Trends in Shipping Practice

Abstract The shipping industry has undergone changes in the past; principally the usage of steel in ship‐
building and the introduction of mechanical propulsion. More recently, changes ushered in by modern
computing and communication tools, newer concepts such as containerization, multi‐ 2 modalism,
outsourcing and globalization are revolutionizing the practice of shipping business. The use of a variety
of communication modes, powerful computing methods and relatively inexpensive transfer of data on
real time basis is bringing about noticeable changes in the industry. This paper attempts to analyse the
changes in the industry and its business practices with special emphasis on dry cargo chartering – a
branch of commercial shipping involving a wide variety of ships and cargoes and varying business
practices. It also tries to highlight the pitfalls that some of the recent changes could introduce in the age
old practices. 2.0 Introduction The topic – ‘Trends in Shipping Business’‐ points to predicting or
forecasting the trends in shipping industry. Prediction is normally understood as a statement of what
will happen in the future, not necessarily based on the experiences and understanding of the past.
Predictions or forecasts can never be cent percent correct and hence are considered to be tricky
exercises. While attempting a forecast, what we could do is to analyse the changes the industry has
gone through in the last few years, the reasons for the changes and their impact on the industry. Such
an analysis will help us understand the direction which industry practices is likely to take in the future.
Shipping is perhaps one of the oldest modes of transport – one which enabled the development of
humanity by spreading, apart from goods and services, knowledge and wisdom far and wide. Shipping
developed as a global industry long before any other industry could do so. The Dhows that traded in the
Indian Subcontinent nearly 5000 years back, the Chinese Junks which regularly travelled to the Indian
Sub‐continent, the famous Arab travelers who expanded their trade from China to the Red Sea and
Africa are just a few examples of how Globalization operated then. The Global nature of shipping not
only facilitated Trade and Commerce but also served as a vehicle for the spread of technology and
culture. A classic example of this is what the famous historian Mr K N Chaudhuri terms as ‘technology
exchange’ between the Europeans and the Arabs and Indians; while the Europeans adopted the ‘Lateen
Sail’ developed in the Middle East, the Arabs and Indians started using ‘nails’ in the construction of their
ocean going boats, a practice adopted from the West. If we carry the notion that the concept of ‘multi
modalism’ is a by‐product of the containerization and unitization and has taken roots in the last few
decades, we need to take a relook at history. To cite a few examples: There is ample evidence to show
that over 1000 years back the goods which landed in the present day Yemen were transshipped to
Babylon and Mesopotamia through the inhospitable desert not by ‘wheels’ but ‘four legged’ and ‘two
legged’ modes of transport. In the Indian Sub Continent, the ‘hub’ port of Baruch was linked over land to
the Ganga Basin in East Coast of India and through the Deccan Plateau to the Kavery Basin in South India
– hundreds of kilometers away. 3 3.0 Events that shaped Shipping in the recent Past 3.1 Major
Historical Land marks Some of the major landmarks in the olden times were the use of steel in ship
building and the introduction of steam engine for propulsion. These developments enabled the industry
to free itself from the shackles of the controls dictated by the vagaries of the weather. During the sailing
days, every voyage, long or short, was dictated by the wind – its direction and force. The use of
motorized power in the propulsion of ships resulted in overcoming the oddities of nature to a great
extent and enabled planning and execution of voyages independent of the weather. 3.2 Factors that
introduced changes recently Shipping as an industry, has under gone significant changes in the last 50
years. More emphasis is given in this paper in analyzing the changes in the last few decades because it is
these changes that point to trends that will shape the future. The factors that ushered in major changes
in the shipping industry in the last few years are:

3.2.1 Industrialization

The impact of industrialization in shipping industry is huge. Industrialization brought in the need for
transporting huge quantities of raw materials and finished goods across the oceans. There was – and is –
no other mode of transport that could effectively tackle the challenges of transporting such huge
quantities of goods from one part of the world to another. The need to transport a wide variety of goods
also forced the industry to develop a portfolio of ship types. The universal sailing ships gave way to
specialized vessels such as tankers, bulk carriers, Roro ships, gas carriers, and many more types of ships
designed to carry specialized or specific cargoes.

3.2.2 Globalization

Although shipping has always been a global industry for centuries, the factors attributed to the term
‘globalization’ as used in modern times did bring in a different meaning to the shipping industry. The
manufacturing base shifted from the West to Asia resulting in large amounts of raw material movement
as well as finished and semi‐finished goods moving back to the West. This, not only increased the
volume of goods moved but also triggered the development of ocean transport in the lesser developed
countries in the form of better and more modern port infrastructure, automated cargo handling, land
based transport supporting ocean transport, etc. The last decade and a half also saw the shift of
shipbuilding industry to the East with Japan, Korea and more predominantly China emerging as major
shipbuilding centers. It is a well known fact that the global steel making industry is now centered in Asia
with China alone accounting for nearly 50% of world steel production, a fact that continues to underline
development of 4 ocean shipping considering the fact that steel making and related activities control
shipping markets world ‐wide.

3.2.3 Information Technology and Modern communication

Perhaps the most important single factor which has influenced the shipping industry in the recent times
is Information and communication technology. Like in every other sphere of modern day life 5 choose
to relocate or outsource to any corner of the world their non‐core processes leaving the residue of
critical and core business inside the firm. Outsourcing is slowly becoming more of a competitive
necessity than strategic planning. The efficiency and reliability brought in by faster computing and data
flow enables a modern day organization to have its core business at the centre and a chain of knowledge
sources, often located in geographically distant locations, connected to it. They work with a common
goal through well laid out performance criteria achieved through a price mechanism which makes the
whole process competitive. As in other sectors of the economy, Charterers, Forwarders, Ship‐owners
and Liner operators have developed newer methods of making ‘back‐office’ a tool to gain competitive
edge. The Liner sector is the one which has used ‘outsourcing’ as a business tool, the most among all the
sectors in the shipping industry.
3.2.4 De‐Centralization

The enormous developments in computing power and telecommunications in the recent years has
brought in the new business stream called ‘Outsourcing’ which results in competitive advantage through
lower costs, better service to customers and flexible organizational structure. There may be drawbacks
in adopting ‘outsourcing’ but going by the tremendous growth in this sector; it appears that the
drawbacks are effectively overcome. Shipping industry which has been using outsourcing for decades in
the form of Technical managers, ship‐ managers, crew managers etc has adapted itself to this new
trend. Many processes are being re‐ engineered to more efficient methods by applying modern
technological solutions With the rapid advances in data processing and faster data flow in the last
decade, information exchange across the globe is becoming cheaper day by day. This fact combined with
the high reliability of information exchange is transforming business entities worldwide. Firms can now 5
choose to relocate or outsource to any corner of the world their non‐core processes leaving the residue
of critical and core business inside the firm. Outsourcing is slowly becoming more of a competitive
necessity than strategic planning. The efficiency and reliability brought in by faster computing and data
flow enables a modern day organization to have its core business at the centre and a chain of knowledge
sources, often located in geographically distant locations, connected to it. They work with a common
goal through well laid out performance criteria achieved through a price mechanism which makes the
whole process competitive. As in other sectors of the economy, Charterers, Forwarders, Ship‐owners
and Liner operators have developed newer methods of making ‘back‐office’ a tool to gain competitive
edge. The Liner sector is the one which has used ‘outsourcing’ as a business tool, the most among all the
sectors in the shipping industry

3.2.5 Containerization and multi‐modalism

Containerization ushered in revolutionary changes in the movement of seaborne goods around the
world. Possibility of transporting very small units of cargo from one corner of the world to another
became a reality. The turnaround of the ships in ports improved drastically resulting in more reliable
sailing schedules. These factors eventually led to concept of zero‐inventory management using ocean
transport which was unthinkable during the break‐bulk era just a few years back. Containerization also
enabled door‐to‐door service using multimodal transport. It became possible even to use aircrafts in the
chain of multiple modes of transport for transporting goods with sea transport as the primary mode of
transportation. ‘Land bridges’, ‘freight corridors’ and such terms linking even cross‐border destinations
became buzz words. The cost of ocean transport, particularly for smaller lots of cargo reduced drastically
with the introduction of containerized movement of goods. There were additional benefits such as less
packaging, lesser pilferage and damages etc which made containerized movement of goods popular in a
very short span of time. 3.2.6 The Internet The internet or the World Wide Web (WWW) is undoubtedly
one of the key factors that shaped the modern world – be it for the practice of business or social and
cultural reasons. The internet has transformed the world into a ‘global village’ by linking remote areas of
the world into a single network which operates day and night right round the year. The internet has
become the window to the world with access to an unimaginable amount of information. It also became
the platform to do business bringing offices or business partners sitting in different corners of the world
together, instantaneously. 6 Although the application of internet based technologies into shipping
industry was rather slow, we are now at a stage where the industry uses the virtues of internet. Online
trading platforms may not be as common or as prominent as in many other forms of business, but many
segments of the industry especially the Liner segment uses internet tremendously‐ from booking cargo
to tracking cargo, documentation, freight collection, equipment control, and so on and so forth. Critics
may argue that the adoption of internet based trading and business practices in shipping is far slower
when compared to many other businesses but it is a fact that the internet based techniques and
practices are re‐shaping the shipping industry at a pace that is unknown hitherto. The application of
satellite technology in the form of ‘Global Positioning System’ combined with Internet enables ships to
be tracked on a real time basis at an affordable cost. 4.0 The Change Factors and their Influence All the
factors enlisted above have had their share of influence in modifying the practice of shipping business in
the last few decades. An attempt is made to analyse the impact of these factors in the evolution of
shipping industry. It can be seen that the business practices are evolving at a faster pace than before
by adopting new computing and communication tools. Shipping, as an industry, is practiced globally
across many segments such as bulk carriers, tankers, Liners, short sea ferries, Roll on Roll off trade,
cruise trade, etc. The method of the practice of Liner shipping is not the same as that of short sea ferries
or bulk carrier or tanker chartering. Each segment of the industry has its own peculiarity with regional
and local variations as well

The Internet

The internet or the World Wide Web (WWW) is undoubtedly one of the key factors that shaped the
modern world – be it for the practice of business or social and cultural reasons. The internet has
transformed the world into a ‘global village’ by linking remote areas of the world into a single network
which operates day and night right round the year. The internet has become the window to the world
with access to an unimaginable amount of information. It also became the platform to do business
bringing offices or business partners sitting in different corners of the world together, instantaneously.
6 Although the application of internet based technologies into shipping industry was rather slow, we are
now at a stage where the industry uses the virtues of internet. Online trading platforms may not be as
common or as prominent as in many other forms of business, but many segments of the industry
especially the Liner segment uses internet tremendously‐ from booking cargo to tracking cargo,
documentation, freight collection, equipment control, and so on and so forth. Critics may argue that
the adoption of internet based trading and business practices in shipping is far slower when compared
to many other businesses but it is a fact that the internet based techniques and practices are re‐shaping
the shipping industry at a pace that is unknown hitherto. The application of satellite technology in the
form of ‘Global Positioning System’ combined with Internet enables ships to be tracked on a real time
basis at an affordable cost.

The Change Factors and their Influence

All the factors enlisted above have had their share of influence in modifying the practice of shipping
business in the last few decades. An attempt is made to analyse the impact of these factors in the
evolution of shipping industry. It can be seen that the business practices are evolving at a faster pace
than before by adopting new computing and communication tools. Shipping, as an industry, is practiced
globally across many segments such as bulk carriers, tankers, Liners, short sea ferries, Roll on Roll off
trade, cruise trade, etc. The method of the practice of Liner shipping is not the same as that of short sea
ferries or bulk carrier or tanker chartering. Each segment of the industry has its own peculiarity with
regional and local variations as well.