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Container shipping on cusp of integration

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Ship operators in the container shipping sector have a five-year window in which to develop their integrated systems that will allow them to compete with the online freight forwarders.

The former Maersk Line chief information officer, Adam Banks as saying that the container shipping sector now has the technology to develop its online systems that will allow them to meet the challenge from the online companies that have evolved over the last 10 years.

According to Container News, Banks said the three elements that will allow the type of integration necessary for the carriers are the development of reliable sensors that have a battery life of six to 12 months with the global connectivity that will allow the carriers to gain a competitive advantage.

“Being an asset owner gives the carriers a potential advantage over competitors, in the past that wasn’t the case, but now technology has caught up and that makes joined up integrated systems operating in real time a possibility,” explained Banks.

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Essentially, as the lines own the assets on which the cargo is transported, the ships, ports/terminals, and trucks and trains to a lesser extent, they will be able to offer services that non-vessel operating companies will not be capable of.

An example is that the carriers can now offer an express service where the carrier can say to a car manufacturer that it will not allow its plant in Mexico to run out of gearboxes.

“Such a deal is worth much more than the cost of carriage to the shipper, because delays on the production line would cost far more, around US$100,000/hour, so if you can guarantee the delivery this becomes a premium product to sell to customers,” said Banks.

Shipping lines will be able to make these offers because the connectivity offers the carrier an unprecedented visibility of the supply chain, and because it has control of the transportation if there are problems they can be solved on the way, Banks said.

Premium and express services would be just one or two of the many possible differentiated services offered to customers whose cargo will most likely be on the same ship.

“It’s a bit like having first class, business class, economy and premium economy on an aircraft,” Banks explained.

He went on to say that in the past Amazon and others were able to turn asset owners into utilities and they could vertically integrate into asset ownership. “Now the asset owners have the weaponry to fight back against the tech giants,” claimed Banks.

However, he estimated that the lines had around five years to make their advantage pay, after that the tech giants will catch up, “Virtual freight forwarders are already renting planes,” he said.

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