The Idea of Critical Success Factors (CSFs) for the Maritime Logistics Sector Report

Executive Summary

My previous report to COSCO Group Trans-National Company (TNC) introduced to the group the idea of critical success factors (CSFs) for the Maritime Logistics sector.

This addendum report develops this idea further by;

1. being an appendix that critically evaluates three most important CSFs currently driving the Maritime Logistics sector and that additionally evaluates one CSF that I feel is being overlooked by the sector.
2. Demonstrating, to some detail, how the effective management of these four CSFs will deliver an effective Competitive Advantage for COSCO Group: over each other and over their competitors, in the Medium-Long term.

This addendum report goes on to demonstrate to the Group, using examples, how innovative Maritime Logistics processes might be introduced to it and Wilh. Wilhelmsen Holding ASA, – another Maritime Logistics company- in the Medium-term. The examples in this demonstration are current and capture successful and unsuccessful innovations.

To demonstrate its key issues this addendum report regularly compares COSCO Group and Wilh. Wilhelmsen Holding ASA. Wilh. Wilhelmsen Holding ASA is a global maritime industry group in Oslo, Norway. Morten Wilhelm Wilhelmsen established it in 1861 in Tønsberg, Norway. In 2009, Wilh. Wilhelmsen Holding ASA registered a profit of $240.8 million.

Introduction

Critical success factors, as the name suggests, are factors that are critical in determining if an organization will achieve its set mission. Critical success factors currently driving the maritime logistics sector are:

1. Information Technology.
2. Environmental awareness.
3. Research and development.

One critical success factor I feel is being overlooked by the sector is knowledge integration.

Discussion. Evaluation of Critical Success Factors

Information Technology

One most important CSF that is currently driving the Maritime Logistics sector is Information Technology (IT). IT is a CSF as it enhances the ability of industry practitioners in the Maritime Logistics sector to deliver cargo fast, safely and efficiently even with the challenges arising from the complexity of the sector’s supply chains (Khalid, Zamil and Farid, 2007, p. 1).

IT has established itself in the area of port operations and management so much that it is a competitive advantage in favour of IT-enabled ports. IT innovations and IT-based applications for the Maritime Logistics Sector have contributed significantly to the growth of global maritime trade and the sector as well. These innovations and applications enhance productivity in the three vital areas of maritime logistics (Khalid, Zamil and Farid, 2007, p.1). These are; port operations and management, shipping and land-based logistics.

IT innovations and IT-based applications in the area of port operations and management have smoothened port operations through addition of speed and efficiency. In so doing, supply chain management for industry practitioners as become less strenuous to extents that it is possible to realize a zero inventory level.

Furthermore, these innovations and applications are making ports able to handle bigger and more sophisticated ships that are the current trend. This is how; for a given ship of the above kind there is in turn a sophisticated IT controlled crane to service it, which among other things is programmed to reduce the ship’s service waiting time as much as possible. Currently, IT is a major port planning factor due to the following facts:

1. Its infrastructure and systems e.g. IT-driven machinery have to be accommodated in the port,
2. It is used as a means that ensures the most feasible use of container storage space in the port, and
3. It can dictate how container-handling equipment and labour is utilized.

Still under port operations and management, IT systems have improved port security and communications significantly.

In the area of shipping, IT innovations and IT-based applications have awarded the Maritime Logistics sector with a number of benefits. One benefit is the overwhelming boost in shipbuilding productivity through introduction of IT software for use in certain stages of this process (Khalid, Zamil and Farid, 2007, p.4). The software is important as it helps ship owners conceptualize on the design of their ships.

This is in turn important because the ships to be built should meet the ship owner’s specifications. Another benefit from IT innovations and IT-based applications is reduced cost of operations in cargo handling between ship and ship (Khalid, Zamil and Farid, 2007, p.5). IT-driven machinery has eliminated the cost arising from hiring shore-side equipment to move cargo form one ship to another. Advances in IT have led to the creation of more robust communication and navigation systems in ships that suit the different needs of ship service and sea conditions (Khalid, Zamil and Farid, 2007, p.5).

Land-based logistics are undertaken to smoothen landside operations that complete the maritime supply chain. These logistics are aimed at ensuring that there is efficiency in the flow and management of information between both ends of the supply chain on the landside (Khalid, Zamil and Farid, 2007, p.6). Clearly, IT makes the management of these logistics easy and effective because it introduces effective technologies for managing information.

To demonstrate that IT is a CSF that is currently driving the maritime logistics sector a comparison is drawn between COSCO Group TNC and Wilh. Wilhelmsen Holding ASA. The comparison reveals that both organizations are investing and spending heavily on IT systems and innovations. For instance, COSCO Group TNC has invested in the Ship and Cargo Online Monitoring System (China COSCO Holdings Company Limited, 2009, p.45)

Environmental Awareness

Environmental awareness is also another most important critical success factor currently driving the Maritime Logistics sector. With the effects of global warming being witnessed across the globe there is growing keenness on environmental protection and conservation.

Any corporate strategy whether in the maritime sector or not that promotes environmental awareness and conservation is being perceived as responsible. Governments are introducing incentives that promote environmental awareness and conservations in industries. These incentives include hefty fines for industries that are continually depleting the environment through pollution.

To demonstrate that indeed environmental awareness is a current CSF driving the Maritime Logistics Sector we draw a comparison between COSCO Group TNC and Wilh. Wilhelmsen Holding ASA. The comparison reveals that both organizations have put up strategies aimed at conserving and protecting the environment. COSCO Group TNC’s strategy is aimed at cutting down on harmful emissions and involves managing the company’s fuel consumption and researching in renewable or green energies (COSCO Group, 2009, p. 45).

This strategy has already yielded success as the Group’s annual report for the year 2009 shows that COSCO Group TNC’s energy consumption reduced by 5.59% between 2008 and 2009 (China COSCO Holdings Company Limited, 2009, p.45). Wilh. Wilhelmsen Holding ASA’s strategy is also aimed at cutting down on environmentally harmful emissions through reduction in fuel consumption and investments in green energy (Wilh. Wilhelmsen Holding ASA, 2010, p.19)

Research and Development

Research and development is another most important critical success factor currently driving the Maritime Logistics sector. Research and development is an activity undertaken mainly for broadening an organization’s knowledge (WebFinance Inc., 2011, p.1). The knowledge is useful to the organization as it is critical in making improvements to the organization’s product(s) or service(s).

Technology is advancing and ways of conducting business are changing in tandem, therefore, a greater need for organizations to research and develop. For instance, take the two critical success factors described above, a Maritime Logistics company like COSCO Group TNC has to research and develop so that it is equipped with the latest IT technology available and environmental protection and conservation techniques.

To demonstrate that research and development is a CSF that is currently driving the Maritime Logistics sector we draw a comparison between COSCO Group TNC and Wilh. Wilhelmsen Holding ASA.

This comparison reveals that COSCO Group TNC is research and development minded as evidenced by its research in renewable energy and its involvement in the research and development project, namely, Demonstration and Development of Supply Chain Application Systems based on Intelligent Container Public Service System (China COSCO Holdings Company Limited, 2009, p.45).

There is no evidence in Wilh. Wilhelmsen Holding ASA’s 2010 annual report of the company undertaking any research and development activity or being involved in any research and development project.

Knowledge Integration

One critical success factor that I feel is being overlooked in the Maritime Logistic sector is knowledge integration. This is because most organizations undertaking research and development are not aware of the concept of knowledge integration and its importance.

Knowledge integration enables the fitting together of different ideas into a single structure that is coherent (Clemens, 2004, p.4). By achieving knowledge integration, an individual or organization is able to; first, make use of available knowledge to formulate solutions to address various problems or challenges that they are facing during growth. (Clemens, 2004, p.3)

Secondly, knowledge integration helps to expose underlying assumptions and inconsistencies through reconciling conflicting ideas (Clemens, 2004, p.5). Thirdly, knowledge integration helps an individual or organization to effectively identify areas with incoherence, uncertainty and in disagreement; it does his through synthesizing different perspectives (Clemens, 2004, p.6). Finally, by weaving different ideas together knowledge integration achieves a whole that is better than the total of its part (Clemens, 2004, p.7).

Demonstrating how effective management of the above CSFs can be a competitive advantage

Now, from the evaluation above IT has been seen to boost performance in the Maritime logistics sector in a number of ways. By this fact alone, middle-to-long term investment in IT guarantees COSCO Group TNC a well-deserved competitive advantage over its competitors since it facilitates optimal performance in the Group’s operations. The same advantage applies to its constituent members who are also competing against each other

Environmental awareness is good for an organization’s marketing campaign and public relations as it portrays the company as being responsible. Furthermore, neglecting it means attracting hefty fines from relevant authorities.

Considering these facts, developing and investing in middle-to-long term strategies that promote environmental awareness and conservation guarantees COSCO Group TNC a well-deserved competitive advantage over its competitors since it ensures that the group is not running the risk of poor public relations and liabilities such as legal fines. Similarly, the same advantage applies to its constituent members who are also competing against each other.

From the evaluation above, research and development has been brought out as a robust tool for broaden an organization’s knowledge. Having the right knowledge means making informed decisions, this is critical in proper and effective management of an organization. Knowledge integration complements research and development activities and therefore enhances informed decision-making in an organization.

A robust middle-to-long term investment in knowledge integration, and research and development guarantees COSCO Group TNC a competitive advantage over its competitors since it guarantees that the Group will be making decisions that are relatively more informed compared to its competitors. The same advantage applies to its constituent members who are also competing against each other.

How innovative maritime logistics process might be introduced to COSCO Group TNC and Wilh. Wilhelmsen Holding ASA

The introduction of innovative Maritime Logistic processes to COSCO Group TNC and Wilh. Wilhelmsen Holding ASA should be a two-step procedure. The first step should be a quality test for the innovation` e.g. a Failure Mode and Effect Analysis (FMEA) test.

If the quality of the innovation is proven from the test, the next step is for the organizations to institute a middle-term project whose aim is to successfully integrate the innovation with the rest of the system. This two-step procedure is justified when you consider two examples; the first is of an unsuccessful innovation whereas the second is of a successful innovation.

A current failed innovation is the successful innovation is COSCO Group TNC’s. A current unsuccessful innovation is Orkut, which was a social-networking site developed by Google Inc. Although it passed its quality test, its implementation project was a failure and thus the social-networking site was not a success. A current successful innovation is COSCO Group TNC’s Ship and Cargo Online Monitoring System.

The system underwent a quality test and passed meaning that it was ready for operation (China COSCO Holdings Company Limited, 2009, p.46). Although the annual report does not give details on how it was integrated into the company, this report assumes that the next best step was initiating an implementation project with clearly understood objectives, phases and risks. The reason for this assumption is that a project can be monitored and tuned – if necessary – to meets its objectives.

Recommendations

This report recommends to COSCO Group TNC that:

1. It continues investing in Information Technology through the guidance of a medium-to-long term strategy.
2. It continues investing in environmental protection and conservation strategies that are middle-to-long term.
3. It continues investing in middle-to-long term research and development activities and projects.
4. It develops middle-to- long term strategies that will enable it adopt and invest in the concept of knowledge Integration.

Conclusion

The discussion above on current CSFs driving the Maritime Logistics sector should encourage as well as enlighten COSCO Group TNC on where to direct its investments currently and in the future. The recommendations made in this report if adopted by COSCO Group TNC will give it and its members a well-deserved and effective competitive advantage over its competitors and over each other respectively.

References

China COSCO Holdings Company Limited. ( 2009). Annual report 2009. Web.

Clemens, M. (2004). Knowledge Integration. Web.

Khalid, N., Zamil, A. S. and Farid, F. (2007). Leveraging The Application Of Information Technology To Gain Competitive Advantage In The Maritime Sector. Web.

Web Finance Inc. (2011). Research and development. Web.

Wilh. Wilhelmsen Holding ASA. (2010). Wilh. Wilhelmsen Holding ASA Annual Report 2010. Web.