The head of a major ocean liner agency criticized maritime shipping for creating service expectations that can't be supported by the industry's can't possibly hope to fulfill.
"In service businesses, like the shipping industry, everyone wants to provide a unique approach to differentiate themselves from their competitors," said Kurt Werth, president and chief executive of WTS Agencies, based in Virginia Beach, Va. "Unfortunately, from my perspective, shipping has all the attributes of a mature commodity business. No one likes to admit that they deal in a commodity business because everyone believes they can differentiate their offering through creative ideas to add value - great service, great on-time performance, one-stop shopping, great technology, etc.
"The truth is that there are many great steamship lines offering the same great service, track record, and 24/7 Web site. Because of competitive pressures, all of the steamship line's great attributes are no longer 'nice to haves' but 'must haves' for shippers. Not only that, but the large retail customers expect everything to be perfect and in almost all cases, they not willing to pay for perfection. Perfection is expensive!" Werth said.
Werth's comments came during an address last week to the Hampton Roads Foreign Commerce Club in Virginia Beach, Va.
When carriers get pressured by shippers, Werth said, agents, in turn, are pressured by carriers. "Everyone expects Nordstrom quality at Wal-Mart prices, which in the long term will just not work," Werth said. "The largest retail companies are in control and if you don't think so, I believe you are fooling yourselves. Unfortunately, one of the only remaining differentiators seems to be price and price is almost solely dependent on the supply and demand curve."
Werth observed that setting reasonable expectations amid the volatile economic factors of ocean shipping is risky. "You better be at the top of your game if you expect to survive with the kind of expectations that are now in some service contracts," he said. "Being exactly right 99.9 percent of the time is not good enough for agents and that is why there are so few of us left. It is a competitive business and we set the customer's unrealistic expectations. It's our fault. We don't practice the 'you get what you pay for' business theory."
To cover the higher cost of doing business, Werth said that carriers and agents are doing more work with fewer staff. "The competitiveness of our industry forces us sometimes not to do what is in the best interest of our employees, but in the best interest of survival." He pointed out that many lines have moved process work to lower cost areas, or out of the U.S. completely, to cut costs.
"In my opinion, this offshore movement is not good for our industry and not good for the U.S. economy, but it is a fact of life. Steamship lines must manage their costs because ocean shipping is a mature, commodity market where low price wins. We don't seem to be able to effectively manage customer expectations when missing a one hour window means you can lose the month's or year's profit in one transaction."