The Future of Uberization in the Shipping Industry: Potential Implications for Economic and Environmental Efficiencies
Shipping industry is probably the oldest but an ever booming industry in the history of mankind. Owing to globalization, the industry has benefited enormously from the surge in global trade since the early 1990s. This is mainly attributed to the integration of many highly populated and economically growing less developed countries to the global commodity market.
In 2017, the United Nations projected the current world population of 7.6 billion to reach 8.6 billion in 2030 and 9.8 billion in 2050. Much of the increase is expected to come from regions of Africa and Asia with rising income and very young population. These regions are likely to be the future hub of global commodity production and consumption. Meanwhile, spatial diversification of (factors of) production will likely increase ship transport volumes. In essence, the prospect for the shipping market seems to be flourishing. But it will not be without challenges.
The rise of a multipolar world order, in which the United States and China take the main leadership role, may imply a stronger tendency toward national interest and the return of trade protectionism. This may affect the industry inversely. Similarly, migration, technological advancements and a shift in consumption from physical to digital commodities may also inversely affect the industry. Nevertheless, on balance the industry is likely to remain robust and profitable, particularly if emphasis is given to improve efficiency.
II. The Case for uberization of sea transport
The current state of shipping industry is characterized by less efficient ecosystem. Multiple actors and complex contractual arrangements often hides inefficiencies. These inefficiencies incur excess freight costs and emissions per cargo unit and exhibits sub-optimal competitive advantage of shipping. For instance, Gustaffson et al.(2016) estimated inefficiencies in the Baltic sea shipping and revealed that ships spend 40 % of their time in port because of the ”first come – first served” slot allocation system and sail 40 % of their time at sea in ballast because of lack of suitable cargo. The result is excessive fuel consumption,CO2 emissions, and waste of time, where only 36 % of the time is used in creating value to customers.
Some trending measures have been observed in reaction to these inefficiencies. These include: replacing small ships and companies by large ships and companies in order to gain from economies of scale; and changing the logistic chains by forming new strategic alliances in order to develop market power. Nevertheless, much more can be done in innovative ways to improve both economic and environmental efficiencies. Towards this end, the concept of uberizing the sea is emerging as a prospective candidate of the future of the shipping industry. Uberization of the sea is emerging as a solution to renew logistic chains by imitating the success story of uber in taxi transportation. Uber revolutionized the traditional taxi transportation concept by creating a new, more transparent, and efficient market place, which provides better service for a significantly lower price. Similarly, uber in the sea has the potential to improve cost and emission efficiencies. To facilitate its realization, shipping digitalization is a prerequisite.
III. Digitalization – setting the stage for uberization
Shipping digitalization is expected to redefine the industry just as it is transforming land transportation. It promises a new level of optimization in engine performance and fleet management. Advanced analytics using data collected from flowmeters, control and alarm systems, sensors, and time stamps, is opening up a whole new opportunity to optimize fuel efficiency, time efficiency, and network design. Digitalization is setting the stage for the uberization together with ”industry consolidation and the pooling of fleets into ever-expanding global alliances”. Moving forward, data transparency may be an important challenge against its full realization.