The shipping industry has been burdened by surplus capacity, low freight rates and depreciating secondhand prices for much of the past decade. This report presents a framework for a circular business case that aims to reinvent the operating model for vessels ownership.
Re-introducing profitability in the shipping industry
New technologies are being applied to existing business models to lower costs and enhance efficiency
The shipping industry has been burdened by surplus capacity, low freight rates and depreciating secondhand prices for large parts of the past decade. New technologies are being applied to existing business models to lower costs and enhance efficiency. But it becomes increasingly hard for individual players to develop a competitive edge if operational excellence is delivered through third-party algorithms or software available to all industry players. In many cases, these new technologies are simply redefining shipowners’ license to operate.
The traditional guiding principles of value creation in the shipping industry corrodes with the introduction of new technologies and more interconnected global supply chains. The industry is struggling to navigate the short-term agenda of trade tensions, geopolitics and the enforcement of new environmental regulation. Few players consider the potentials of adjacent markets, different parts of the value chain, and new industries.
Why it matters
The digital transformation of the shipping industry and the industry’s deeper integration into global supply chains will test core business models. Some players will focus on the ecosystem play related to the movements of cargo, others will work to standardize and scale business models of vessel ownership while the more traditional players will continue their operation. Shipowners that do not adapt to the emerging changes and begin to digitalize and innovate their business models may find it increasingly difficult to deliver a return on invested capital. In time, they may even find it difficult to employ their vessels.
What to do about it
It is time to re-introduce profitability in the shipping industry. We need to think critically about potential new sources of value, shifting competitive dynamics, and regulatory policies that affect both the revenue and expense sides of the business.