Container shippers need to transform: BCG
Report calls for accelerated transformation and closer alliances.
The Transformation Imperative in Container Shipping: Mastering the Next Big Wave, drawing on analysis of data from proprietary benchmarking databases and other tools, anticipates continued overcapacity in the container-shipping industry, with no market recovery in sight.
BCG says carriers – especially midsize global players – are struggling to generate returns sufficient to cover the cost of capital; and their attempts to turn the situation around by investing in new, ultralarge vessels provides only temporary competitive advantage.
The Boston-based global consulting company recommends a more holistic approach that looks beyond common cost- and revenue-improvement levers “that have become mere table stakes.” And they need to adopt more sophisticated alliance models.
“We don’t expect the container-shipping industry to see any significant recovery soon. Overcapacity will continue to be the norm,” said Ulrik Sanders, a BCG senior partner and co-author of the report. “Container shippers should therefore focus on speeding up their transformation efforts and on unlocking the scale advantages promised by their alliances.”
The report’s authors recommend a process that generates short-term cost and revenue improvements by sharpening strategic focus and rethinking approaches to network design, pricing, procurement and project execution.
Carriers must use the resulting gains for “winning in the medium term,” which includes defining a business model.
Four models are noted: regional scale, deep-sea scale, short-sea specialist, and product specialist; although some companies may define a hybrid model. Once a carrier chooses its business model, it must back it with the right operating model and also deploy “next frontier” cost and revenue levers that deliver more enduring competitive advantages.
The authors say carriers need to sustain the gains they achieve by establishing the right organization structures, building transformation-leadership teams with the right skills, and fostering a performance culture.
The authors say more sophisticated alliance models could also help them derive more value from these partnerships by unlocking synergies among alliance partners through practices such as joint procurement, joint operations, equipment pooling, back-office consolidation and shared services, and joint IT development.
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