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‘If FedEx couldn’t satisfy the demands of Amazon, how is it today’s shipowners think they can do any better’

The head of Transas, Frank Coles, provides a curtain raiser today to next week’s Maritime CEO Forum in Singapore where he will be speaking in the future of shipping session.

Let’s go back to basics. Shipping is the transportation of goods, cargo and parcels from producer to consumer. Maritime forms only one link of the shipping chain – albeit an essential link for the long distance and intercontinental movement of large volumes of goods or cargo.

What happens next in the maritime sector will be determined by more than an aspirational digital vision. It will also be profoundly affected by changes in the political and economic climate. Together, these will create various, difficult to predict feedback loops in the shipping and maritime ecosystem.

The maritime industry is not unique; it is just late, old and behind the times. That makes it especially vulnerable to disruption from the likes of young digital start-ups. Even if it evades that onslaught, it will still be exposed to pressures and demands for digital transformation from elsewhere in the shipping supply chain.

This transformation is already underway and creeping ever closer to maritime. When it arrives, the impact will be substantial and likely turn traditional business models and ways of operating upside down. It is inevitable that eventually Amazon will lease ships in the same way it does planes. If FedEx couldn’t satisfy the demands of Amazon, how is it today’s shipowners think they can do any better. The idea of owning and operating assets will be severely challenged.

The global economy is changing and with it the flow of goods around the world. The signs are that growth in regional trade is picking up at the expense of the international commerce patterns that have dominated for the last thirty or so years. Naturally this will drive changes in preferred modes of transport, as logistic operators adjust their use of rail, road, air and ships to optimize the route goods take from producer to consumer. It is not hard to picture maritime transport losing out. This will add to pre-existing pressures for improved efficiency and for responding to a more digital world.

At the simplest level, shipping is the delivery of cargo to the right place at the right time as cost effectively as possible. It does not make sense to have numerous intermediaries – brokers, agents, freight forwarders – bringing unnecessary complexity to this process. Other sectors have made or are making the adjustment and maritime will have to do the same.

Innovation from within the maritime industry won’t be enough unless it dares to tackle the things that disruptors would fix or eradicate. Even then, it might be insufficient to address the fundamentals of the current model.

What we see today are maritime stakeholders scrambling for a place in the world of tomorrow. A world driven by commoditisation, where scale matters and where many stakeholders will find themselves redundant. There are too many players chasing too little value in maritime operations. This endangers ship owners, vessel operators, equipment vendors, insurers, yards, ports to varying levels.

It is the business model, not technological change, which will decide the future shape of vessels and operations. Unmanned ships won’t happen unless the economics make sense. If increased automation and further reductions in crew makes better sense, then that will happen and probably more quickly. Or maybe having ships designed for specific routes managed from ashore in large operations centers will work best.

Ultimately what we have to ask is what shippers want from the maritime sector and how maritime companies can step up, find the efficiencies and compete with other modes. And if they can’t do it, then who will?


  1. Christmas period 2015, Fed Ex only delivered 95% of packages on time, UPS, only 91%, this prompted the e-commerce companies, Amazon amongst them to seek out their own fleet of leased aircraft. Amazon Prime now have over 60 aircraft, and looking to lease another 100.

    1. The carrier have added extra capacity for this a once a year shipping surge. They do the best they can. Check out all the complaints on Amazons in house delivery. This mote is much deeper than Amazon can handle. They want everything for nothing, They should be thankful the carriers even delver their crap.

    2. What do you mean by only 95% that is a very high percentage. I would like to see them do better good luck.

  2. Amazon is following Ubers model. No oversight of drivers. maintenance, or insurance. Good luck with a few lawsuits, then your opinion of DOT compliance will change.

  3. By allowing the speaker a benefit of doubt.
    Is digital technology the only solution or a part of solution to cover the remaining 5% shortfalls.
    If e-commerce players decide to enter sea transportation, how will they be any better than the existing operators, surely a integrated ERP solution will not make any more difference, current players are inundated with different OS, what is further needed is uniformity within B2B stakeholders to enhance efficiency & create value for the end users. Another IT platform is not the best way forward.

  4. I think the point of the article is being missed. This is not about the other 5%. It is about the removal of the middleman, about the digitalization of the shipping chain.

    Amazon lease the aircraft, they don’t own or even run them. Someone does it for them. They are removing the middleman. If you have followed any of the other things I have said, you’ll see reference to large ship management companies handling this more effective leased model. Amazon just want to control the assets.

    Also lets not forget, banana companies, oil companies, ore companies have all owned and operated their own assets and ports/docks in maritime for years. Technology is simply making shipping and trading the cargo easier. Amazon can/will easily do the same.

    Today every container transaction requires 28 different hands to touch it. If you don’t think that can be improved then I won’t waste my time trying to explain it. Maersk see the issue. Also over 400 start ups last year received over $4B in investor money, in shipping alone…

    World trade is regionalizing, other modes will compete, maritime will have to be smarter or shippers will demand they are or change the model. In the meantime while everyone sits and thinks about the current model and the current shipowner, the disruptors are going to take your lunch.

  5. After reading your article and your comment responses, I am still not understanding how FedEx did not satisfy the demands of Amazon? That statement is very misleading and inaccurate. Amazon is trying to cut shipping costs and investing into creating their own logistics methods of transportation and delivery. With that said, they cut down on using FedEx and UPS by a chunk starting in 2013-2014 to reduce their highest bill – Shipping cost! So it’s not that FedEx or any other shipping giants cut could not satisfy their demands. Amazon chose to pull away from the services to other shipping alternatives.

  6. QUOTE from the Business Intelligence article … (that also refers to the costs savings you mention)
    Customer service: The main reason e-commerce retailers are moving further into shipping is
    because carriers aren’t doing a great job of meeting demand. With consumers doing a greater
    share of their shopping online, there are more packages to be shipped. While in general, this
    has been a boon to shipping companies, they’ve struggled to deliver packages on time.
    ? FedEx had to deliver 15% more packages during the 2015 holidays than the 2014
    season, and UPS had to deliver 10% more.
    ? Peak shipping volume was so extensive during the 2015 holiday season that in the
    week leading up to Christmas Day 2015, UPS could only deliver 91% of packages on
    time, according to ShipMatrix. FedEx did only slightly better, delivering 95% of
    packages on time.
    The problem for retailers is that delivery delays end up angering consumers, and it is the
    retailers — not the shippers — that get blamed for these issues.
    BI Intelligence Copyright © 2016, Business Insider, Inc. All rights reserved. 7
    Ultimately, poor customer service — including slow delivery — can impact a retailer’s
    bottom line. 66% of US consumers are willing to spend more money with a company that
    provides them with excellent customer service, according to Microsoft, while 60% of
    consumers say they’ve decided not to complete an intended purchase due to a poor customer
    service experience.
    This is one of the big reasons why major retailers are building out their shipping
    capabilities. Retailers want to reduce shipping delays and expedite shipping times to keep
    customers happy.

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