Learning Curve

Last week, in Art. 32, we dealt with Eivind Kolding’s call for “serious change” in the shipping industry. Mr. Kolding, everyone knows, isn’t just an average guy. He’s CEO of Maersk Line, the world’s largest shipping line, and he wouldn’t highlight his industry’s faults without a good reason.

But we weren’t the only ones who took note of Mr. Kolding’s advisory. In an advance copy of the speech provided to the Wall Street Journal, the CEO pointed to three critical areas. The container industry, he said, has fallen behind the curve in three areas: Timely delivery, reliable and easy booking and tracking, and in ensuring transparent and comparable environmental footprint data.

“If the container shipping industry is to secure its license to operate in the future, the industry needs to change now,” Mr. Kolding said.

Another “Journal” also took note of Mr. Kolding’s address at the TOC conference. Peter Leach, at The Journal of Commerce, reported that, “European shippers are endorsing the call for radical changes in the container industry by Maersk Line CEO Eivind Kolding, but the European Shippers Council said Maersk has a heavy legacy to overcome and that shippers were impatient for a change.

“The ESC said Wednesday it agrees with Kolding’s speech earlier this week, that reliability ‘is not good enough’; that container shipping is ‘too difficult’ and complicated for customers; and for shipping to be more environmentally sustainable it must display greater ‘transparency,’ and to follow the adage ‘what gets measured gets done.’…”

The ESC secretary general added, “We hope Maersk can set a shining example for other carriers to follow suit by changing their business model to focus on their customers’ long term needs. But shippers are impatient for change, so the pressure is on for changes to take place quickly.”

Except for the astonishing change affected by Malcom McLean’s introduction of the container, no significant advances have been made in the shipping industry. Sure, ship’s are larger, but that’s not a sign of progress – that’s a sign of mismanagement. Those ill-conceived, giant newbuilds have brought about just two “developments”: business for Bangladesh and Indian breakup operations and temporary “mothballing” of excess capacity. And these “developments” are hitting carriers where it hurts – on the bottom line. So the “serious change” is not really intended to “focus on the customers’ long term needs”, after all. The focus has always been on the carriers’ bottom lines.

But what changes could be made? Has anyone come up with any ideas? Here’s the most logical one: CEOs need to shut down their order books, and if they need to be convinced, they should be advised that Lloyd’s List just revealed that capacity is being pulled off the floundering Asia-Europe trades and that further ship lay-ups have become a distinct possibility.

The world is in a precipitous economic decline and the shipping industry is feeling the pinch, yet the “bigger-is-better” enthusiasts are in denial. Is that mismanagement or just plain stupidity?