Data

The most important part first: Automation needs process management

Multiple impacts from automation:

• 3D-printing – is actually more to be likened with near-shoring. Negative

impact on global demand growth in TEU*Miles

• Autonomous vessels – unlikely in any important capacity in 2025. Highly

likely: Semi-autonomous vessels

• Full automated digitization of back-end processes. Consequence: 30-

100.000 jobs will disappear, primarily in service centers

• Consequence of automation: Commoditization

• Big Data: Be careful to avoid “fishing expeditions”

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Impact on ports and terminals

Network design will result in a concentration of

transshipment in fewer but larger hubs

Severe overcapacity resulting from upscaling

and automation in the face of slow growth, and

negative transshipment growth

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Impact on cargo owners, freight forwarders and NVOCCs

Cargo owners need to adopt the processes to

match the main commoditized systems – or use

niche carriers

Freight forwarders/NVOCCs are subject to the

greatest strategic risk from a combination of

transparency, simplicity and carrier shift to

automation combined with exception management

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Company culture will change

All these aspects we have discussed

can only happen if the underlying

culture is changed

Unless this change is addressed

explicitly, the underlying company

culture will counteract the necessary

changes

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What should industry stakeholders do in 2017?

Create a plan for process management

Do not look for ideal solution – pilot test many

solutions

Plan for full transparency

Do not fight commoditization – plan to thrive in a

commoditized market

Plan for integrated yield management

What is your culture today – and how will it be

changed?

February 2017 © SeaIntelligence Consulting

SeaIntelligence Consulting

Liner Shipping 2025 How to Survive and Thrive

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