Analysis on efficiency of internet technology on maritime chartering market

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Maritime University of Szczecin Faculty of Transport Engineering and Economics

Analysis on efficiency

Analysis on efficiency of internet technology on maritime chartering market

E. Perdian ewelina.perdian@gmail.com

S. Iwan stan.ivan@wp.pl

Abstract

EWELINA PERDIAN

STANISЈAW IWAN, Ph. D.

Information and Communication Technology provides access to wide-spread, easy accessible and low-cost information. It functions as well good enough as a helpful tool that facilitates business processes. There exists a very controversial aspect of Internet technology becoming a leader of business processes on maritime market. What position has currently Internet technology according to maritime market? How it affects information flow on maritime chartering services? This article is focused on maritime chartering market reactions on introducing Internet technology through its processes and between its employees.

Keywords: maritime market, chartering services, e-chartering, Internet technology, ICT.

chartering service maritime market

1. Description of maritime chartering market and the role of shipbroker

We define maritime chartering market as system that contains:

· charterers, who enquiry information regarding market and vessels;

· ship owners, who offer their price;

· shipbrokers, who negotiate chartering conditions.

When the terms are agreed upon, the main term fixture is prepared and contract under negotiated freight rates must be finalized. Gorton defines shipbrokers as people, who have informative, intermediary and coordinating functions along the above-described procedure [1]. Information, that is exchanged, concerns matters such as ships' and cargo's demands. Relevant meaning has sort of communication, that professionals from shipping field have. It definitely determines quality and the quantity of information exchanged.

E-business technologies have introduced new models of accessing information, therefore several changes have been introduced. Behavior of maritime chartering market, particularly influence on shipbroker's services has been researched with help of online questionnaire around representatives of maritime chartering market. Target of the survey was to analyze information flow on maritime chartering market in relation to information and communication technology, particularly e-chartering systems. At the same time, another aim was to look into aspect of changing communication patterns between participants of maritime chartering market.

2. Level of adapting information and communication technology on maritime chartering market

In order to follow information flow on maritime chartering market, it is necessary to answer the question: what is the level of adapting Internet technologies in maritime world? According to the respondents of the questionnaire, adaptation of ICT is handled in a rather average, optimal way, as seen below - figure 1.

Figure 1 Degree of adapting ICT and e-commerce on maritime market (A - the lowest, E - the highest)

Source: own work

Why is that result average? In general maritime market might be seen as a conservative one, with its own rules depending mostly on traditional forms of doing business. All the processes maintained over the supply of high quality and quantity of information are tightened to personal business contacts. However Paul Шstergaard, CEO of ShipServ, believes that e-commerce in ship supply is now a reality [7]: "Our business is mostly about changing the process rather than changing relationships. In most cases the ship owner continues to order direct or seek quotes from his usual suppliers”.

Moreover, amount of information that is provided is massive. Respondents of the questionnaire believe that there is general need for creating platforms, that collect all the information, filter it and provide the principals with the most important information (figure 2).

Figure 2 The answers for the question: should resources of low-cost and wide-range available market information be filtered by specific Internet platforms?

Source: own work

More than 50% of respondents have admitted that creating online platforms for filtering information is very useful. Particular networks in that case shipbrokers and participants of maritime chartering market are supplied with up to date and relevant information that represents value for the intermediaries, stakeholders, so in fact end-users. Furthermore, users are not over-supplied with information and can easily sort out, what are the major elements they need.

3. Online chartering platforms, E-Chartering systems

Without doubt a reliable information is an essential basic element of well-functioning chartering market. Popularization of electronically guided communication and implementation of electronically supported business processes is a background of integration of Internet technology on maritime chartering market. First step of adapting has affected communication tools, but because of massive correspondence, it occurred that Internet platforms under the name e-chartering should be involved to handle the problem.

E-chartering system is seen as a possibility for participants of maritime market to maintain business processes on line. It's based on access to information, real-time communication and virtually provided transactions. Auh, explains e-chartering as the latest service concept that provides Internet based trading platforms for chartering ships between ship owners and charterers [1].

Figure 3 Schema of e-chartering system

Source: own work

One of such online auctioning systems is ShipIQ - a company with an electronic chartering platform that connects the oil chartering community and the tanker owning community. Bob Conley, product development manager for Massachusetts-based ShipIQ, says [7]: "ShipIQ provides its users with the information, tools and the platform to complete complex transactions online. Charterers can search for vessels meeting their criteria while tanker owners can identify cargo matches for their vessels. After a negotiation is initiated on ShipIQ, the parties are able to complete the deal online, leaving a clear, well-organized audit trail and documentation”.

Other, typically recognizable online working systems are LevelSeas, subsidiary of Clarksons, AXS Marine, Steminorder, Strategic Software, Go Refeers and Chartering Solutions. All of them have few things in common. The main idea of functioning these systems is data registration, data analysis and electronically supported transactions. The target is to achieve a shipping contract under adequately fixed freight rates.

Advantageous objectives of these platforms are real-time interactive environment and integration of internal and external processes. Elements and functionality of e-chartering system is presented on figure 3.

4. Efficiency of E-Chartering systems - questionnaire analysis

4.1 Analysis on impact of e-chartering systems on shipbroker's services

Introduction of Internet technology, e-chartering systems has changed the working patterns of shipbrokers. First of all they have glorified e-mails, as a tool of a constant possibility for communication. The next step was unfortunately the fact that shipbrokers have been loaded with hundreds of e-mails. That has become quite uncomfortable so people from Internet technology departments become to search other ways to cope with the problem. The results of their actions were online platforms for e-chartering, having specific functionality.

E-chartering systems definitely have various usability dimensions for shipbrokers that have been researched as well in online questionnaire (figure 4).

Figure 4 The most essential component of e-chartering systems

Source: own work

The respondents have stressed that the fundamental component of functioning e-chartering systems is constant access to maritime market information and real time communication, less important occurred to be functionality of these systems. Participants of maritime chartering would be rather happy to be quickly, fully supplied with up to date information concerning ship owner's and charterer's description, than have a possibility to maintain negotiating process online. Information, that creates value in its pure form, sounds interesting but only when the number of users is appropriate. Value of chartering network is directly tied to the number of its users. Bob Metcalf, inventor of Ethernet, is credited with the following scaling law named after him [9]: “the total value of communication network grows with the square of the number of devices or people it connects”. Essential information such as price of various ships and ship specification can be reached easier and wider only with convenient engagement of users. Therefore, the amount of users create highly value of the system, which is very significant in short-term.

Auh claims that e-chartering can have positive network externality in short-run. More ship owners users join the service, charterers more easily find suitable vessels. However, the users would not be increased sharply in the sort-run. In the long-run, the network eternality of e-chartering will be saturated over time. The marginal benefits from the additional users will be offset by the increasing costs of finding the right trading partners [1].

Reflection on a fact, how e-chartering systems and communities add value to their users brings above results of the questionnaire.

Figure 5 The most important benefit from using e-chartering system

Source: own work

The most relevant feature occurred to be higher transparency of the market. It leads us to a conclusion that it's hard to provide clear information about the transactions handled on maritime chartering market. On the other hand, it is claimed that such transparency gives charterers the ability to push rates down. Next element in the hierarchy is more strategic competition. Internet technology has become an important point for shipping companies to gain a competitive level over their rivals on the arena of globalization. Closer collaboration with partners all over the world generates significant values that can have a huge impact on efficiency of provided tasks. Relevant tend to be as well productivity of the system, operations, which it fulfils, as a value itself. Platform provides objectives as: data registration, data analysis, electronic negotiations over the freight rates, electronic finalization of the contract. Timeliness of operations is a standard on virtual market, that generates quite expenses, but its aim is to make customers satisfied with services such as timely feedback and real time vessel tracking services. After completion of each voyage, charterers and owners can have the opportunity to give a rating. The last element is feedback - typically informational part of a market and should in fact be placed a little bit up in the hierarchy.

4.2 Quality of shipbroker's services in relation to e-chartering systems

Brokers feel that technological developments have enhanced the quality of theirs services. It has definitely changed the working patterns, but what's the direct influence on quality of these services? This question has been answered in the next questionnaire problem.

According to the questionnaire's results, Internet technology as a provider of an unlimited, massive formation, allows brokers to provide better quality job. That empowers their expert knowledge of the market. Zolkos admits that value of the broker is recognized by the consumers of their service [10]. Worldwide and online access to the market improves sales and continuous customer assistance improves customer support. The indicator of a well-maintained relationships is without doubt a reliable, timeliness service. Partners of the network can only come closer together if they are fully satisfied with provided operations. Might it be as close that the two principals (ship owners and charterers) deal directly with each other without the involvement of intermediaries? The respondents of the survey admit that this possibility is balancing on the border of average and relevant meaning (figure 6).

Figure 6 Influence of access to information and communication technology (e-mail, on-line platforms, Internet) on a quality of brokers services

Source: own work

4.3 Possibility of disintermediation on maritime chartering market

It is widely discussed if Internet eliminates intermediaries from the supply chain, but author of research concerning disintermediation of maritime market claim, Lambrou indicates that in fact in the transformation process of the value chain new types of intermediaries may appear [10]. In fact these new types of intermediaries might be people with wider competencies, having operational and analytical abilities, willing to work in constant cooperation with Internet technologies, generating such values as better productivity and higher level of services. Bob Conley, product development manager for Massachusetts-based ShipIQ says that one of the keys to his company's success is not eliminating the middleman. "Our system is broker friendly. We do not 'disintermediate' the broker from the transactions.

Results of this questions (figure 7 and 8) presents, that respondents are aware of disintermediation possibility on maritime chartering market. They point out that it has average meaning with a relevant tendency to become a consequence of changing electronic environment. On contrary others believe that chartering is much to complex to take place only over the Internet with reference to the issue, that online systems could be easily hacked.

There exist concerns about aspects such as security, privacy, data ownership and possibility of malfunctioning practices by some of the companies on maritime chartering market.

Figure 7 The possibility of handling on-line chartering processes directly by cargo owner and ship owner

Source: own work

Figure 8 The chance of disintermediation in maritime supply chain because of introducing e-commerce

Source: own work

Conclusions

Tools and achievements of Internet technology are treated in the way, as information is the one that points the guidelines of using and performing development of services. E-chartering system improves quality and quantity of information and enhances market relationships in order to get more reliable sources.

Current e-business model of e-chartering is mainly focused on information search and basic communication. Typically functional aspects of e-chartering are used in less popular extension.

An online trading environment is closely tight to changes in electronic world. IT can help maritime market become more transparent and competitive. The efficiency on IT might be mostly seen as the quicker access to information. According to that, speed of doing business increases in a relevant dimension. Online information services improve the knowledge of the market, communication with customers and business partners with a few side effects such as more formal and task-orientated way of maintaining negotiations. Internet technology promotes sustainable and flexible development of maritime chartering market, moreover provided by IT tools changes working environment and generates higher quality of service.

References