The ocean transportation industry clearly is different from what it was just 15 months ago. Then, in the depths of the financial crisis, a main drivers for selecting an ocean carrier was cost.
Manufacturers needed to move cargo as cost effectively as possible, and the idea of quality and reliability frequently went out the window for the sake of saving money. But shippers quickly learned this was merely a short-term solution.
As manufacturers emerge from the crisis and cargo volumes escalate, shippers likely are reassessing transportation strategies and focusing on the long term. Priorities are shifting from cost-based decision-making to strategic determinations. Shippers are evaluating key concerns — Is my transportation partner reliable? Which carriers best serve my key markets? Who can accommodate my unique transportation needs? This longer-term strategic thinking requires a real transportation adviser, and the low-cost carrier of the moment simply lacks this expertise.
What happens next? I believe carriers offering quality long-term partnership solutions and value-added services will outshine the others. The industry likely will undergo a type of natural selection — quality carriers will rise to the top and those that capitalized on short-term needs and bargain-basement rates will fall from grace. We could see consolidation or bankruptcies.
But the industry will stabilize soon, the quality players will thrive and carriers will look to reinvent their services to remain competitive.
Another challenge will be preparing for looming environmental regulatory mandates. One concern is how carriers will manage the costs related to upcoming Emissions Control Areas in the U.S., Canada and, soon after, in other parts of the world. Bunker fuel, and especially the type of low-sulfur bunker required by the new ECA regulations, is expensive, and the necessary refining capacity is somewhat limited. Total costs, therefore, will increase. Carriers must start acting now to minimize the impact of these challenges on their businesses, profits and customer relationships.