Good service levels linked to boxline profits

10/12/2017

Container shipping lines that provide reliable services are also the best financial performers, according to SeaIntel.

The analyst tested whether the relative profitability of a carrier was independent of service reliability relative to competitors. This was measured by calculating the correlation coefficient between relative profitability and reliability across 14 quarters between 2014 and the second quarter of 2017 (2017-Q2) for all major carriers that publish financial results on a quarterly basis.

“From a statistical perspective, what we can see from the data in the period Q1 2014-Q1 to 2017-Q2 is that, with 94.3% confidence, we can reject the hypothesis that there is no link between profitability and reliability,” concluded SeaIntel. “Furthermore, that the rejection is biased towards a positive correlation coefficient.”

The analyst found that the most-reliable carriers were also more profitable than their competitors, although the data did not reveal where the added profitability stemmed from.

“It could be from a commercial upside related to higher rate levels or more loyal customers,” said SeaIntel CEO, Alan Murphy. “But it could also stem from lower operational costs as more reliable services lead to less exception handling.

“And finally, it should be noted, that correlation does not imply causality, and what we may be witnessing is in fact the reverse − that more profitable carriers are more likely to be on time.”