The commoditization of container shipping services poses significant challenges for carriers, affecting their operational and commercial strategies. To counter this trend, carriers must differentiate themselves through innovative approaches and value-added services.
New or Niche Products and Routes
Innovative Service Offerings: Carriers can introduce new products or services by exploring uncharted port-to-port corridors, targeting emerging markets, and providing direct connections to reduce transit times. For example, servicing ports like Batangas in the Philippines can help alleviate congestion at major ports and offer faster and cheaper alternatives.
Niche Markets: Identifying and serving new, rapidly growing economies or developing direct routes that bypass traditional transshipment hubs can create unique market opportunities and attract new customers.
More Flexibility for Bigger Customers
Customised Services: Carriers can offer tailored solutions to key customers by providing flexible operational processes, such as extended cut-offs, priority empty container allocation, and space guarantees. This approach caters to larger exporters who prioritize supply chain reliability over cost.
Priority Treatment: By offering dedicated services to high-volume clients, carriers can ensure customer loyalty and potentially command premium rates for their specialized offerings.
Use Non-Asset-Based Elements for Differentiating Factors
Superior Customer Service: Enhancing customer service levels, streamlining processes, and implementing advanced systems can differentiate carriers even when the core transport service remains standardized. Providing a smoother and more efficient transactional experience can add significant value for customers.
Process Optimization: Automating and digitizing workflows not only improves efficiency but also reduces errors and enhances overall customer satisfaction, making the carrier’s service more attractive compared to competitors.
Reversal of the trend
Some carriers are bucking the trend of operating as part of alliances and building significant scale by themselves so they can design their unique products and eliminate one of the factors that have led to commoditization.
The trend of container carriers forming Alliances had gathered momentum since the early 2000s, with even the hitherto strong players who previously preferred to operate alone since deeming it expedient to join an Alliance (besides co-operating in other ways, such as slot sharing or vessel sharing agreements).
These avenues of cooperation, while making commercial sense for carriers, contributed significantly to the standardization of shipping services.
Over the years, Carriers have come to accept such cooperation as inevitable, making it a defining characteristic of the industry. The prevalence of container alliances is such that carriers proactively seek membership in alliances to ensure steady utilization levels and rarely operate alone.
Post the Covid pandemic, we have witnessed carriers like MSC making a strategic decision to operate independently after the announcement of their break-up of the 2M alliance with Maersk.
Container carriers evolving into Integrated Logistics service providers
Carriers are investing heavily in logistics capabilities and controlling more parts of the supply chain in their quest to provide end-to-end logistics services.
Carriers like Maersk have long harbored ambitions of expanding beyond their core shipping business and offering end-to-end logistics services, a strategy that has been emulated by other carriers as well – resulting in the emergence of integrated logistics service providers (who have a presence across the supply chain rather than in just one or two components thereof).
The result is that several big and mid-sized container carriers now have significant logistics and port assets with matching capabilities and expertise, putting them in a position where they can offer a wider range of transport-related services.
With these forays in the logistics and ancillary sectors, container carriers have gradually evolved from being pure shipping service providers to integrated logistics service providers, with their assets and product portfolio augmented to bridge the first and last-mile gap and provide door-to-door services.
Better market research
To identify emerging trends and needs, new customers, and unearth unmet or future requirements.
With the mass of paperwork generated during the course of any shipping transaction, carriers have access to a humongous amount of data regarding every aspect of their customer base, commodity profile, pricing information, etc.
The challenge lies in the fact that the data is mostly unstructured and stored in different formats (on paper or in emails, Excel files, word documents, PDF reports, etc) and in different locations (local servers, cloud platforms, physical files, personal laptops, etc).
This presents obvious difficulties when it comes to collating and analyzing the information available, wherefore, companies generally are not able to glean valuable insights from the information available.
Eco-friendly and sustainable products
Especially for customers who have made significant commitments towards CSR and sustainability.
With increasing regulatory focus on the emissions generated by the maritime transport sector, there has been a raft of legislation aimed at curbing the carbon footprint of the shipping industry.
Governments, exporters, retailers, and consumers are becoming aware that the shipping industry is responsible for a significant share of global emissions (even though it is the most eco-friendly mode of transport) and that their demand for imported goods is a factor in increasing emissions.
Since most countries are now highly interdependent, and trading ties are too entrenched to make a complete decoupling feasible, it is not possible to reduce the international trade in goods significantly.
Consumers are therefore seeking products with a lower carbon footprint and are willing to pay a premium for such products, due to which a rapidly growing market for eco-friendly products now exists.
Simultaneously, exporters and manufacturers have also started focusing on making their supply chains greener as part of their CSR activities.
Focus on holistic customer experience
While customers are nowadays willing to accept basic service levels simply because they are provided at low rates, the complexity of the international transport process means that there are various junctures in the transport chain where expert guidance and good customer service are needed, which in turn means that their overall customer experience with transport vendors is generally sub-optimal.
Also, given the numerous bottlenecks and potential chokepoints in the international transport process, cargo owners will likely need to contact the carrier’s customer service and operations teams on almost a daily basis throughout transit.
Areas in which assistance could be sought vary from the availability of containers to the extension of free time and cut-off dates to queries about documentation or commodity, rollovers and delays, correction or revisions to information submitted, and claims for damage to cargo.
Since these are all issues where human intervention will be necessary for resolution, and extensive coordination and liaising with relevant stakeholders will be required. Cargo owners will need a responsive customer service person to understand issues and provide solutions.
Carriers who take this factor into cognizance and aim to deliver a superior customer experience will be preferred by exporters over carriers with whom the customer experience is perceived as being of average quality.
Better customer segmentation and profiling
To identify big BCOs who prioritise service over price due to their global scale of business, the complexity of supply chains, and inventory management.
Carriers typically have a very broad and disparate customer base, with the profiles of individual customers differing in terms of factors such as scale, operational complexities, coverage requirements, variety of cargo, and transport requirements.
A standardised solution or a one-size-fits-all approach towards serving customers will prove to be ineffective in such cases, as customer needs exhibit considerable variation, warranting an individual approach and customised solutions.
Carriers will, however, need to weigh the costs of delivering customised solutions with the incremental revenue accruing therefrom while ensuring that the customer has the scale to justify the efforts and resources expended.
Therefore, carriers need to analyse their customer base to identify the biggest ones whose business might conceivably require customised solutions and, most importantly, who are capable and willing to pay a premium.
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Source: Marine Insight
