Maintaining Stolt Tank Container’s Competitive Advantage In The Digital Age
The tank container industry has struggled with sluggish demand and increased competition. How can Stolt Tank Containers position its digital ecosystem at the center of service for their customers?
Over the past 5 years, the global tank container fleet has been challenged by a compound annual growth rate of 8.5% of the delivery of new tanks resulting in a sharp reduction in rates.[i] Within this fleet development however, there is a growing trend in favor of the operators as shippers are outsourcing logistics requirements. Stolt Tank Containers stands as the world’s largest operators with 35,000 stainless steel tank containers in their fleet, representing 10% of global supply.[ii][iii] By specializing in food grade products and specialty chemicals, STC excels through superior handling and safe, reliable and quality transportation. As the market faces further pricing pressure, incumbent operators stand poised to benefit from this competition as customers will prioritize quality of services. In order to take the lead in this trend, STC must focus on providing superior door-to-door information technology and leasing management systems.
STC’s proactive approach to these needs are reflected in their investments into mySTCtanks.com and their Quality Leasing Management system. In a recent McKinsey Report on the container shipping industry, they survey the growth in digital startups in transport and logistics due to influx of venture capital funding.[iv] For instance, Xeneta, an Oslo based startup, offers customers simplified access to over 35 million spot and long-term contracts.[v] That being said, these solutions are marketed towards the container market. Further given the complex nature of specialty chemical and food grade products, digital innovation must be handled by the incumbents. This is where STC has taken meaningful steps by developing mySTCtanks.com, their independent shipment management system.
The standout value add from the website is the quoting & booking system. Within the tank container industry, the customers vary by long term contracts or spot market orders. Depending on the nature of the supply, the company might interface directly with a manufacturer or through a dedicated broker. In either instance, the customer is afforded immediate quotes enabling access to quick pricing in an industry that was once dominated by a paper trail of communications between the customer, broker, and logistics provider.[vi] As the market experiences more competition, quick access to such information provides STC with a significant competitive advantage.[vii]
Remaining conscious of the nature of the products which STC ships, asset-intensive industries such as chemicals or food product supplies have increasingly been digitizing their supply chains.[viii] Subsequently, the need for their logistics partners to provide equally informative data has compounded and therefore addressed in STC’s track & trace systems. The ability for a customer to analyze the time spent at each of the points of distribution through the journey allows for constant cost efficiency solutions that both the customer and STC can work on together.
The long-term opportunity that STC must continue to develop and explore is their Quality Leasing Management interface. Given the growing trend towards operators, it is unclear how STC has made this unique platform readily available through digital means. It might be easy to assume that much of this work is human capital intensive however by potentially integrating mySTCtanks.com with a QLM interface, STC might be able to provide quick and reliable quotes to shippers who are looking to outsource logistics.
As digital disruptors are aggregating pricing information across logistics providers, STC should be the first movers in the industry to increase transparency of rates across suppliers. This can be done by working with selected freight forwarding IT companies to create such a platform. By doing so, given STC’s notably superior quality in logistics and pricing power from scale, there will be increased mobility in the industry that inevitably STC will benefit from.
Broader to this conversation, it is unclear how increased competition in the industry, in terms of the number of operators, are reacting themselves? The nearest competitor to STC stands asthe Hoyos Group with roughly the same number of tank containers in the market. The breadth of chemical storage solutions they offer make it potentially more difficult to offer one single digital solution. Will being horizontally integrated and differentiated act as a barrier to digitization or offer more potential solutions?
Further, as world trade increases and container shipping reaches its most consolidated stage, how will digital solutions in this broader industry adapt to more specialized forms of shipping?
[i] International Tank Container Organisation, Global Tank Container Fleet Survey: 2017, viewed November 10, 2017, https://www.international-tank-container.org/library/#newsletters.
[ii] “State of the Tank Container Markets”, Tank Container Finder, June, 2017, https://tankcontainerfinder.com/blog/view/state-of-the-tank-container-market-2017-14.
[iii] Stolt-Nielsen 2016 Annual Report, Accessed, November 10, 2017, https://www.stolt-nielsen.com/en/investors/.
[iv] McKinsey & Company, Container Shipping: The Next 50 Years, viewed November 4, 2017, https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/how-container-shipping-could-reinvent-itself-for-the-digital-age.
[v] Xeneta, viewed November 10, 2017, https://www.xeneta.com/freight-forwarders.
[vi] McKinsey & Company, Container Shipping: The Next 50 Years, viewed November 4, 2017, https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/how-container-shipping-could-reinvent-itself-for-the-digital-age.
[vii] Stolt-Nielsen Limited, “mySTCtanks.com”, viewed November 10, 2017, https://www.stolt-nielsen.com/en/our-businesses/stolt-tank-containers/mystctanks/.
[viii] Schrauf, S. and P. Berttram, Industry 4.0: How Digitization Makes the Supply Chain More Efficient, Agile, and Customer Focused, PWC Strategy& (2016).
Student comments on Maintaining Stolt Tank Container’s Competitive Advantage In The Digital Age
Great ‘insider’ article – it was fun reading about the family business. I wonder as well how the increased pricing transparency through online platforms will impact pricing. Usually greater pricing transparency leads to better pricing for the customer as they can ‘shop’ around more – I’m curious to what extent greater transparency will impact prices in the shipping industry.
In terms of superior door-to-door information management, my mind heads to blockchain. As a good chunk of the other TOM Challenge essays seem to shouting that blockchain is coming to food and agriculture fast, I wonder if Stolt getting moving into a universal ledger system would enable to better integrate with customer supply chain information management and this integration could become a competitive advantage to give an edge over Hoyos group and others. It looks like Maersk has recovered from that pesky breech that had them working off of private cell phones, and is now working with IBM to integrate blockchain. Maybe Stolt can take advantage of lessons that partnership is learning.
Reading this article, I wonder how digitization changes STC’s “edge” in this industry. This reminds me of our case on Li & Fung. This is another B2B business that has been around for a while and has significant market share. One of Li & Fung’s biggest advantages was its relationship with upstream providers, which made their position defensible even once digitization arrived. Otherwise, digitization could have democratized this industry, disintermediating Li & Fung, or spreading demand among competitors. Whether STC is threatened here also might depend on if their current edge is based on 1) relationships and 2) managing significant complexity for customers. If it is mostly based on cost and quality, digitization could only serve to amplify that advantage.
I think its always important for companies facing pricing pressures to reevaluate what truly is their value proposition to customers. I think it’s smart for companies like Stolt Containers, that historically had a very simple value proposition to be forward thinking and see how they can be less of just a transport company, but one that can provide a breadth of services and conveniences to their customers in order to maintain a competitive advantage and maintain prices. Its key to be honest about what business you’re actually in, (for example Amazon not being so much a market place as much as an expert in logistics) so that you can stay ahead of your consumers evolving expectations.