The transportation industry, is traditionally expected by shippers to readily adapt to market capacity requirements. The maritime industry especially, has traditionally suffered from dynamic changes in demand, where those having the most resilient systems in place survive over time. Differentiation strategies have been applied by various operators via expanding their business portfolios in niche markets achieving higher margins for a period of time. These strategies are aligned with business models applying cost based and asset play strategies, with the latter taking advantage of the maritime cycles. Nevertheless, the modern dynamic business environment, where shipper supply chains are rather extended and rely on reliable transportation, demand for a change in the business philosophy and models the maritime industry applies. In this new model, relationships with customers and suppliers along with human capital development and available technology are key to its success.
Given the fact that limited academic work exists on the business models shipping management companies follow, the present effort aims at furthering existing research on such models to achieve the next competitive advantage. This effort, is based on three main pillars namely; strategic direction of the company, human resource development and digital business capabilities. This work envisions to conceptualize and develop an enriched Business Model for the industry based on future needs and in parallel identify employee skills and other resources needed for its success. This new knowledge is expected to assist the Greek Shipping Industry to remain competitive in the global business environment and the Greek maritime cluster to increase its attractiveness through the new digital mind-set. Finally, the identification and development of digital tools and skills for the enforcement of the local work force will create new job opportunities and facilitate the provision of services of the highest calibre.
1. Research aims and objectives
The main aim of DELTA-S is to provide the framework, the methodologies and the tools for furthering and enriching the shipping business model. In this effort, a key enabler to the development of such business model will be Digital Business. Shipping is a globalized business. The interest of research is competition in the global shipping markets. In this context, it focuses on Greek-owned shipping, a par excellence internationalised industry, which has been at the top of the global shipping league for many decades. Thus, research efforts are towards analysing and proposing methodologies and tools, which will respond to the needs of Greek-owned shipping companies for the achievement of the next competitive advantage.
The overall goal will be accomplished through the accomplishment of specific goals:
- Analysis of the effects of technological innovations, methodologies and tools, in the organization of shipping companies both ashore and on-board ships.
- Analysis of the aforementioned in the supply chain context and in the role of shipping companies within it.
- Analysis of the role human resources, on-board and ashore, and the skills and knowledge needed for supporting the companies’ strategic direction in the new competitive landscape.
- Enrich the knowledge on shipping companies’ operations and the way these need to support business strategies.
The aforementioned will be achieved via a number of objectives with actionable results, which are expected to have a spill over effect. Among the results are:
- The project will be implemented in two pillars, each one leading to a PhD thesis.
- The first pillar will focus on the conceptualization and development of resilient Business Models based on the future needs of the industry.
- The second pillar will examine the management of human resources in need to serve the new enriched business models.
- Ppublications presented in international conferences and published in high quality academic journals will be used for the dissemination of this work.
- Workshops for the dissemination of the results at academic and industry level.
- Development of stand-alone methodologies and tools.
DELTA-S aspires to create knowledge useful for shipping management companies, which will increase their internal integration and external adaptation, assisting them to remain competitive in the dynamic digital global business environment. The Greek maritime cluster is expected to increase its attractiveness through the new digital mind-set resulting in new business opportunities and creation of highly skilled jobs.
2. State of the Art
2.1 Current state and existing challenges
The transportation industry, let alone the maritime industry, is traditionally expected by shippers to readily adapt to market capacity requirements (Lagoudis, Naim and Potter, 2010). The maritime industry has traditionally suffered from the dynamic changes in demand requirements experiencing the so called “maritime cycles” (Stopford, 2009). These changes in demand create a turbulent business environment, where those who have the most resilient systems in place survive over time (Harlaftis and Theotokas, 2010). This model requires the shipowner/operator to make decisions related to three main pillars, namely; asset financing, asset operation and shipper selection. These pillars are a function of a cost based strategy applied by operators, which have been dominant in the maritime world. Integral part of the asset operation pillar under this model is asset play (Theotokas and Harlaftis, 2004). By implementing anticyclical strategies (Thanopoulou, 1996) in buying and selling ships, shipping companies are able to increase their return on investment.
Over time differentiation strategies have been applied by various operators via expanding their business portfolios in niche markets such as container, LNG, LPG etc. achieving higher margins for a period of time (Thanopoulou, Theotokas and Constantelou, 2010; Tenold and Theotokas, 2013). Thus, existing business models rely heavily on the success of applying cost based and asset play strategies, with the latter taking advantage of the maritime cycles, both contributing to the companies’ profitability (Thanopoulou, 1996; Thanopoulou and Theotokas, 1997; Theotokas, 1998; Duru, 2016; Kavussanos, and Alizadeh, 2002; Lorange, 2009).
Various tools, models and techniques appear in different works related to the analysis of the different challenges the industry faces as is the case of freight markets’ (Kavussanos, 1996; Kavussanos and Visvikis, 2006; Alizadeh and Nomikos, 2011) and human capital development and knowledge transfer (Progoulaki and Theotokas, 2010; Theotokas, 2018; Fei, 2011). However, very limited research on business models has been published (Theotokas, 1997; Lagoudis, Lalwani, Naim, 2004; Lyridis et al., 2005).
There is an ocean of challenges stemming from the modern global business environment for the maritime industry among the many being freight rate variability, supplier and customer relationships, energy prices variability, bunkering, spare parts and more. An indicative grouping of these challenges where research has focused until today is listed below:
- Customer Needs: Globalized trade has led to extended supply chains requiring resilient models of operation and strategies that can adapt to different regions. These new supply chain strategy models demand for more integrated transportation, offering flexibility to demand variability (Haralambides and Acciaro, 2010; Notteboom, 2012). Maritime operators need to adjust and follow these new business model trends by covering customer needs in order to become as integrated as possible. Such examples are present in certain sectors as is the Container and Energy ones but there is plenty of room for improvement (Lagoudis, Lalwani and Naim, 2002; Lagoudis, Naim and Potter, 2010). Understanding customers’ special requirements and responding to them by creating customised services require dynamic capabilities for shipping companies, which influence their competitive advantage (Kuo et al, 2017).
- Supplier Relationships: Depending on industry sector and company size, flexible contracts can be negotiated taking into account market variability facilitating the operations of both parties (Platts, Probert, and Cáñez, 2002). In the case of spare parts depending on fleet size and spare part types (SKUs) contracts can be negotiated with freight forwarders or manufactures adjusting the supplied quantities based on the company needs. In order for such concepts to succeed though closer relationships via business systems is required (Carter and Ellram, 1994; Min, 1994). The specific area provides significant opportunities for breakthrough research in the maritime field.
- Human Capital: The human element is the most critical component to the success of any business model. Today, employee skill development is imperative than ever mainly due to the impetus developments stemming from technology (Theotokas et al., 2008; Progoulaki and Theotokas, 2010; Chatzimouratidis, Theotokas and Lagoudis, 2012). An additional reason for considering human resources among the most crucial factors for the competitiveness of a company is the fact that shipping management companies need to recruit and retain two categories of employees, (i) those employed at the offices ashore and (ii) those employed on-board the ships. While for the former group of employees the market is geographical linked to the origin of the shipping management companies, for the latter group the market is global. Recruiting talented employees from the global market and not simply relying on the cost criterion for the selection of employees, is a factor that defines the prospects of the company and its ability to gain sustainable competitive advantage (Progoulaki and Theotokas, 2010; Theotokas, 2018).
- Technology: The dynamic changes in technology, constantly redefine the man-machine relationship (van Laar et al., 2017). It is contended that the business model running through shipping cycles is not a suitable platform for the introduction of the new technology (Stopford, 2017). When referring to new technologies most relate mainly to unmanned ships or automated systems when it comes to vessel operations (Kretschmann, Burmeister and Jahn, 2017). Another dimension that should also be considered is Digital Business, which is directly linked with any business related decision-making process. The tendency towards digitalization in maritime transport, will increase the importance of the technology, as a contingency factor, affecting the organizational structures of firms. Having the right systems in place, collecting the right data and of the right quality, is imperative in the business environment ahead (Kane et al, 2015). Digitalisation is a part of the transformation process, which is expected to take place in liner shipping, affecting existing organizational models of companies (Porter, 2017). Nevertheless, digitalisation should not be approached as an ΙΤ project, but as a change, which will require companies a change in mind-set and corporate culture, (Jensen, 2017; Lin, 2017). This change implies alternative organisational structures, which would lead to different business models and strategic direction for the firms.
2.2. Vision of DELTA-S
The new business environment increases the need for the maritime industry to shift from the traditional model of selling capacity to a model, which will offer higher value to the users. Until today capacity is dealt as a commodity and like any commodity when demand is high revenues increase and vice-versa. The fact that demand dynamics move at a much faster pace compared to those of supply, makes the industry vulnerable to revenue fluctuations from an operating perspective (Stopford, 1997). The changes in the external environment bring into fore factors not considered as important under the existing business paradigms. Enriching these business models, especially for those companies active in the traditional bulk shipping markets, via introducing an Enriched Business Paradigm, which will take into account several of the factors that are currently neglected, is the challenge for the DELTA-S. These factors are grouped under the below three pillars (Figure 1).
Figure 1: Next Competitive Advantage Pillars
2.3. Scientific breakthrough and long-term vision of DELTA-S
The scientific breakthrough of DELTA-S is the innovative combination of the three pillars presented in Figure 1, in the context of shipping industry. More specifically:
- Strategic Direction: Strategic direction does not imply the way that the company should head only, but it mainly answers a fundamental question, which relates to where the company should be in the years to come. This question is answered in relation to its existing and future customer base needs and is aligned with its internal and supplier capabilities (Hax and Wilde, 2003). As supply chains become more extended shippers demand from the shipping industry for integrated services via the offering of a wider spectrum of services (Haralambides and Acciaro, 2010). For instance, liner shipping companies expand their services to the logistics sector, providing integrated services to respond to the requirements of their customers. Characteristic is the example of Amazon China, when in early 2016, received approval from the U.S. Federal Maritime Commission to provide ocean freight services (Theotokas, 2018). This was perceived as an indication of Amazon’s plans to expand its logistics business for its own retail business and to provide third-party logistics services to other industries (Saito, 2016). This action by Amazon in combination with other strategic decisions (Stevens, 2017) are considered as the first step towards the leasing of vessels, which could be seen as a first move in the transformation of the traditional shipping model (McCarthy, 2017).
- Human Resource Development: Human capital is key to the success of any business model since it is involved during both concept and implementation phases. Selecting or developing a skilful set of people is key determinant to any new model implementation. The majority of concepts fail at the implementation phase mainly due to the lack of skills, leadership direction and even availability of people. Diversity and technological challenges make the role of the human resources crucial (Progoulaki and Theotokas, 2010). On one hand diversity in the globalized shipping business asks for the development of soft skills (i.e leadership, diversity management, cross-cultural communication), while on the other hand the effort to respond to technological challenges asks for the development of hard skills and talent by employees. Thus, the enrichment of the business model presupposes investing in the development of human resources.
- Digital Business Capabilities: Digital Business can be a key enabler to maritime companies today, since data is growing at fast pace, volume and variety (Nguyen, et al., 2017; Larson and Chang, 2016). Swift decisions on spare part management, bunkering, maintenance and more, demand for real time systems, which will enable decision makers to make data driven decisions. For this reason, such systems require well-structured data lakes, quality data and visual simplicity (Kwon, Lee and Shin, 2014). In addition, man-machine harmonization is key to the success of such systems with training and skill development being critical (Jin et al., 2015). Market reports and announcements show that the major liner companies are moving ahead in collaborations with IT companies in order to respond to the challenges of the new technological environment. For example, Maersk Line, collaborates with IBM in order to use blockchain technology to digitalize the paperwork related to the global supply chain process, aiming at improving efficiency and cost optimization (Szakonyi, 2017). CMA CGM, has set up a venture capital fund to spend two million Euros per year on investing in digital start-ups related to container shipping business (Porter, 2017). Such initiatives will require organizational transformations to respond to the challenges of digitalization like those reported by Wilhelmsen, who decided to relocate its headquarters in SE Asia (Splash24/7, January 11, 2018).
The above three pillars are essential determinants to the success of an Enriched Business Paradigm. A de-commoditized service requires a strategic direction towards a closer collaboration between customers and suppliers. In order for such direction to be achieved the selection of skilful people is important during the conceptual and implementation phase complemented by cutting edge technology. Digital business can be a key enabler to such a process facilitating the processes of data acquisition, organization, validity, analysis and final decision. Data is key to the competitive advantage of any company. Maritime companies can leverage new technologies available today to master the challenges ahead.
Taking the above into account, the present work focuses on shipping management companies aiming at:
- Developing an Enriched Business Model for shipping management companies, which will lead to the next competitive advantage.
- Identifying the future role of Human Capital, along with the systems in need for its management, based on the skills and capabilities required by companies active in bulk shipping.
For the accomplishment of these aims Digital Business and Transformation methodologies and models will be used as key enablers. The need for such an approach stems from the increasing use of such technologies across industries globally, where the maritime industry is actively following the developments (Splash24/7, 2017a; 2017b)
3. Research Impact
1.1. For Academia
The present research aims at furthering existing state of the work related to the competitive advantage of the maritime industry. So far models and frameworks encapsulated in various studies take a single-dimension approach focusing on traditional management tools and techniques. With the use of modern available technology tools, this work aims at shedding light to an alternative and differentiated way of thinking with actionable insights when it comes to human capital development and business models leading to effective decision making. Via a number of publications to conferences and academic journals the results will be disseminated to academia.
1.2. For Industry
The outcome of this work aims at providing valuable insights on how the industry and more specifically shipping management companies should operate under a more than ever dynamic environment where data acquisition, quality and analysis are key to the next competitive advantage. With the development of methodologies in relation to problem solving and software tools for swift decision making at strategic and business level industry players of the maritime cluster will be facilitated in improving productivity and competitiveness levels. Greek Shipping Management Companies will be at the focus of this research and is expected to be the main beneficiaries of the findings.
1.3. For Society
Improving the Greek maritime cluster competitiveness, via the development of skilful work force and the existence or creation of new competitive organizations, acts as an enabler to the community and economy. The new knowledge created via this work will assist in improving Greek-owned shipping companies’ abilities to adjust and improve their competitiveness. This will contribute to increasing further the attractiveness of the Greek maritime cluster globally creating new job and business opportunities for people and organizations.
To achieve the above aims two PhD projects will be undertaken, both adopting a triangulation approach with primary, secondary and action research sources for data collection. More specifically:
- Primary data collection will be questionnaire and interview based from a pool of experienced stakeholders with global exposure.
- Secondary data will be based on data bases such as Clackson’s, Lloyds and other.
- Action Research data will be collected in collaboration with companies from the maritime industry, which will express interest in participating in this effort. The Department of Shipping, Trade and Transport (STT) of the University of the Aegean (UA) and the research team have an extensive network of collaborating companies of the Greek maritime sector.
In reference to the data analysis process both qualitative and quantitate tools will be used. In the former case among the tools used will be scenario planning, Delphi, Multi-criteria techniques such as AHP and MAUT, CAQDAS and other. In the latter case among the tools used will be statistics, forecasting tools such as regression, simulation and other. The overall methodology is presented in Figure 2.
Figure 2: Methodology
WP1: Literature review
WP2: Development of Research Model
WP3: Data Collection and Action Research
WP4: Project Write-up
WP5: Dissemination of results
WP6: Project Management
5. Research Team
The leading research team is composed by the following members of the Research on Shipping and Port Management Laboratory (RESHIP) of the Department of Shipping Trade and Transport (STT):
Professor Ioannis Theotokas (Principal Investigator)
Dr. Ioannis Theotokas is Professor at the STT specializing in Management of Shipping Companies. From April 2015 to February 2017 he had served as Secretary General of the Ministry of Maritime Affairs and Insular Policy of Greece. He has been the director of the RESHIP from 2009 to 2015. His research interests lie in the fields of Management, Human Resource Management and Strategic Management applied to shipping business. He has participated as scientific coordinator or as principal researcher in several research projects related to DELTA-S. He is the author of seven books (with five as co-author) published in Greece and the UK and of 42 papers published in international journals and in edited books. He has presented over 50 papers at international scientific conferences.
Assistant Professor Ioannis N. Lagoudis (Member)
Dr. Ioannis N. Lagoudis is faculty at the STT, and member of RESHIP specializing in transportation logistics and supply chain management. He is Fulbright research scholar at the MIT – Center for Transportation and Logistics where he is affiliated today. Prior joining academia he has worked as a maritime consultant. He has advised multinational companies and Government agencies in Asia, USA and Europe on supply chain related issues. Among the companies are CSX, Starbucks, Petronas and Johor Port Authority. His research interests belong in the areas of strategic management, maritime logistics, supply chain management and decision-making. He has published several papers in conferences and academic journals.
Captain George Georgoulis (Member)
¶Georgoulis Georgios is member of specialized educational personnel of STT and member of RESHIP. He is a graduate of the Merchant Marine Academy of Oinousses with long career at sea as ship officer. ¶¶In 2000, he acquired the Captain Licence and he served as a Captain in Very Large Crude Carriers (VLCC) until 2003 when he started his engagement with the STT as Technical and Teaching Associate supporting the Nautical studies of both undergraduate and postgraduate programs. He holds a MSc from the University of the Aegean emphasizing on new technologies and currently is a PhD candidate. Between February 2011 and July 2012, he served in the ministry of maritime affairs as an advisor and supervisor of the office to the Secretary General. ¶He is an active Captain and he is specialised on seafarer education issues, on International Safety Management Code, maritime Risk Assessment and environmental protection issues.
Eirini Papadopoulou, Economist
Eirini Papadoupoulou is Economist/Knowledge Transfer Specialist at the Liaison Office of the UA, for more than 14 years. She is a member of the University’s “Committee for Innovation” targeting to the adoption of innovation strategies at regional level. In this context, she supports and consults on Research and Development, Entrepreneurship and Technology Transfer, Dissemination of Research, Knowledge transfer from science to industry and regional government and social authorities, on the mobility of researchers and smart specialization issues in national and regional level. She also provides entrepreneurship consulting services in businesses (through the liaison office), in networking and cluster development. She serves as a consultant to local communities and government organizations as project, financial and communication manager on issues related to capacity building, business plans development, place branding, rural sustainable development, society and culture.
Two doctoral students will work on this project. Each student will be responsible to successfully complete each of the two PhD thesis under this work. Students should have both qualitative and quantitative skills preferably with two years or relative working experience.