Costly Miscalculations

The following story appeared in “The Container Shipping Manager” on July 10, 2014:

“Knowing your costs? Shippers say carriers don’t know”, was the headline.

“When your own customers comment on your inability to understand your costs and what you need to make a profit, then it is time for some serious reflection.

“Shippers we have spoken with often comment to us on the state of senior management in the liner shipping community, which more often than not proves itself to be inept at grasping the principles of running a successful business.

“Speaking to The Container Shipping Manager, one executive from a retail shipper in Europe said that many carriers have thrown logic completely out of the window when it comes to dealing with customers …

“‘This profit-cost mentality, yes, they are aware of it,’ he said, ‘but when it comes down to this psychology behind having utilization factors of less than 95 per cent, nobody, not a single carrier takes a stand. Instead they say, ‘I have to follow the market or I have to follow this guy, because everybody else is doing it,’ he added.

“Essentially, when utilization drops, little additional thought is spared for what price is necessary to maintain a profit. While shippers are left scratching their heads over this phenomenon, they are quick to point out that it is to their advantage, making negotiations a far less stressful process.

“But one can’t help but wonder whether shippers are truly better off in the long term.

“One shipper we spoke to from a major sporting goods brand said he realized the value in not forcing carrier prices down too far. However, it can be difficult to reject such low rates, he added.” —

If you’ve been reading our commentaries over the past few years – and recall our unflattering descriptions of “senior management” in the maritime industry – the above article will most likely justify the adjectives we used.

We said those CEOs were deaf , dumb, blind, arrogant, inept, and in most cases, greedy. In fact, we pulled no punches. We still wonder how and why those men were put in a position to make important decisions, and who it was who placed them there.

We also reminded you a number of times that “the corporate fanning of feathers” was all that concerned those CEOs. “I have to follow this guy, because everybody else is doing it,” each figured.

“So I’ll just charge what the others are charging,” each figured. Right. Monkey see, monkey do.