How Does The Shipping Alliance Shape Global Trade?

Evolution of the Shipping Alliance

Earlier, the shipping container industry was primarily dominated by well-established players, a few mid-sized shipping companies and small-scale carriers. All worked separately and faced various challenges, such as high competition, increased operational costs, lack of small ports, and lack of remote trade routes to carry out international shipping efficiently. The small-scale carriers continued to ship goods restricted to their own country due to a lack of investment to acquire international trade routes and resources for advanced shipping. In the late 1990s, the big-scale and small-scale carriers bid to align and pool their resources and form an ocean alliance. It was an effective way of distributing authority among all members by providing access to all resources.

What is a shipping alliance?

The maritime industry is the most considered mode of transport for international trade. Multiple shipping carriers engage in shipping activities to fulfil the constant demand for ocean transportation. Not all carriers can extend their services to every corner of the world, and they have some or other restrictions. In these cases, carriers collaborate to form alliances to expand their services. Shipping alliances, commonly known as ocean alliances, are cooperative agreements between shipping carriers to serve different shipping routes to develop an expansive and fast transportation network globally. The ocean carriers align for a common goal to benefit from each other and offer enhanced customer service. Each carrier has access to its vessels, but under this alliance, every shipper can access every ship owned by the ally. Carriers in the alliance have the authority to move containerships according to their needs.

Importance of shipping alliance in global trade

1. Expanding shipping business- Shipping demands can come from any corner of the globe, remote or densely popular. Both big and small carriers coordinate to extend their services to inaccessible areas to allow international trade businesses to flourish. The outreach expansion helps build more contacts and gain new customers, increasing profitability.
2. Acquiring more trade routes- Shipping companies can extend a broader range of services to establish global connectivity of shipping routes. Allies cooperate by giving each other the authority to choose the fastest and best route from the joint list of shipping routes.
3. Offers enhanced customer experience- Since the route network grows with shipping alliances, the operational costs incurred by shipping companies get minimised. Therefore the freight rates to transport goods to remote areas are comparatively lesser. It helps in fostering more trade businesses throughout the globe.

Benefits of shipping alliance for shippers

1. Shipping alliances help in pooling customers affiliated with big or small-scale shippers together. The locations vary, and partnerships help in benefitting carriers at different levels.
2. Freight forwarders get the best prices and enhanced services and security offered by shipping allies.
3. Contingency plans are discussed and shared among all the members of the ocean alliance to prepare for any financial trouble or incoming disruptions such as natural calamities, trade wars or pandemics.
4. All carriers work to increase the efficiency of all member ports by distributing and providing better resources and personnel and optimising operations for more productivity.
5. Geopolitical events may disrupt the trade and financial balance of some small or large carriers. Having alliances is profitable in controlling these sudden changes and establishing stability by sharing profits and taking over their share of transportation duties.