Erxin Yao, president of OOCL (USA), urged the shipping industry to pay more attention to pricing services profitably and fostering innovation rather than trying to hold onto market share.
“Faced with the challenges of today, we forgot why we suffered yesterday and reverted back to the old ways: rate, rate, rate instead of service, service, service,” he said in a speech at the Foreign Commerce Club of New York’s annual Steamship Night dinner this week. “But think we must and change, we must. It is the only way forward.”
Yao said the shipping industry’s “pricing structure and asset investment model are similar to utility companies which are capital intensive and have long build-up cycles."
He noted estimates that the container shipping industry needs $50-60 billion dollars over the next four years to fund vessels on order.
“But compared with utility companies, our demand is totally inelastic. We do not have the pricing power nor enjoy the same regulatory protection as utility companies. The market would not ship more because our rates are low," he said.
The shipping industry needs to stop "chasing the shadows of the last full box," and he suggested it might look to computer company Apple for inspiration.
“Only when we start to focus on our customer’s supply chain instead of merely filling our ships, will we be able to manage our business like the late Steve Jobs and create value added products such as the iPhones and iPads,” he said.
“Through decades of competition, our industry today offers more frequent services, a higher number of port calls and better supply chain visibility to our customers and partners than ever before," Yao explained. "This has been made possible by huge investment in more sophisticated hardware including vessels, onshore facilities as well as IT systems. It is time we share our resources and networks to create better and superior coverage for our customers, which would create a win-win for all."