The strange tale of risk and reward in global liner trades
Let the chaos commence
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Let’s remind you all of that figure again, lest you forget. Just 2% of the world’s goods are carried by air, 98% by other modes. OK, so there’s the happier “by value” statistic, but let’s focus on the 2% one for now.
Well, Maersk has thrown down the gauntlet to you all. CEO Eivind Kolding, in a campaigning speech, last week told the sea freight industry it must reform, or it will lose out. “In 35 years of container shipping, not much has changed, but the rest of the world has, and our customers have,” he said.
Sea freight again, you ask? Well, yes. Hear me out.
The air cargo industry seems to cannibalise itself. That 2% figure hasn’t changed in years. And yet the carriers in the industry have – some have gone, others have arrived, more have strengthened, others weakened. Which means that nothing has been done to increase market share. All the movement has been within the industry itself. Capacity issues and rate wars have only affected airlines. Yet if the industry was more focused, and acted as one (in a legal way, of course), instead of taking a 0.001% share of the business from your neighbour, why not focus on together taking a 0.5% share from other modes?
How, you may well ask.
Well, according to Maersk, there are three things the shipping lines need to do to, and they aren’t bad tenets for the air freight industry either. The first is reliability. Admittedly, air freight is light years ahead on this one. Famously, only one in every two containers arrives on time. Many take months (after the scheduled delivery date) to arrive.
But this is going to change. And it doesn’t matter to an organised shipper how long a container takes, but it does matter whether it arrives on time. It cuts storage costs, administration. And if the shipping lines are going to achieve that, then there’s a big problem coming air freight’s way. “Reliability has to become the new rate war,” said Kolding. Maersk is aiming for 95% reliability by the end of next year. That’s perhaps a fearsome prospect for some in the air cargo industry, but the integrators have near-on perfect reliability. It’s not unachievable.
The second aspect Maersk suggests is simplicity. Kolding wants it to be a “one click” process. “Today there are 19 touch points between the customers and carriers, and we need to keep that complication within our industry rather than transfer it to customers,” he said. Simplification here means e-freight. And you don’t need to hear more about it here, but the quicker it’s implemented the quicker the benefits across the board.
The third point is potentially a harder one for airlines. The environment. But instead of calling for alternative fuels, Kolding asks for more transparency, so the shipper is better informed about the environmental costs of shipping. With the arrival of Europe’s much-loathed Emissions Trading Scheme, airlines are ready to answer these questions. But they are also, as an industry, more focused on the future – many companies are looking at sourcing bio-fuels, and IATA has an industry deadline for switching.
If these three things are what the shipper wants (and you can hear some fairly pallid comments on the Maersk statement from Adidas, M&S and TetraPak at www.changingthewaywethinkaboutshipping.com), then the airline industry is in a position to provide them.
Of course, the big divider between sea and air is price. But if you can convince shippers that just sometimes, air freight provides more reliability, less wasted stock, fewer markdowns, less expensive hinterland logistics, simpler systems and more overall efficiency, as well as a willingness to reduce emissions, you might get that elusive 0.5% extra share.
Kolding finished: “If we don’t change now, someone else will do it for us.” Why not you?
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