3. Scoping the brief 8

4. Development and implementation 9

5. Re-categorisation and customer management 10

6. Relationship management of high value customers 11

7. Conclusion 12

Analysis of the use of IT in customer / supplier relationships –

The international ocean freight shipping industry

Executive Summary

From the complex web of business to business relationships that exist in the international ocean freight shipping industry shown in Figure 1.1, the relationship network (Figure 1.2) between the shipping line and it’s customers has been analysed. One EU based shipping line ‘the Line’ has been used to study how customers were traditionally categorised by geographical region and how relationships were allowed to develop unchecked over time on an ‘influential’ ‘old school tie’ basis. It was only when the industry life cycle entered the ‘decline’ stage and the company faced financial difficulties that the senior management were prepared to consider a reorganisation of the business.

The contract of carriage of a cargo on board a ship is still a ‘joint venture’ between the cargo owner and the ship owner. Together they undertake the venture of a voyage. Should any peril befall the ship whilst on the voyage, the master may ‘sacrifice all or part of the cargo to preserve the ship and remaining cargo. The party who has suffered loss is reimbursed by all the other parties to the adventure, each paying a proportional amount of the loss according to the value of their interest’ (Dictionary of shipping terms 3^rd edition, LLP, Peter Brodie). This centuries old practice known as ‘General Average’ overshadows much of the business relationships in traditional shipping companies. Consequently contracts of carriage were taken very seriously usually between directors of known and trusted firms, developing an ‘old school tie’ network.

The emergence of customer oriented service companies in the airfreight and courier industries such as DHL and FedEx challenged the rationale of the seafreight business model. Often the same manufacturer, exporter or importer would use airfreight and seafreight, thereby opening an opportunity for shipping companies who could adopt a customer focus. The increase in world cargo movements as manufacturers sought ever lower manufacturing costs and the emergence of more private and national flag shipping lines placed more cargo carrying capacity on the market than there was cargo to fill it. A fiercely competitive environment was created and shipping cargo by sea lost much of its mystique as freight rates fell and cargo space and cargo were traded as commodities. Shipping lines that could not manage the change found themselves in decline as clients deserted to more customer focused firms, revenues per unit of cargo reduced and the traditional lines were unable to reduce their costs accordingly.

A customer database was built using a legacy IT system and from this the customer values established and the basis of the relationships with the customers was re-categorised. Traditional, now low value customers could be serviced transactionally and new high value customers identified and targeted to be managed on a relationship basis. In re-categorising the customers and identifying new target accounts, it became clear that relationships had to be developed in a new way, from the old salesman – buyer method.

The whole firm, including all functional departments such as operations, accounts and secretarial services that had traditionally not been concerned with customer relationships were now finding themselves as part of the business-to-business relationship network.

The result of the re-categorisation was a turnaround of the business and eventual trade sale at a satisfactory premium for shareholders.

Further information, business plan, strategy, implementation, available from; paul@paulbrianblack.com