By Arthur Chen    Photo: @rawpixal

70% of small and medium-sized customers need "customized" services to assist their supply chain logistics. if we need to be molded into “1 & 0” digital customers, why don’t you just be a robot?

I recently saw a report about shipping lines grabbing business across borders. With rich capital, they are trying to take all of the upstream and downstream industrial chains. In fact, several shipping giants such as Maersk, CMA, MSC, have long been planning for such an attempt. Especially since the beginning of this year, due to the short of containers caused by the covid-19 chaos and loss of control in the container transportation industry, shipping lines intend to have more control the effective flow of containers so as to reach their hands out into the business of the supply chain service providers which they used to cooperate with. Because of the pandemic, in the fragile international logistics supply chain, shipping giants have become a ruthless player with the most capital concentration. They have ample cash flow and generous shots, and their every move shakes the present and future of the logistics supply chain. According to the report, the three industrial chains have been intervened by these giants.

First, it is involved in inner river shipping. It is rumored that the 2M alliance has begun to skip barge operators and operate its own inner waterways to move empty containers, thereby alleviating the difficult situation of finding a container. It is said that in the past two weeks, 4000-6000 TEU empty containers have been transported by three ships. Too many empty containers are stranded in the European inland container yards. The shipping giants originally just rented barges as empty container distribution centers, but as the number of empty containers scattered around Europe increased, they directly opened charters to the barge owners. Although the shipping giants are mainly engaged in ocean shipping but not an expert in inner waterway shipping, the negotiation between the shipping lines and the barge owners to extend the lease can give shipping giants greater control over the logistics supply chain. On the contrary, companies that do not directly lease barges at this time, such as HPL, will suffer, because first, the barge operator will give priority to ship the containers of existing contract customers; second, the terminal must serve large shipping lines, and the barges shall be managed when there are free berths. The shipping lines lease the barges directly, so the terminal must accept these barges. Therefore, the leasing of barges by shipping giants will change the attitude of terminal operators towards barges in the short term, and will change the ecology of the entire supply chain in the long term.

The second is to say goodbye to freight forwarders. Shipping lines with strong control space are squeezing the survive of freight forwarders. Liners are prioritizing shipping orders from customers who agree to use their own land logistics services. In practice, land transportation is arranged by freight forwarders which subcontracted to logistics providers that are mainly engaged in road transportation. Now shipping giants adopt a vertically integrated business strategy to compete with small and medium-sized freight forwarders for land logistics, warehousing and customs clearance services. At present, shipping lines are trying to control the pricing of land transportation by mastering marine channels, and because they control containers and space, freight forwarders and logistics service providers are likely to become bundled sales to shipping lines, and have nowhere to stand.

The third is to scrape off the business of feeder operators. The ocean line is the main artery of shipping, and only shipping giants have enough capital to travel across the ocean. The feeder operators can only cultivate the offshore area, transfer the cargo from the small ports to the hub ports, and transport the containers for the main ocean lines. But their living space is becoming more and more difficult in the current extreme maritime market. Shipping giants have two powerful weapons: on the one hand they refuse to increase the contract price, on the other hand they rent ships at high prices. In Northern Europe, for example, port congestion, rising oil prices, and soaring daily rents of ships have prompted feeder operators to impose temporary price increases, but shipping giants have refused to accept an extra surcharge of 50 euros per TEU because the terms of feeder contracts are usually expires at the end of the year, and the surcharge clause is clearly excluded. The giants with huge cash flow are buying and leasing ships at high prices. Ship owners are of course happy to lease them to high-priced offered by shipping giants. Their share in the offshore and feeder shipping markets has increased year by year. The daily rent of a 4250TEU container feeder vessel set a record of 200,000 U.S. dollars. Behind it, is the giants represented by MSC that favor feeder ships. Therefore, feeder operators have every reason to worry that the shipping company is "drain the swamp". The shipping giants will no longer need their services.

Based on the above phenomenon, it can be reasonably speculated that some shipping giants are extending their service scope upwards and downwards, and de-intermediate. That is to kick off the original cooperative service providers, and directly control inner barges, inland trucks, and offshore feeder ships to complete the initial full transportation network. It also squeezed out the symbiotic freight forwarders. From the author's point of view, such an aggressive expansion risk is extremely huge and undoubtedly too ideal! Shipping lines have been operating miserably in the past 10 years, losing more and earning less, although this year they have made a lot of cash profits through the major covid pandemic, and then used the cash in hand to buy large container ships, lease long-term ships, feeders and barges, intervene inland trucks, etc. The expansion action is simply too optimistic about the future prosperity of the shipping market. The pandemic and economic changes will influence the future of the shipping market. This is no one can predict. What's more, the most important thing is the transportation industry. Whether it is ocean transportation, land transportation, river transportation, and freight forwarding, it is a “human oriented” service industry that need professional staffs to make job done well, and it is an upstream and downstream industry chain that must be seamlessly integrated. As long as one link is loose, transportation will fail. Among them, for freight forwarding industry, professional human quality has always been an vital reason why the transportation industry cannot completely de-intermediate. People are "services and products". What's more, the larger the scope of the shipping giant's service, the harder it is to control the "people"! In addition, the shipping giants have to expand their scope to be more larger so as to they focus on larger volumes from the customer they serve.  The outcome may be 30% of the large customers with huge volume in the world may flow into this kind of mass production lines provided by shipping giants. However, there are still 70% of small and medium-sized customers in the world. These small and medium-sized customers need more "customized" services to fill up the deficiencies of their supply chain logistics, such as daily active tracking of cargo status, files for customs arrangement, and intractable sectors in the logistics process be solved by the communication with "people". Artificial Intelligence answers and passive queries on the website lose their "human touch" and cannot provide the answers that guests want to know. The lines simply think the service can provide the necessary information through the digital website is unable to meet the needs of small and medium-sized customers. Without the professional services of middlemen, the supply chain cannot run smoothly.

The author strongly agrees with the conclusion of the article: “Capital has done many transformations. Ford has tried to plant rubber forests for tire production in South America. They spent a lot of money to manage them carefully, but there is no complete ecological chain to resist pests. The fertility of the land was dried up, and it ended in misfortune. The growth of capital in the shipping market also requires soil and requires the participation of every intermediate link that is an organic part. Shipping giants may be able to transform customers through the platform, but if we need to be molded into “1 & 0” digital customers, why don’t we just be a robot?

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