Reliability increases carrier profitability

The key question which has been constantly debated at numerous container shipping conferences in the past decade (and more....) is whether there is a positive business case for carriers in actually providing reliability. Or, as it has often been provocatively stated, are sufficiently many shippers actually willing to pay for reliability?

This week's SeaIntel Sunday Spotlight analyzes container carriers' quarterly financial results from Q1 2014 to Q2 2017 and compares this with the schedule reliability each carrier delivered in each quarter.

Of course reliability is only one small portion of the drivers of profitability for the carriers, however from a statistical viewpoint, the numbers are clear. There is a link between carrier reliability and carrier profitability.

The link essentially is, that if a carrier is more reliable than competition in a given quarter, then the same carrier will also be slightly more profitable than the same competitors. Whether this is driven by commercial considerations such as higher freight rates or more loyal customers, or whether it is driven by operational efficiency stemming from having less exception management when vessels are on time, cannot be determined from the dataset.

It should be noted that the measurement is relative within the competition given, and not absolute in terms of actual performance. However, given the substantial changes seen in the top-18 carrier reliability performance over the past 12 months, it would indeed appear that reliability might become a new competitive battleground - although presently that battle starts from a very low base with global reliability only being 75% in August 2017.