Executive Briefings

A New Generation of Measurements in Ocean Transportation

Analyst Insight: While on one hand the container shipping industry has become ever more commoditized, a new range of service measurements could increase the potential for market differentiation. The key to any differentiation is the ability to make it clear to the customer what the difference is. Such transparency would certainly be a novelty in the industry. - Lars Jensen, CEO, SeaIntel Maritime Analysis

The availability of quantifiable market statistics in container shipping has remained relatively stagnant for many years - and as it pertains to quantifiable service-level measurements they have been very few and far between. Chiefly they consisted of on-time arrival studies of vessels in less than a dozen ports globally combined with ad-hoc surveys measuring how satisfied groups of shippers were with particular service elements.

This state of affairs naturally leads to a situation where a shipper only has rudimentary knowledge of whether the service he receives is above or below the market level. It also leads to a situation where service-level competition amongst carriers is somewhat inefficient as no solid benchmarks exist. Consequently it becomes a matter of marketing skill for the carriers rather than skill in delivering specific service levels.

The consequence of this state of affairs is that the transportation of containers by sea has become an ever more commoditized product. As we see the industry evolve towards ever larger vessels, serving customers through hub-and-spoke systems, it is inevitable that some degree of commoditization takes place. After all, the very container itself is a symbol of commoditizing ocean cargo. However, the lack of comparable metrics on service levels has pushed the commoditization further than necessary, as currently the prime measurement available is simply price.

We are currently seeing this situation at the verge of changing with a range of new quantitative service measurements being launched into the marketplace. What is particularly interesting to see is the emergence of measurements specifically aimed at a highly detailed level. Some of these measurements include the ability to measure the arrival of individual containers vis-à-vis the original promise the carrier made on the booking confirmation. Such measurements are clearly even more valuable to a shipper than schedule reliability measurements. We have conducted a study across more than 20,000 ports showing that whereas 65 percent of all liner vessels arrive on time, the containers on board those vessels are only delivered timely in 50 percent of the cases. These measurements therefore bring a whole new dimension into the market analysis available to the individual stakeholders in the market.

We find that there is an emerging understanding in the market that data transparency will become a way for service-focused carriers to increasingly differentiate themselves in the market. Shippers with a genuine need for elevated services levels will be gravitating towards carriers able to provide quantifiable service measurements, and hence we will likely begin to see service contracts actually contain service metrics rather than merely price.

                                      The Outlook

In the years ahead, we expect to see a continued emergence of more detailed market intelligence statistics. New data mining techniques allow for rapid data access, and better market intelligence support provide for rapid application of the information. We believe this emergence of detailed market intelligence will eventually support carriers focusing on differentiation as it provides the means for quantifying the value of such differentiation.


Keywords: Ocean Transportation, Transportation & Distribution, Logistics; Quality & Metrics, Supply Chain Analysis & Consulting, Global Supply Chain Management, Ocean Cargo, Data Mining, Market Intelligence Statistics

The availability of quantifiable market statistics in container shipping has remained relatively stagnant for many years - and as it pertains to quantifiable service-level measurements they have been very few and far between. Chiefly they consisted of on-time arrival studies of vessels in less than a dozen ports globally combined with ad-hoc surveys measuring how satisfied groups of shippers were with particular service elements.

This state of affairs naturally leads to a situation where a shipper only has rudimentary knowledge of whether the service he receives is above or below the market level. It also leads to a situation where service-level competition amongst carriers is somewhat inefficient as no solid benchmarks exist. Consequently it becomes a matter of marketing skill for the carriers rather than skill in delivering specific service levels.

The consequence of this state of affairs is that the transportation of containers by sea has become an ever more commoditized product. As we see the industry evolve towards ever larger vessels, serving customers through hub-and-spoke systems, it is inevitable that some degree of commoditization takes place. After all, the very container itself is a symbol of commoditizing ocean cargo. However, the lack of comparable metrics on service levels has pushed the commoditization further than necessary, as currently the prime measurement available is simply price.

We are currently seeing this situation at the verge of changing with a range of new quantitative service measurements being launched into the marketplace. What is particularly interesting to see is the emergence of measurements specifically aimed at a highly detailed level. Some of these measurements include the ability to measure the arrival of individual containers vis-à-vis the original promise the carrier made on the booking confirmation. Such measurements are clearly even more valuable to a shipper than schedule reliability measurements. We have conducted a study across more than 20,000 ports showing that whereas 65 percent of all liner vessels arrive on time, the containers on board those vessels are only delivered timely in 50 percent of the cases. These measurements therefore bring a whole new dimension into the market analysis available to the individual stakeholders in the market.

We find that there is an emerging understanding in the market that data transparency will become a way for service-focused carriers to increasingly differentiate themselves in the market. Shippers with a genuine need for elevated services levels will be gravitating towards carriers able to provide quantifiable service measurements, and hence we will likely begin to see service contracts actually contain service metrics rather than merely price.

                                      The Outlook

In the years ahead, we expect to see a continued emergence of more detailed market intelligence statistics. New data mining techniques allow for rapid data access, and better market intelligence support provide for rapid application of the information. We believe this emergence of detailed market intelligence will eventually support carriers focusing on differentiation as it provides the means for quantifying the value of such differentiation.


Keywords: Ocean Transportation, Transportation & Distribution, Logistics; Quality & Metrics, Supply Chain Analysis & Consulting, Global Supply Chain Management, Ocean Cargo, Data Mining, Market Intelligence Statistics