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.