flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

How Can We Fix the Shipping Industry? Let’s Think outside the BOX!

shippingThe current status quo is that the shipping industry’s cycle is not synchronized with global economy’s one. As a consequence, the ratio between demand and offer for sea transportation of containerized cargo is bringing shipping line’s revenues even below operational expenses on the majority of the trades. Shall we start panicking? No, maybe we should simply start to change our perspective.

Arguably, when years ago massive investments for mega cellular ships have been decided, there was not only hope but also certainty about a healthy recovery of the world economy. This, in turn, would have brought to an increased derived demand for maritime transportation, stronger freight rates and huge profits for those shipping companies able to have their super-efficient, mega vessels at sea by 2013-2014.

However, as we know, something went wrong, and unfortunately it is still going wrong. Something unpredictable happened, something able to inhibit the expected synchronism between the shipping cycle and the world economy’s one. More specifically, a chain of events bogged down the world economy. First of all the stall of the Chinese growth, secondly the implosion of the Southern European and North African economies, then the stagnation of other BRICS economies, just to mention a few.

So what is going to happen within the container industry? The current scenario appears to be very gloomy, with (almost desperate) IPOs (Hapag-Lloyd) and not very convincing M&As (CMA – NOL), shares’ value plunging, balance sheets turning to red, and massive layoffs (Maersk).

Furthermore, just to hit the last nail on the coffin, technical and geopolitical factors (related to resources accessibility) might bring the oil barrel up to $ 60-80 by the end of 2017, despite recent OPEC’s skirmishes. This will not only push more to the right global economy’s recovery but also increase shipping line’s operational costs.

Common sense would suggest that this is the perfect set-up for one of the worst bloodshed in the history of the container industry, where competitors, due to the increasing imbalance between tonnage and cargo, will fight for cargo volume, no matter how much shrinking freights will jeopardize their profitability and – in the end – shipping lines’ own existence.

My personal point of view is slightly different: this is going to be the best bloodshed ever for the container sector. You can bet on the fact that less cash-solid and efficient company either will be acquired or liquidated after going out of business, but this will be the survival of the fittest. The day after tomorrow will see less shipping lines in the market, probably fewer alliances but for sure a healthier and more balanced industry. In turn, the world economy will benefit from a rejuvenated and leaner container sector.

The issue is now to guess which players we’ll continue to be in business after this shipping catharsis: beside political and geopolitical interests, the key factor will be the ability of shipping company’s leaders to make a difference in terms of knowledge, timely decision making, courage and stamina. As the Latin saying quotes “mala tempora currunt, sed peiora paratur,” we are going through tough times, but the worst is yet to come: a solid hand at the helm is paramount to the get out of the storm. Only those companies, which have been able to nurture and retain consistent mid, senior and top management ranks will survive in the middle term and prevail in the long one.

About Michele Sancricca

Michele Sancricca is a seasoned executive and Maritime expert, having worked several decades over differentiated roles in both the Defense sector (where he was a Lieutenant Commander in the Italian Navy) and Maritime industry. Project experience includes multi-billion dollar shipbuilding projects, maritime security operations, and ocean and intermodal international trades. Michele's functional experience includes Process Optimization, Leadership Training, Strategic Planning, Shipping Finance, and Maritime Security. Michele also has published a series of Leadership training courses based on both Corporate Leadership and Military Leadership tools on Flevy here.

, , ,




Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]   What does it take to achieve Operational Excellence? Read this guide and learn to build an integrated Business Execution System from Six Sigma Master Black Belt Frank Adler, co-founder of Operational Excellence Consulting. [Learn more]
The Fiaccabrino Selection Process (FSP) is a proven methodology for increasing sales and reducing turnover, developed by "Mr. Roche," Charles Fiaccabrino. Mr. Fiaccabrino is a Sales Executive with over 50 years of experience. [Learn more]   Learn this time-tested approach to Change Management authored by Ron Leeman, recipient of the Change Leader award by the World HRD Congress in 2012. Ron Leeman has been Change, Process and Project professional since 1974. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (http://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most articles have been contributed for management consultants and industry executives with over 20 years of experience. If you would like to contribute an article, please email our editor David Tang at [email protected].

Flevy (http://flevy.com) is the marketplace for premium business documents, such as management frameworks, presentation templates, and financial models. Our documents are of the same caliber produced by top tier consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. Learn more about Flevy here.


Connect with Flevy:

   
  


About Flevy.com   /   Terms   /   Privacy Policy
© 2015. Flevy LLC. All Rights Reserved.