Overview
The main goal of the shipping industry is to transport goods by making use of high capacity ocean going ships that transit on regular routes on fixed schedules.
Shipping is a truly global industry. It connects business, markets and people across countries allowing them to trade in goods at an unimaginable scale. Shipping is estimated to account for 60% of international trade by value, amounting to over 4 trillion US dollars’ worth of goods every year. By moving large volume of goods are low cost through economies of scale, shipping enables global trade like no other industry.
Cargo also has to move using surface transport (trucks or rail) in the source and destination countries making the end-to-end shipment an intermodal transport system. Service disruption or lack of coordination at any leg of the intermodal system can cause delays and increased cost.
Globally, the United States of America and China are the largest contributors to the trade and by far the busiest trade route is North-America to East Asia. Europe is another major contributor also interesting because many of the countries in Europe are land-locked, requiring extensive on surface transportation.
Solutions
PMSoft has been working with global shipping companies across the value chain for over 10 years and understands these challenges. Here are some of the ways in which PMSoft has been helping Shipping companies.
Challenges
Regardless of the type of organization, there are a number of challenges that organizations working in the shipping industry are facing. Here are just some of the issues that are common across the industry.
- Demand and Supply mismatch: Although the international trade is growing and estimated to double by 2030 according to the International Monetary Fund (IMF), there is a slowing of demand from the major contributors (China, USA). This puts enormous pressure on the freight costs and the ability of the shipping companies to hold on to its fleet or think about expanding its fleet even if it is optimistic about the future.
- Environmental regulations: Shipping is responsible for about 2.5% of the CO2 emissions in the world and is also subject to a number of other regulations about preservation of aquatic life. The absence of universally accepted regulations and reliable technology to alleviate these issues makes it challenging for the industry to comply with these regulations and expose companies to expensive lawsuits and activism.
- Security concerns: Ships face physical threats from armed pirates, especially on some trade routes. There are also challenged by cyber-attacks.
- Increased M&A activity: There is a significant trend towards consolidation in the industry with some large mergers and alliances taking shape. This may lead to domination of specific companies on certain routes with unpredictable consequences.
- Leveraging Information technology: Availability of technology like satellite communications, telematics, big-data, automation, IoT, etc. is expanding at a rapid pace, but the shipping industry has not fully leveraged these techniques for building smart ships and smart fleets.
- Personnel challenges: The industry is always challenged to build a team that is trained to handle all the complexity in terms of operations, compliance and evolution of the trade. The challenges have multiplied in recent times and availability of trained staff with the know-how and capabilities is a big issue for most companies.