We are now into the fifth month of the COVID-19 pandemic, and it has become normal for stakeholders in the container shipping supply chain to keep a close eye out for either additional blank sailings or the reinstatement of blank sailings. If one was to purely look at the sheer volume of blank sailings and disruptions, one might mistakenly come to the conclusion that the pandemic has disrupted the entire supply chain.
However, we should also be mindful that despite the disruptions when the market bottomed out in April/May, more than 80 percent of the normal volumes still got shipped. Not on the desired routing, but it got shipped. Even more interestingly, schedule reliability for the vessels that did indeed sail improved as the pandemic impact worsened.
This in itself speaks volumes to the resilience of the global container shipping supply chain. But, perhaps, the most interesting aspect both presently and going forward is the impact it had on the land-based employees.
Just as a side note, the seafarers — who are, of course, also employees — are clearly horribly impacted due to the inability to perform crew changes and hence working literally months beyond their contract without being able to go home. But the focus here is on the land-based staff.
On July 1, CMA CGM still had 50 percent of their worldwide staff working from home and the situation is not materially different for other carriers. In South America, it was as high as 90 percent of the staff working from home.
First and foremost, this pokes a hole in a common myth in the industry: that carriers had not embraced digital tools and somehow remained stuck in the proverbial electronic stone age. Clearly, carriers already had sufficiently robust tools to handle the majority of tasks even in the case where, suddenly, most of the employees could no longer come into the office. Hence, the backbone operational and customer service systems were clearly up to the task.
Did the systems cater for everything? Certainly not. There are plenty of examples of manual process gaps and physical paperwork which needed to be expedited under difficult circumstances — but these were resolved.
Automation push will quicken
This also means that over the past five months, the land-based employees have proven how adaptable and valuable they are in a time of crisis. But this is where, for them, the potential troublesome outlook also begins.
If you can switch such a large part of the operation over to home offices almost immediately, it also means that the underlying systems are getting closer to automation. The current situation serves to highlight the manual gaps in the processes, and this will speed up the process of developing targeted systems to also automate these tasks. In cases where the process gaps are due to regulatory issues, the governments are now seeing the need to urgently change regulations to allow pure electronic documentation.
This means that the process of automating the entire end-to-end flow of data and documents will now move faster. In turn, this means that there will be a reduced need for back-end customer service staff to handle these tasks. What will remain is staff related to tasks which cannot be automated — notably either exceptions where something is not going according to plan, or specific services being tailor made to an individual client.
At the end of the day, this means a reduced need for land-based employees. The ones who are retained, however, should be highly skilled as they need to primarily handle exceptions.
But how much will the workforce be reduced? Most carriers do not provide specific public data to make a reasonable estimate, with Hapag-Lloyd a notable exception. In 2010, the German carrier shipped 4.9 million TEU and had 5,457 shore-based personnel at the end of the year. This means, as a simple average, that each employee had a productivity of 17.4 TEU per person per week.
In Q1 2020, Hapag-Lloyd’s productivity using this measure was 21.6 TEU per person per week. Hence, the productivity improvement had reduced their total workforce by 2,590 people compared with a situation without such improvement. Hapag-Lloyd has a global market share of 7.2%. If all other carriers have undergone a similar productivity improvement since 2010, this means the industry has de facto shed 36,000 jobs over the past decade. If the other carriers have not yet seen such improvement, the digitalization will push them in that direction and the job reductions will follow.
How much additional improvement will we then see going forward as a consequence of the digitalization? If we — very conservatively — estimate that productivity by this measure can go from 21.6 TEU per person per week to, say, 25 or 30 TEU per person per week, this would mean an elimination of an additional 20,000 to 42,000 shore-based jobs in the coming years.
Right now, the carriers’ shore-based employees are very successfully ensuring supply chain continuity despite having to work from home. However, in the longer term they are facing a development where there will be fewer of their jobs available.