Strategies of container companies against freight volatility

Abstract

It is without a doubt that the container shipping market is constantly exposed to uncertainties and volatilities. This encourages container companies to implement effective strategies to mitigate the negative effects that come with various uncertainties and volatilities, and at the same time, leverage on such situations to stay competitive in the industry. Depending on the circumstances that the companies encounter, certain strategies were found to be more efficacious and constructive in maintaining or improving their organizational performance compared to others. This study aims to explore the container shipping strategies commonly implemented by container companies and investigate the association of these strategies with uncertainties and volatilities.

A literature review of previous studies was conducted to source for prevalent uncertainties and strategies in the container industry. These secondary findings were then substantiated through a mixed method research design consisting of online surveys and interviews involving stakeholders with relevant container shipping experience. An analytical model, known as the original House of Quality (HOQ) approach, was used to assess the correlation and analyze the effectiveness of the identified strategies in countering various types of uncertainties.

The results of the HOQ analysis found ‘cost reduction’, ‘shipping alliance/merger and acquisitions’ and ‘capacity consolidation’ to be the most effective strategy in an economic downturn. Meanwhile, container shipping companies have shifted their focus on adopting ‘vertical integration’ and ‘digital transformation’ to improve the supply chain resilience and ensure continuity in their business in the volatile shipping industry today.