18 September 2014

[180914.EN.SEA] Sea Change In Revenue Management Needed To Improve Profitability: Expert

CONTAINER shipping lines can improve profitability with more sophisticated revenue management systems, says Seabury Group consultancy's executive director Gert-Jan Jansen.

Speaking at Containerisation International's Global Liner Shipping Asia Conference, Mr Jansen said management had to understand the implications of every container move and not just which box makes the most money.

When vessel space is limited, this will allow companies to select to carry containers from origins that have the most positive impact on overall company profitability, reports Lloyd's List.

"How do you account for the repositioning costs of empty containers? How do you look at transshipment costs? How granular and detailed are you able to do these calculations and assessments?" he said.

"You have to understand all the network implications of a certain choice and I think that is something that can be done with sophistication," said Mr Jansen.

But Mr Jansen said the process requires a "mental and cultural change", adding that companies might consider bonuses based on sales which had the most positive impact on overall company profitability rather than selling space to the highest paying box.

"When we are thinking of revenue management, I see a lot of over-investment in IT and under investment in training, process improvements and getting people to understand how it is," he said.

Another speaker told delegates that shipping lines needed to have better understanding of customers' needs and not focus solely on price.

United Arab Shipping Co (UASC) vice president Eric Williams said container shipping market was too focused on costs, which resulted in lower reliability.

He said carriers that focused on customer needs would be in a better position to charge a premium even for low-value commodities, he said.

"Do we, as an industry, have a willingness to change? Or will it be the same old approach of trying to win the same old business on the lowest price? Or is there a new way to work with customers and find solutions for their business, and at the same time get paid a fair amount for that?" he said.

While much of this service differentiation would come through closer customer relationships, customers also required access to vessel space, particularly in the peak season, good levels of service and improved reliability, said Mr Williams.

Agreeing, Maersk Line's Asia Pacific chief Lars Mikael Jensen, said: "We think the next battle between carriers will be around our ability to actually develop commercial excellence and online possibilities that will make life easier for everybody.

"The lines have now pretty much said that they have all gone into groupings where they are going to work with each other to provide the basic products," he said.

Mr Jensen said Maersk Line differentiated itself from other carriers in different ways, individualising services, educating staff and expanding the customer relationship across different teams, improving online solutions and tailoring its KPIs [key performance indicators] to individual customer needs.

Yet while a customer focus was important, the "basic stuff" such as a continued drive to create cost-efficient and reliable services was not to be forgotten, Mr Jensen said.

During question, period a large European shipper said he would settle for getting the product he bought, rather than some else where all too frequently occurred with many carriers.

Mr Williams and Mr Jensen agreed that improving consistency of service and process throughout would ensure this did not happen.

Source : HKSG, 18.09.14.

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