The development of the maritime industry and the related cargo operations in particular, is an extremely important and interesting part of the historical development of business relationships and industrialization. One of the turning points in the history is the development of the shipping container, which, according to many professionals and academics, have turned around the industry and had tremendous effect on the business as a whole along with the automatization of the cargo operations.
There are numerous factors, which influence the development of the containerized cargo and bulk transportation. Both modes of transportation are subject to economic, political, social, technological, environmental and legal impacts. While in many situations this impact on both modes is similar, it is still possible to argue that break-bulk is slowly giving space to containerized operations, as the British ports continue adapting the port-centric logistics, based on automatization of the terminal and utilization of the ever-larger mainland vessels and feeders.
The findings of the research conducted with regards to the container and bulk trade on the UK market outlines that the industry have evolved dramatically with the growing scope and scale of companies´ operations and outreach capacity of the ports. Technology made significant contribution to the development of container trade and associated port and terminal infrastructure modernization.
Key words: containerized trade, container, break-bulk, maritime industry.
Transportation is a paramount construct of the human history development and the evolution of the business and social environments. This document focuses on the exploration of the UK cargo operations market. Terminal and port operations specifically, are a subject to constant innovation, which affects trade relations and the distribution of goods. The history of the terminal development in the country followed the general trend in the evolution of the cargo operations in the country. The port of Felixstowe, as an example, which was 75% focused on Ro-Ro and break-bulk cargo operations at the time, today is the major hub for Western Europe intra-Europe operations and inbound Asia-to-South America cargo handling (Drewry 1991).
PESTEL analysis of the cargo operations in the country is, at the same time, the reflection of the evolution and shift from manual operations to automated terminal cargo handling. While the history of break-bulk cargo shipping is significantly longer, containerized cargo operations are not an ancient history. The outreach of the shipping lines has grown dramatically with the introduction of technology and its advancements, such as Panamax container ships, the shift from coal and steam to fuel, building of the first gantry crane and other critical developments.
The purpose of this report is to look at the external influences on the container and break-bulk cargo handling operations and analyze the development of the industry over the past decades in view of major political, economic, social, technological, environmental and legal factors (Levinson 2006). The report will specifically look at each of the PESTEL components for the UK market in view of contemporary cargo operations. Furthermore, the author will draw a line under the major findings and present the conclusions of this research. It is important to outline that the research method used for this work is secondary data collection, where numerous studies and research were analyzed and summarized.
Cargo operations in the contemporary business environment are very diverse. Container It worth mentioning, however, that containerized cargo shipment, which recently celebrated its 50th anniversary, have grown dramatically over the past decades. Levinson (2006) argues that “even as it helped to destroy the old economy, the container helped to build a new one.” (Levinson, 2006: 16). While containers offered significant cost-saving and efficiency to the transportation of goods, it also had a tremendous impact on the development of the maritime infrastructure. That said, port and terminals had to adjust to the evolution of the shipping industry as the proportion of the manual cargo handling for Ro-Ro and break-bulk as opposed to container trade in the country changed from 75%/25% to 17%/83% over the past four decades (Gov.uk, 2013). The development of container came along with significant financial investments in port and terminal sector, re-building international maritime maps and changing the balance of the UK port operations with the total annual growth of 35% over the period between 1980 and 2000 (Rumenov Krastin 2011; Gov.uk 2013).
The UK recognizes the maritime network as a vital network system.. The importance of the maritime industry for the international business as well as the UK government is difficult to underestimate and, thus, the countries ‘national interest dictates the levels of efficiency, sustainability and financial return to the local economies. The reality shows that break-bulk shipments have recently become very regionalized and the specificity of the cargo type, shipped on the bulk vessels have increased. Bristol port, as an example, maintains strong focus on bulk handling operations and Ro-Ro terminal, while Felixstowe had long become one of the major container cargo hubs for Western Europe.
The UK government pursues integrated transport policy and establishes taxation and port surcharge system to control the industry. The governmental policy with regards to the capital inflow in break-bulk relative to container operations on the terminal illustrates the disadvantaged position of the first. The UK government discriminates the industry by vessel flag and crew composition and, experience among current carriers show that container vessels have much wider access to the European waters. The international Maritime Safety Agency is one of the strongest political instruments, which controls the shipping industry by defining international standards, imposing the actions from the developing and underdeveloped economies, as a condition for participation in the international containerized shipping. On the contrary, the control over the break-bulk shipment operations are significantly less centralized, which results in difficulties to gain access to European states for the companies and vessels with the flags from underdeveloped states (EMSA 2012; Stopford 2009).
According to the DW (2005) report, the container industry is expected to grow 400% by 2022. The world total market, based on the estimate of 2004, accounted for USD 530 billion and is also expected to grow at rapid pace. The UK market, at the same time, has also evolved, demonstrating the shift from traditional bulk cargo operation to container operations. While some decades ago Britain was said to own 50% of the global tonnage, in 2013 British companies total deadweight ownership was only 20.6 tones, which illustrates gradual decrease of 5% and 11% respectively for two previous years (Gov.uk 2013). Unlike wise, break-bulk development illustrates that the this mode of transportation is in stagnation stage, where the seaborne trade of the major bulk commodities, such as coal and grain have either remain unchanged over the past four years, or reduced, such as sugar. Rumenov Krastin (2011) argue that one of the basic forces that influences the development of the containerized trade as well as the break-bulk is the shift of forces from Fordism to Post-Fordism. When the productivity, based on the above theory reached its limit, the concept of scope and individualism took place on B2B and B2C markets. This can be interpreted as one of the causes of the shift from break-bulk to containerized trade, where the technology and economies of scale allowed containerized trade overgrow break-bulk.
The development of the container has fundamentally re-structured the labor intensive break-bulk operation. Globalization and manufacturing outsourcing development cannot be underestimated as the major influences on the containerized and bulk trades. The changes have had a significant effect on the social picture of the port cities around the globe. The vibrant at some point with coal production and old vessel yard and docks operations, cities have changed their “face”, Some of them were destroyed, others had to grow into the centers of technological development. (Ekpo 2012).
Ports had to become more responsive to the changing profile of their customer relationships management. It is significantly easier or container carriers to establish relationships with B2C customers than it are for break-bulk carriers. The concern with the logistics security as the outreach of the maritime transportation today is extreme and the businesses are enabled to run their operations in the countries with low-security levels and economic instability. This creates additional pressure on the companies to build on affiliated partnerships. Due to the flexibility of the container trade, these partnerships are significantly easier to build for container carriers than break-bulk. But the break-bulk operators developed a new strategy to build on partnerships in developing countries and invest in port infrastructure. According to the report, prepared by ISL (2012), international trade with Ethiopia and Nigeria, as examples, grew over 35% over the past decade, enabled by the focus and investment in local port infrastructure.
Additionally, shift in population growth and the distribution have significantly contributed to the development of the contemporary shipment volume maps and container imbalances as some of the countries are dominant by the import, while others are pure exporters. This trend is especially strong in Africa and Asian regions, influencing reefer container shipping (Hofstra 2014).
The development of container has twofold relationships with technology. First of all, one should consider its impact on the backbone systems, and, secondly, its impact on the port operations in terms of operational capacity and handling. Latest developments in Enterprise Resource Planning (ERP) systems, Terminal Operating Systems and Electronic Data Interchange System (EDI) outline the potential of the industry under the focus on technology. Containerization have affected cost, accuracy and flexibility of the systems by making the breakdown of information about the cargo more detailed and efficient with the e-Bill of Laing and E-Shipping Instructions.
Technology impact on the physical port operations is even more impressive. Back in 1960s 100% of the handling operations on the terminal were done with the use of human labor. The situation changed by the 80s and 90s, when the first gantry and stack cranes were placed in operation, allowing 150% increase in operational efficiency, measured in container moves per hour. The development of the automated cranes and handling equipment in the container terminals globally, however, revolutionized the movement of goods by bringing efficiency into the supply chains (Talley, 2000). Such enterprises as the port of Felixstowe and Southhampton are exemplary companies, adopting such equipment as unmanned gantry cranes and reducing their headcount costs by 75%. This illustrates the influence of technology on the development of the container industry (Notteboom & Rodrigue 2005).
The relationships between the environmental factors and container and break-bulk shipping are two-fold. First of all, it is important to recognize the impact of the industry players on the environment. Indeed, the green gas emission, other forms of pollution, such as acoustic and oil, are significant. The International Maritime Organization (IMO) is concerned with the regulation of the above elements and ensuring that the companies, involved in maritime transportation industry are aware and comply with the international environmental standards. Similarly, environment itself sets serious limitations and outlines the major challenges for the industries. Some of the most evident influences of the environment on the shipping industry are draft restrictions and the weather conditions (Khee-Jin Tan 2006).
Preservation of the marine environment is the key to the industry with such a long-going impact. Wildlife collision, atmospheric pollution, recycling issues and other challenges are just some of the issues to be addressed. The MARPOL convention is concerned with the pollution from ships and is responsible for the minimization of accidental discharge of oil and other pollution types as well as waste disposal. The aging fleet in the bulk segment as opposed to the container vessel building, places more pressure on the multipurpose carriers. Solid waste, generated on the ship includes glass, cardboard, paper. Becoming marine debris it can bring significant harm to marine organisms and coastal communities, especially taking into consideration that the decomposition process takes thousands of years.
Legal environment of the international shipping is extremely complex. The reality shows that the companies and the activities of the shipping lines, as well as ports and terminals, are regulated by the local authorities, as well as the subject to the international conventions, such as Hague/Visby Rules, Rotterdam Rules and Hamburg Convention. According to Rumenov Krastin (2011), one of the most significant developments in the legal backgrounds of container and break-bulk shipment over the past decades is the acceptance of the changes in the Convention of Contracts for International Carriage of Goods Wholly or Partly by Sea. The above mentioned Rotterdam Rules as well as the Hague Convention determine, restrict and outline the nature of container shipping and legal relationships and bonds between governmental bodies, local market players (clients and partners) as well as competition in this complicated market. The principle difference between Hague/Visby, Rotterdam and the Hamburg Rules is the fact that the last explicitly excludes its application to other modes rather than sea and, at the same time apply to both, inward and outward shipping from contracting states. The Hague/Visby Rules, applicable only to the outbound voyages from contracting states, moreover, do not define the obligations of the parties (carrier and shipping company), but rather creates a link between the contract of carriage and the bill of Lading, issued hereunder.
Findings and Conclusion
The development of the container shipping had a dramatic influence on the break-bulk and destroyed and built back the entire industry with totally new face. It is difficult to argue that the maritime transportation industry today is very different from what it was 50 years ago. The scope and scale of shipping line activities in the UK, as well as outreach and handling capacity of the country´s ports have grown tremendously. While the cargo operations continue being dominated by general bulk and Ro-Ro operations, containerized trade continues to gain importance.
The relationships between the industry players and the external influences are twofold. On one side, the companies with their growing ambitions and competition on the market create tools and need for change and innovation, on the other, external governmental bodies and the variety of PESTEL factors influence the companies in the industries (Slack, Comtois & McCallan 2002).
Cost pressure on the supply chain and the specificity of demand will continue shaping the direction of innovation and R&D in the industry in the UK. Technological development and automation of handling operations are the major drivers of unmanned cargo operations, which outline the future of the industry. Aging fleet of the multipurpose vessels and stagnated markets of coal, grain and other break-bulk commodities along with the benefits of containerized trade, gained by the economies of scale will negatively affect the break-bulk shipments.
Drewry 1991. Strategy and Profitability in Global Container Shipping. Drewry Shipping Consultants Ltd, London.
DW 2005. Maritime Industry Global Market Analysis. Douglas-Westwood Ltda. Available from http://www.marine.ie/nr/rdonlyres/b66fbe34-3859-4fa8-9abf-8c8558cdb15e/0/foresightseries1_global_market_analysis.pdf [23 October 2014],
Ekpo EI 2012. Impact of Shipping on Nigerian Economy: Implications for Sustainable Development. Journal of Educational and Social Research. Vol. 2, Issue 7.
EMSA 2012. European Maritime Safety Agency Annual Report 2012. EMSA. Available from: https://www.google.com.br/?gfe_rd=cr&ei=wgi0U9GvG6Gj8weC4oGAAQ#[23 October 2014]
Hofstra (2014). The Geography of Transport Systems. Hofstra [Online]. Available from: http://people.hofstra.edu/geotrans/eng/content.html [23 October 2014]
ISL (2012). Shipping Statistics and Market Review. ISL Statistical Publications. Volume 56 Issue5/6. Print
Khee-Jin Tan, A. (2006). Vessel-source Marine Pollution: the Law and Politics of International Regulation. Cambridge: Cambridge University Press, Cambridge.
Levinson M. (2006). The Box. How the Shipping Container Made the World Smaller and the World Economy Bigger. Woodstock, UK: Princeton University Press, Woodstock.
Notteboom T. E. (2004). Container Shipping and Ports: An Overview. Review of Network Economics. Vol.3 Issue 2.
Notebook T.E. and Rodrigue J.-P. (2005). Port Regionalization: Towards a New Phase in Port Development. Maritime Policy & Management: The flagship journal of international shipping and port research. Vol. 32, Issue 3.pp.297-313.
Rumenov Krastin K. (2011). Changes in the UK Container terminal Market – How Will DP World Southampton Respond to the Challenges? School of Engineering Construction and Maritime.Southampton Solent University. Southampton.
Slack B., Comtois C., and McCalla R. (2002). Strategic Alliances in the Container Shipping Industry: A Global Perspective. Maritime Policy & Management: The flagship journal of international shipping and port research. Vol. 29, Issue 1. Pp. 65-76.
Stopford M. (2009). Maritime Economics. 3rd Edition. London, UK: Routledge Publishing. Print.
Talley W.K. (2000). Ocean Container Shipping: Impact of a Technological Improvement. Journal of Economic Issues. Vol. 24, Issue 4. Pp.933-948.
Wilmsmeyer G. (2013). Liner Shipping Markets. Networks and Strategies. The implications for port development on the West coast of South America. OECD International Transport Forum, discussion Paper 22. Available from: http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP201322.pdf [23 October 2014].
Gov.uk 2013. Port Freight Statistics 2013: Final Figures. Available from: https://www.gov.uk/government/statistics/port-freight-statistics-2013-final-figures [27 October 2014].