Three keywords from interview with Jae-Bong Ryu, Team Manager of Container Sales & Marketing Team: Customer-optimization, New market Africa, Restructuring market
1. What are the main operations for Container Business Unit?
Container Business Unit (CBU) works in the production, sales, creation, and operation for container shipping companies of OPUS Container, an IT solution that covers the full gamut of its operation, and also provides related consulting
Our unit was created in 2015, with container business spun off from Maritime Operation. Before the splitting, CBU worked in Maritime Shipping Division and was in charge of developing, delivering, and servicing IT solutions that were going to be used by container shipping companies and bulk shipping companies. Now, the unit is operating separately in order to strengthen services for container shipping companies and increase customer satisfaction.
2. What are the characteristics of the market that CBU is handling?
The container shipping market we are dealing with characteristically has 100 or so major container shipping companies, thus registering a number that is relatively not large when compared to other industries. While there are some 150 shipping companies in the world, top 100 companies account for a 96% market share. And the companies’ fleet totals 18 million TEU with 5,000 ships. Notably, the larger shipping companies take up a very large market share, with top 5 companies registering a 50% market share with 2,000 ships totaling 9 million TEU and top 20 companies taking up an 86% market share with 3,500 ships totaling 16.6 million TEU.
3. What business goals does CBU have?
CBU has created OPUS Container for Hanjin Shipping, Heung-A Shipping, and Kambara Kisen and is currently working on the project for creating a system for a major global shipping company. Recently, we embarked on a project for some other shipping company.
Coming into this year, we have successfully completed the creation of systems for two shipping companies and we are working hard to increase our market share by creating our new customers out of other shipping companies.
We aim to capture a 20% market share based on the bottoms of the shipping companies that use OPUS Container in five years and a 50% market share in ten years.
4. Special strategy or methodology for achieving the goals?
One of our major business strategies is the success of our customer companies.
As I said earlier, in the container shipping market with its small number of players, the word of mouth spreads pretty fast. Therefore, we are going to improve the market recognition of OPUS Container by satisfying the customers whose systems are completed through successfully carrying out their on-going installation and continued maintenance.
For example, we successfully completed the installation of OPUS Container for a shipping company last year. Now, as the project has resulted in great customer satisfaction, we are taking up the system maintenance down the road. And as the successful project with the customer created wide reverberations in the customer’s country, the recognition and reliability of OPUS Container has significantly improved in the country.
CBU places priority on another goal: upgrading the efficiency of shipping alliances.
Current shipping alliances include 2M, Ocean 3, CKYHE, and G6, which account for 80% of the entire market. The hard core of the solidarity for those alliances must be communication and cost efficiency ensured by joint operation of ships. To upgrade their efficiency, we will provide an operating system that is going to be shared in an alliance. The method is to work on OPUS Container to select modules required for operational alliance and ensure that shipping companies share them as members of an alliance. If this is possible, we expect, much of the erstwhile redundancy and operational inefficiency involving a shipping alliance will be reduced.
5. What is the advantage of CyberLogitec’s container operating systems?
OPUS Container condenses 30 years’ well-organized know-how for creating and operating container operating system. OPUS Container does not merely function as a system, but creates synergy from the organization, process, and manpower designed to develop and operate the system. Considerable budget and workforce invested for several years came up with OPUS Container as it is. And the company has a road map already lined up for its continuous evolution.
The greatest strength with respect to its specific function is its being a single unified system. If a system is dispersed to different regions as with most current shipping companies, applications will be supplied from a single location to different regions, thus generating the need for system integration. Unless the system is integrated, data must travel from the servers at international branches to the server in the country where the head office is located, thus generating great quantities of transactions in manpower, equipment, and data. OPUS Container has successfully solved the problem of data interface by amassing data to a single server from several servers. Also, in case synchronization doesn’t work well or creates time differences, data may not match among different servers. OPUS Container provides solutions to these issues.
6. What are major issues of the container shipping market?
6-1. Market restructuring: the influence that low yen and LA port strike exert on supply of ships
Just two or three years ago, in the global shipbuilding market, Korea came on top with Japan trailing and China coming in third. Recently, however, Japan has been enthroned again. Now, Korean shipping companies perceive greater justification for issuing orders to Japan. Japan’s comeback as the world’s top shipbuilder finds a significant factor in low yen among others. Thanks to low yen, Japan is building a new dock, which is increasing the world’s shipbuilding capacity. One whole year taken previously to deliver a completed ship has diminished to eight months or six months to complete, thus increasing the worldwide shipbuilding abilities. As LA port strike and others were effective in controlling ship supply, freight rate is decided between supply and demand. As speedier completion of ships seems to improve price elasticity of supply, it seems that it is now in fact out of the question to keep freight rate as high as it was.
6-2. Three plans to reduce costs for the container shipping market
The biggest issue for the current container shipping market is the pressures for cost reduction. To reduce costs for shipping companies, the three plans can be considered as follows.
First, shipping companies can save depreciation cost by purchasing ships when ships are low-priced. Also, the companies need to save costs for fuel and transport. And while the latest drop in oil prices has positive influence on cost reduction, it can also have negative influence on sales, for the forced drop in bunker adjustment factor (BAF) decreases profits. Thus, keeping in mind that falling oil prices constitute a double-edged sword for shipping companies, one should consider both its upside and downside.
Second, we can reduce transport costs by providing users with low-priced transport methods from the booking stage with an optimized transport plan that is suggested to shippers through the replacement or upgrade of an operating system like OPUS Container.
Lastly, reduction of cost for system operation and maintenance. Since a saved portion of system operating cost is immediately reflected in current net profit, even a small reduction hugely improves profit compared to reduction in other costs. For instance, one of our customer companies has reduced its annual cost for system maintenance by half with the introduction of OPUS Container.
6-3. Africa emerging as a new export market
Looking ahead, Africa will deliver a lot of new markets. Africa presenting itself less as a buyer than as an exporter suggests that manufacturing is growing in the continent. Lately, a lot of Chinese companies are investing in Africa and relocating to the continent, to such a degree that those companies that previously considered their move to South Africa are now headed to the rest of Africa. It cannot be defined as a trend yet, but that’s what is happening at the moment.
However, as Africa suffers from shortage in infrastructure and ports, large vessels cannot operate in the region, which may present related issues. Operating small ships alone should incur higher cost per unit. While 10,000 TEU needs seven crew members, 2,000 TEU needs as many crew members, thus requiring the same fixed costs. To use an expression of the industry, the cost price per container goes up.
7. A solution optimized for operating container ships
Container shipping companies are organizations that create value through movement in space and time. As such, container shipping companies must provide quality services for shippers to survive the fierce competition. OPUS Container is going to not only reduce operating cost for container shipping companies but also ensure effective data exchange among the companies with a view to satisfying their needs. With this service, we will increase efficiency from manufacturing to distribution and services by providing quality logistics data ultimately for all industries.