There are quite many articles written on the challenges that the maritime industry is facing. The Economic Crisis of 2008 has left its mark on the industry. Also, the current challenges are partly the consequences of the increasing demand triggered by e-commerce.
Despite the many challenges, shipping lines must survive, as the ocean shipping industry is unquestionably an important foundation for the global economy. Whether all shipping lines will survive this difficult time is yet to be seen. However, those that aim to stay in the game, need to innovate to regain profitability and the time for that is now.
Challenges of Ocean Shipping
Before we would answer the question in the title, first it’s the best to take a look at some of the main challenges of the maritime industry. Understanding these challenges will allow us to explain our point better as for how data integrations can have a significant impact on the entire ecosystem.
Many of the shipping lines have already started to tackle these challenges together with innovative startups. One thing is common for all of them: they cannot avoid data and system integrations with iPaaS and they are all looking to do it quickly and efficiently.
This issue has been around since 2011 and the demand in 2018 doesn’t look too bright either. It is forecasted that the demand would be even lower than last year.
What is the reason behind the long-lasting supply/demand imbalances year by year?
The economic crisis in 2008 was definitely an important factor. However, more importantly, the maritime industry has been having too much confidence in the growth of e-commerce. Back then when the e-commerce had started to bloom, shipping lines planned to increase the number of vessels they operate with. Additionally, the vessels are even larger than before.
Large idle vessels
As the demand is not as significant as many anticipated before, many of the vessels are idle. You may have seen many images of ghost fleets that are anchored in the high seas close to the port (anchoring a vessel at the port is extremely expensive).
Empty containers cost billions of dollars to shipping lines. The Boston Consulting Group estimated in 2016 that repositioning of the containers costed $20 billion for the industry. Partly, the containers are empty because of the lack of demand. Oftentimes, empty containers are the result of poor coordination and communication, and the lack of transparency across stakeholders. With better cooperation, the shipping lines could avoid that the containers would be shipped around the world empty or the need for constant repositioning at the ports (which also affects the stowage planning).
There is a pressure to fill the capacity and improving the visibility of the containers could significantly help the shippers.
Shipping rates are traditionally volatile, but rates were recorded low in 2017. It is expected that the prices would fall more during 2018.
The inefficiencies of the industry and the lack of demand for shipping services have a strong influence on the shipping rates. As everyone is going after market share, the importance of pricing is rising. McKinsey even described it as a “price war”.
Bigger players can put a lower price tag on their services, while smaller companies cannot afford to do the same.
Most of the shipping lines are now pricing their services at a marginal cost which is not optional, as in some cases the cost-management systems are not adequate enough to be used for determining the price.
Often, shipping lines are also pricing each service the same for all of their customers instead of coming up with premium services that would allow them to charge more.
Inefficient stowage planning in maritime container transportation increases the costs of shipping as the vessel needs to stay at the port for a longer time. Effective planning of unloading and loading the vessel can reduce the time spent at the port and result in significant cost savings. Having enough information on the route of the vessel and which containers it is going to bring and needs to take is crucial.
Outmoded approaches to design routes
Designing the routes is more important than many would think. As the fuel prices are constantly rising, it’s crucial that the routes are optimized. For optimization reasons, vessels are stopping at a few ports to make it possible to cover different markets, as one stop-over wouldn’t be economically advantageous. However, this requires more efficient planning from many different parties of the supply chain, but the connectivity for this is often missing.
Can data and system integrations save the maritime industry that is still using legacy processes?
We are positive that integrations can have a positive impact on the maritime industry and save it from unprofitability. Although, data integrations have little to no effect on the demand, however, the rest of the challenges can be improved by adapting to integrations. Below we are listing the 5 core elements of integrations that can influence the maritime shipping business.
Connectivity Management is essential
It is vital to building connections quickly between supply chain partners and customers. Integrating the systems of carriers, shippers, ports, and consignees will enable accurate information sharing. Real-time information helps stakeholders to analyze their operations and optimize their processes.
Legacy system integration
Which makes connectivity management even more difficult, it’s not only that the majority of systems and databases are disparate, but that most of the technologies used by industry stakeholders have been around for decades, therefore it’s difficult to connect them to modern applications.
Reliance on EDIFACT and the message format chaos
Logistics operators are still heavily relying on EDIFACT which is an inflexible data format and it’s difficult to work with it. Besides it, there are a great variety of formats (e.g. proprietary formats) used for messaging. This complicates the sharing of the data in real-time.
To enable that companies can process the information fast, data integrity is essential. The data needs to be translated to one another’s preferred format during the information transfer and need to ensure that the data is validated and forward back for enrichment if necessary.
Real-time data sharing adds visibility, predictability, and efficiency to the operations
Simply having more data on all aspects of the supply chain is not enough. The data needs to be available for any relevant parties in a format that they can easily process and understand.
The timeliness of the data is crucial in this fast-paced industry: it will allow stakeholders to utilize the container capacity better, manage routes, improve stowage planning, and better manage prices.
To learn more of how we can help the maritime industry with data and system integrations, download our 'Digitization of the Ocean Shipping Industry' whitepaper: