By Ryan Skinner (email)
- Customers are now in charge. They can be heard around the globe and have an impact on huge institutions in an instant.
Well, what do shipping's customers want? They want a) complete transparency, b) to pay next to nothing or - quite simply - nothing and c) the shipment to happen extremely quickly and safely (read: no damage claims).
There's no reason why all of these things couldn't happen. What if products were moved without the customer asking them to move? What if a South African customer found out that the iron he or she wanted was ready to be picked up, right now, with zero related shipping expense? That it had come from Chile? And that it could be bought for half the price of the traditional route, i.e. making a contract with an iron producer, buying it and chartering a ship to move it?
Information is abundant. And price information moves at the speed of light; its analysis can be rapid and complex. Couldn't these huge flows of information, in full transparency, be managed? Price information from suppliers compared to that from buyers? Thus, products could be moved on their own merits, based on accurate prognoses of future gain.
Thus shippers could take the risk of the shipment themselves. With a mega-cloud server running trillions of computations, shippers could track price and demographic developments in markets throughout the world, and then turn these into viable prognoses that in turn signalled a shipment. He would buy the cargo, load it and depart. Once the shipment neared the market, it would be sold (possibly by auction), and the total sales price would be the shipper's. In this way, the buyer, in the receiving market, would neither pay for, nor ever feel the risk, wait or regret of chartering a ship, or ordering a shipment.
Imagine the owner of an aframax tanker. He examines supply prices and finds, not surprisingly, that cheap cargoes are available from a number of sites in the Persian Gulf. Further analysis shows that, due to slowing production in Venezuela and Brazil, South and Central American terminals will make the most profitable market for oil in two weeks. As his ship approaches the region, an online auction takes place, in which different buyers make bids on the owner's cargo.
A terminal in Buenos Aries has made the highest bid, and the ship's owner makes that his destination. He can resupply the ship at ease in Buenos Aries becuase ship supply has become relatively uniform in any port in the world (and he has a global deal with a worldwide port services company). But, before he'd even settled on Buenos Aries as his destination port, he was already analysing South American production locales for price data in one week, when he would be picking up his next cargo.
In a world with so much information, a specific sender and a specific receiver for every cargo is an unnecessary luxury.
Thus all shipping becomes speculative - a spot market with a very s0phisticated brain. The beauty of such a market is that it is very economically efficient. And by auctioning off cargoes, you know that no one pays a penny more than they must.
If you're an industry reliant on key supplies, you say, what would happen? What if I absolutely need more tungsten for my light-bulb factory? With this system, not only would you simply need to bid for a load of tungsten, that load of tungsten would be already at hand. Even though you hadn't done a thing. And, the more regular your bids, the lower your prices would get over time. Thus, happily, your first-time price would be the steepest; over time, your prices would always come down. When you no longer wanted a supply, you simply stopped ordering it.
What of investors that don't like the risk of spot markets? No problem. Like bank funds, some investors could be assured a steady return on investment, while other shippers dealt with the computational risk.
Shipping would become more economically efficient. Customers interested in buying products from around the world would no longer pay for, or even consider, their shipment. And accumulated information could be used to create advanced models and trends, so that the entire industry grew more efficient and effective over time.