SHORT SEA SHIPPING LOGISTICS STRATEGIES IN EUROPE REVISITED

1

• SHORT SEA SHIPPING LOGISTICS STRATEGIES IN EUROPE
  REVISITED
• Peter Marlow and Ana Paixao Casaca
• IAME 2006 MELBOURNE

2
Objectives

• To examine the effectiveness of short sea
  shipping when used as part of multi-modal
  logistics supply chains.
• To consider what strategies might be developed to
  improve the competitiveness of the short sea
  shipping mode.

3

• THE ROLE OF A LOGISTICS MANAGER
• - to devise channels of distribution
• - to deliver customer service
• - to integrate and make trade-offs

4

• MODAL CHOICE IN LOGISTICS
• - road
• - rail
• - sea
• - air
• - pipeline
• - various combinations of some of the above

5

• FACTORS AFFECTING MODAL CHOICE
• - traffic related
• e.g. length of haul, weight, dimensions,
  value
• - consignor related
• e.g. size of firm, inventory policy, channel
  structure
• - service related
• e.g. speed, cost, reliability, security

6

• LOGISTICS CONSIDERATIONS
• - consignment size
• - length of haul
• - transit time
• - cost
• Is there a trade-off between speed and cost?

7

• ROAD TRANSPORT is often the most popular choice
  BUT PROBLEMS OF
• congestion
• pollution
• noise and
• intrusion
• have led to roads to water initiatives

8

• ROADS TO WATER INITIATIVES
• - require cooperation between modes
• - involve two separate modes of
• transport
• - constitute broken supply chains
• - can satisfy logistics requirements
• In Europe this has led to the establishment of a
  short sea shipping (SSS) network

9

• PREVIOUS RESEARCH is outlined in the paper
• - several European research projects
• - various Roundtable Conferences
• - consultants reports e.g. Drewry
• - academic studies
• e.g. Paixao Marlow (2002, 2003, 2005)
• Brooks Frost (2004)
• Becker et al (2004)
• Baird (2004)
• Fafaliou et al (2005)
• Sanchez Wilmsmeier (2005)

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• Paixao Casaca and Marlow (2005) identified 8
  factors or service requirements on which SSS
  could base its strategy.

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Carriers logistic network design and speed
Cost of service (freight rates) and
reliability/quality
Investment policy
Carriers representatives Sales after
sales behaviour
Com. oper., and Carrier-shippers Relationship
policies
Short Sea Shipping services
Involvement in the forwarding industry
Corporate image
Service guarantee
12

• A survey of SSS operators indicated the types of
  challenges that they faced
• - Changing customer expectations of quality,
  service and price
• - Deregulation
• - Meeting customers needs and values
• - Profit maximisation and growth
• - Regional forces to maximise trade within
  the bloc
• - Survival
• - Technological change
• - Economies of scale and scope
• - Economies of fit

13

• The most important challenges are those of
• - changing customer expectations
• of quality service and price
• - meeting customers requirements
• - profit maximisation and growth
• - economies of scale and scope
• and SSS operators should develop strategies to
  meet these challenges and provide an effective
  logistics service

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Survey of SSS operators

• Mail survey of 348 operators
• 22 response rate
• Analysis via SPSS

15

• A factor analysis provided 13 factors of
  relevance but further reliability tests reduced
  these to 10 key strategic areas

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• Key Strategic Areas (1-5)
• 1. Strategic marketing
• 2. Time management
• 3. Integration
• 4. Freight forwarding
• 5. PR and publicise performance

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• Key Strategic areas (6-10)
• 6. Develop partnerships
• 7. Develop inland clearance depots
• 8. Sustainability
• 9. Develop terminals
• 10. Outsourcing

18

• MOTORWAYS OF THE SEA
• Motorways of the sea are floating infrastructures
  capable of concentrating freight flows in well
  defined transport corridors linking ports of the
  Member-States in the short run the concept is to
  be applied to roll-on-roll-off transport though
  in the longer term it envisages container trades
  as well. The motorways of the sea interface
  concept and the efficiency of SSS services are
  two key elements.

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• A motorways of the sea interface is a port
  infrastructure and superstructure through which
  cargo flows seamlessly, whose hinterland
  connections provide a fast door-to-door cargo
  pick up or delivery, and which makes use of
  powerful information/technology systems. The
  market winners will be those ports capable of
  devising a strategy towards this change, which
  are capable of working together, of eliminating
  the bottlenecks and constraints, and which can
  promote cargo consolidation along the trade
  routes they serve. So what is the role for SSS
  in this new environment?

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• METHODOLOGY
• (a) SCENARIO DEVELOPMENT
• 1. the current SSS market
• versus
• 2. SSS and the motorways of
• the sea
• and (b) SWOT ANALYSIS

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• STRENGTHS
• A coastline in excess of 67,000km
• Can offer services at lower freight rates due to
  inherent economies of scale and distance
• Unlimited capacity of the sea
• No time restrictions. Ability to use the oceans
  7 days per week, 52 weeks per years
• Port investments and port maintenance are low
• Does not require a huge land take
• The market players possess the knowledge for
  operating this transport mode
• Inclusion of external transport costs in freight
  rates
• Environmentally friendly. Contributes to
  reduction in energy consumption less emissions
  and reduced number of accidents
• Contributes to the development of the EU
  shipbuilding industry
• High safety levels in the transport of dangerous
  goods
• Underused capacity for expansion

22

• WEAKNESSES
• Capital intensive industry
• Can hardly offer a door-to-door transport
  service part of a broken chain
• Old/traditional organisational cultures
• Need to plan carefully the development of a
  port/dedicated terminal layout
• Higher inventory costs
• Lack of information technology/information
  systems compatibility
• Lack of shipping operations flexibility,
  frequency, reliability
• Very bureaucratic industry
• Time in port depends on the ports physical
  conditions

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• WEAKNESSES (Cont.)
• 10. Lack of good road and rail links to ports
• 11. Low speed of port operations, lack of
  empowerment, lack of port capacity, lack of
  transparent port tariffs
• 12. Low levels of port reliability
• 13. Poor image
• 14. A passive attitude of shipping companies
• Lack of reliable statistics
• Trade imbalances
• High sailing times
• Complicated to arrange sea transport
• Customers do not choose transport because of
  environmental friendliness

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• OPPORTUNITIES
• To tailor services according to customer wants
  and needs
• To change its selling behaviour
• To introduce new technologies (new ships and
  equipment)
• To reduce environmental impact even further
• To promote SSS close to the final end user
• To take advantage of the road transport structure
  and changes in prices caused by the
  internalisation of external costs
• To extend SSS services into inland navigation

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• OPPORTUNITIES (Cont.)
• 8. To develop terminals which allow the
  application of contemporary logistics trends
• 9. To streamline port operations
• 10. For SSOs to invest in port operations
• 11. To implement new organizational cultures and
  management techniques
• 12. To offer door-to-door transport
• 13. To take advantage of the political
  environment
• 14. To get involved in logistics operations
• Take advantage of the regulatory aspects taking
  place in other transport modes
• To contribute to sustainable growth.

26

• THREATS CAUSED BY
• Changes in the industry structure and location
• The lack of a proper logistics strategy adopted
  by some industries
• The introduction of heavy labour regulations
• The entry of rail companies capable of contesting
  existing market and of providing high quality
  alternative transport services
• The entry of new SSOs
• New shipping regulations on maritime transport
• The lack of an adequate legislative framework
• Delays in accomplishing TENs projects
• Thin trades
• Public sector subsidies for competing road and
  rail infrastructure.

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• The proposed Motorways of the Sea concept is
  expected to eliminate many of the SSS weaknesses
  - especially those highlighted in the next
  slides which are linked to port activities and
  prevent SSS becoming fully integrated with other
  modes.

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• WEAKNESSES
• Capital intensive industry
• Can hardly offer a door-to-door transport
  service part of a broken chain
• Old/traditional organisational cultures
• Need to plan carefully the development of a
  port/dedicated terminal layout
• Higher inventory costs
• Lack of information technology/information
  systems compatibility
• Lack of shipping operations flexibility,
  frequency, reliability
• Very bureaucratic industry
• Time in port depends on the ports physical
  conditions

29

• WEAKNESSES (Cont.)
• 10. Lack of good road and rail links to ports
• 11. Low speed of port operations, lack of
  empowerment, lack of port capacity, lack of
  transparent port tariffs
• 12. Low levels of port reliability
• 13. Poor image
• 14. A passive attitude of shipping companies
• Lack of reliable statistics
• Trade imbalances
• High sailing times
• Complicated to arrange sea transport
• Customers do not choose transport because of
  environmental friendliness

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• The motorways of the sea concept can help SSS to
  overcome some of its weaknesses. How can the
  industry exploit its numerous strengths and
  opportunities and minimise the effect of the
  remaining weaknesses and threats?

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• Strengths Opportunities analysis
• SSS should Focus on customer relationship
  management with existing and potential customers
  focus on a green policy vertically integrate
  forward and backward develop new services

32

• Weaknesses Opportunities analysis
• SSS should Develop a SSS promotion plan adopt
  a new management technique, delegate power use
  small ships to allow frequent, regular and
  reliable sailings on a JIT basis engage in
  training actions

33

• Strengths Threats analysis
• SSS should comply with existing regulations
  show safety and security of SSS operations
  consolidate SSS operations if possible get
  involved in buying and acquisition to rationalise
  resources

34

• Weaknesses Threats analysis
• SSS should publicise performance levels raise
  awareness get involved in freight forward
  activities, find niche markets and exploit them
  before new entrants that are capable of
  contesting the market

35

• Substantial internal strengths and the numerous
  environmental opportunities suggest that SSS
  pursues an aggressive market position supported
  by a vertical integration. The choice of this
  position is explained as follows
• 1. The development of the motorways of the sea
  allows/requires the consolidation of freight
  along certain trade routes thereby creating the
  critical mass required to sustain a viable
  business venture
• 2. The implementation of the motorways of the
  sea requires the traditional bottlenecks which
  occur in a port environment to be eliminated

36

• The SSS operators can become logistics providers
  and focus on their core activities, i.e.
  reliable, frequent and regular door-to-door
  services, thereby satisfying customer
  requirements
• The required vertical integration is explained by
  the need to control the whole transport chain
  this integration is expected to happen backwards
  and forwards
• Looking into the long-term success of the
  industry, the next step would be a concentric
  diversification caused by mergers and
  acquisitions or internal generation of separate
  businesses with synergetic possibilities to
  rationalise the available resources.

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• CONCLUSIONS
• SSS strategy should not be over concerned with
  the physical aspects of the movement of freight
  since MoS and market pressures will oblige ports
  to eliminate existing physical constraints if
  they wish to be part of corridors where the
  consolidation of cargo flows is to occur.

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• Changes are needed in
• - the integration of freight forwarding
  activities
• - organisational structure of SSS operators
• - structure of the industry
• - becoming more proactive
• - relationship management