It will come as news to nobody that the breakbulk shipping industry is enduring tough times. The reasons why are many and varied, and include economic, regulatory and political factors. Together these contribute to the idea of a ‘VUCA’ market, meaning ‘Volatile, Uncertain, Complex and Ambiguous’. The term has military origins, but the business world has embraced it in recent years because it captures the dynamics of certain industry sectors, including breakbulk shipping, so well.
The underlying question is how do we as an industry cope with this VUCA market? From the perspective of carriers, the reflexive reaction is often to batten down the hatches and hope to ride out the storm. The better option, in my view, is to innovate ourselves out of it, as it would not only help us deal with the current situation, but also create strategic benefits on the longer term.
There are many ways to innovate, but, in this most practical of industries, thoughts quickly turn to vessels. Larger vessels has been the name of the game these past years in the RoRo (Roll-On Roll-Off) industry. However, a vessel only delivers on its economy of scale if it has a high utilisation factor. Since ever-larger vessels are ever more challenging to fill, there is effectively an upper size limit. That limit was reached for Wallenius Wilhelmsen Logistics (WWL) with its previous newbuild series, the Mark V. Hence; the new ‘HERO’ (High Efficiency RoRo) newbuild series are of a similar size, but have an advantage in terms of versatility. They are shorter, wider and have more hoistable decks, making them easier to adapt to the cargo needing to be carried. These characteristics have the added benefit of being able to extend service to ports with shorter, shallower berths. In summary, they are vessels for a VUCA world.
Another practical take on innovation is to look at the equipment used to carry cargo. Of course there are numerous new kinds of equipment that could be developed, but it is also true that existing equipment could be used in a wider range of ways. Success with this approach means a carrier can maintain a more homogenous equipment profile. For customers that means it is more likely the carrier has the equipment necessary for a job in the location where they need it. To help WWL continue to innovate on cargo solutions it is in the process of developing a Breakbulk Centre of Excellence, which will open in Bremerhaven later this year.
Shifting focus from steel to software, information technology holds great innovative potential with immediate benefits to shippers. In this day and age, one might think rapid response times, continuous cargo visibility, e-documentation and system integration would be the industry standard, yet that’s only available from a relative few carriers. Customer oriented IT innovation can effectively create a new (and improved) normal.
It’s tempting to think that today’s situation is unprecedented, but to the old hands of the industry, we’ve been in similar waters before. What may be different this time is that the VUCA dynamics could be here to stay. I would argue that -even leaving the economic, regulatory and political factors aside - the underlying improvement in the breadth and depth of data available to shippers is supporting a more analytical procurement approach, one that can lead to less stability in commercial relationships. Also, unlike the other factors, it is not a cyclical phenomenon. The upshot is that carriers are presented with a choice of either getting drawn into price only focus, with the associated risk to service quality, or finding new ways of creating value for their customers. The former is literally a strategy of diminishing returns for all concerned, so I believe that embracing innovation on every front is really the best and only tool for those with a long term perspective.