Ocean Risk Management part 2: Navigating Global Shipping Alliance

Ocean Risk Management part 2:

Navigating Global Shipping Alliance


The shipping industry continues to evolve. With market swings and changing consumer demands forcing companies to adapt to stay competitive, one approach that has gained popularity in recent years is the use of Global Shipping Alliances (GSAs), which are agreements between multiple carriers to share vessels, routes, and other resources. While GSAs can provide benefits such as cost savings and increased efficiency, they also introduce new risks and challenges for shippers. In this article, we explore the pros and cons of the alliance model in the shipping industry, compare the solo strategy versus alliance strategy, and provide tips on how shippers can prepare for market swings. Additionally, we examine the decision between using a carrier or a Non-Vessel Operating Common Carrier (NVOCC) as a vendor and how this choice can impact risk management.


History of Shipping Alliances: 

Since 1990 the shipping market has evolved significantly; container ships operated are larger and more specialised, massive infrastructure developments have been made in ports as well as modernization and automation in order to handle the increase of volume. In recent years there has been a focus on Green Shipping and sustainability to decarbonize the shipping market.

In this article we will focus on another key development in the shipping industry: Global Shipping Alliances (GSAs). The first ocean alliance was the Grand Alliance which was formed in 1998 between three major shipping companies: Hapag-Lloyd, NYK Line, and OOCL. Where do we stand today? How alliances in the shipping industry might impact shippers? How should shippers be prepared to secure their supply chain operations?

History of Alliances in Container Shipping

Source: Port Economics, Management and Policy


What are Global Shipping Alliances (GSAs) in the shipping industry?

Global Shipping Alliances (GSAs) are agreements between shipping companies to share vessels, ports, and resources. GSAs should allow shipping companies to offer more frequent and reliable services to their customers, while also reducing costs and improving efficiency in a highly competitive industry.

In early 2023 three major ocean alliances were operating:

  • The 2M Alliance is a partnership between two of the world’s largest shipping companies, Maersk Line and Mediterranean Shipping Company (MSC). The alliance was formed in 2014 and covers major shipping routes between Asia, Europe, and North America. The 2M alliance will be disbanded in 2025. According to experts, Maersk is focusing on its end-to-end logistics strategy whilst MSC wants to consolidate its position as the largest container shipping company in the world.
  • Ocean Alliance: The Ocean Alliance was formed in 2017 and consists of four major shipping companies: CMA CGM, Cosco Shipping, Evergreen Line, and OOCL. The alliance covers shipping routes between Asia, Europe, and North America, as well as routes within Asia.
  • THE Alliance: THE Alliance is a partnership between five major shipping companies: Hapag-Lloyd, Yang Ming, ONE, HMM, and Ocean Network Express (ONE). The alliance was formed in 2017 and covers major shipping routes between Asia, Europe, and North America.


Are alliances the best model in the shipping industry?

The effectiveness of alliances in shipping depends on various factors, including the routes, the types of goods being transported, the competitiveness of the industry, and the specific goals of the participating companies.

While alliances can bring benefits such as increased efficiency, reduced costs, and improved market share, they may also face challenges such as coordination difficulties, competition law issues, and potential conflicts among partners.

There is no one-size-fits-all approach to alliances in shipping, and different companies may choose different models depending on their needs and goals. Some companies may prefer to operate independently, while others may prefer to form alliances or merge with other companies. Ultimately, the success of an alliance depends on how well the partners can work together and achieve their shared objectives, as well as how well they can adapt to changing market conditions and customer demands.


Solo strategy versus alliance strategy

A solo strategy allows companies to maintain full control over their operations, schedules and routes. In theory, it allows companies to make quick and independent decisions, and to maintain their own brand identity. However, it may also limit the ability of companies to access certain markets or resources, and it may result in higher costs due to the lack of economies of scale.

Overall, the choice between a solo strategy and an alliance strategy in the shipping industry depends on various factors such as the company’s size, market position, and strategic goals.

When the 2M Alliance is disbanded, it will lead to changes in shipping routes, service frequency, and pricing. Customers will in turn need to adjust their shipping arrangements, which could cause disruptions and delays.

Furthermore, the cessation of the alliance could ultimately lead to a shift in the balance of power among the major players, and potentially prompt other companies to form new alliances or partnerships to maintain their competitiveness.


How could shippers be prepared for these market swings?

To be prepared for market changes, shippers need to know their shipping routes. What are the port pairs they are operating in? Are these port pairs easily substitutable with other ports of loading or ports of destination? It is not just necessary for shippers to have a clear mapping of their routings but to also have a clear understanding of the market offer. 4 key criteria which will help shippers find the best service available on the market would be:

  • Cut off day is the last date and time a container can be returned to the port terminal in order to make a sailing schedule. It’s usually two days before the expected departure date. Potential cut off days should be calculated based on the handover day of your vendor at origin.
  • Estimated time of departure (ETD) is when the ship is estimated to leave the port. In the case of transshipment (unloading of goods from one vessel and loading them into another to complete a journey to the final destination port) the ETD of the first vessel will impact the operation of the second vessel before reaching the final destination.
  • In addition to the ETD, the sailing frequency is also an important factor to take into consideration while choosing your shipping services. Sailing frequency refers to the regularity of ship departures on a specific shipping route or trade lane. For example, a shipping line may offer a weekly sailing frequency, meaning that a vessel departs from a certain port every week.
  • Estimated time of arrival (ETA) indicates when the cargo shipped is expected to arrive at its final destination. Some terminals do not operate during weekends so one would prefer to have a weekday ETA. Selecting the “right” ETA could lead to savings on demurrage and detention costs.
  • Transit time is the time it takes for a shipment to be transported from the port of origin and delivered to the port of destination. Transit time expectation might be different for shippers to another on the same port pair. Indeed, some operations at destination as well as documentation requirements or willingness to decrease carbon footprint by using a longer transit time might lead to different transit time expectations. Transit time reliability should be monitored since it is crucial for shippers and logistics providers and impact supply chains key performance indicators.

It’s recommended that for each port pair, shippers select at least 2 or 3 different shipping service options. With the actual moderate service reliability rate as well as high level of blank sailings it is compulsory to have a short list of backup carriers.

In order to monitor the market closely we advise shippers to consult specialized websites that provide global market information on shipping services availability and some analysis on their performances.


Will you use an MLO or a Non-Vessel Operating Common Carrier (NVOCC)?

Logically, dealing directly with a main line operator (MLO) that operates the service is the right approach. Indeed, direct contracts will enable shippers to negotiate the best package that include: rates, volume capacity, container availability and some extra services.

To make a choice between carriers, you should consider various factors such as the routes and ports they cover, the service quality, the pricing, and the customer support. You may also want to consider the company’s sustainability initiatives, innovation, and digital solutions. Ultimately, the choice between carriers depends on your specific needs and priorities as a customer.

ATBBS (average time between blank sailings).

Main Incentives for Carriers to be Involved in Alliances

Source: https://porteconomicsmanagement.org/pemp/contents/part1/ports-and-container-shipping/incentives-carriers-alliances/

Not all companies can utilize shipping alliances effectively. For example, small shippers with small ocean Full Container Load (FCL) will not be able to command bargaining power to negotiate directly with shipping lines. In addition, supply chains relying heavily on door-to-door transportation will discover that many shipping lines are not able to provide satisfactory solutions and therefore gravitate towards using freight forwarders or NVOCC.


In conclusion, global shipping alliances have become a popular strategy in the shipping industry for reducing costs and increasing efficiency. However, they also introduce new risks and challenges, such as reduced flexibility and dependence on other carriers.

Shippers must carefully evaluate their options and implement effective risk management strategies to mitigate these risks. By understanding the pros and cons of different approaches and staying up-to-date on industry trends, shippers can stay ahead of the curve and ensure successful operations in the ever-evolving world of ocean shipping.About the LCSMS Shippers’ Council” heading_tag=”h5″ alignment=”left”]

The LSCMS Shippers Council is a very active group of major Shippers. The group members share their logistics expertise, and industry common challenges and discuss opportunities and solutions. This engagement advances knowledge and expertise for logistics practitioners across the spectrum of supply chain topics.

The group meets on a regular cadence, both virtually and in person, to raise and discuss topics of interest with attention to current and pressing relevant subjects. This group is not just a “talk shop session” but one where the focus is on achieving outcomes.

If you are a Shipper and interested to hear more on this topic or would like to join the Council, please feel free to contact us at elee@lscms.org.

.This article and the views contained therein was prepared or accomplished by the LSCMS Shippers Council. The opinions expressed in this article are strictly those of the LSCMS Shippers’ Council and not attributable to a specific individual or enterprise.[vc_text_separator title=”MORE FROM THIS EDITION” border=”no”][vc_single_image image=”20481″ img_size=”medium” qode_css_animation=””][ult_layout layout_style=”4″ list_style=”6″ s_image=”0″ s_excerpt=”0″ s_categories=”0″ s_metas_o=”0″ s_metas_t=”0″ quick_view=”0″ taxonomies=”post_tag” price_font_weight=”” atcb_font_weight=”” title_font_weight=”normal” title_font_style=”normal” title_text_transform=”capitalize” metas_font_weight=”” excerpt_font_weight=”” filter_font_weight=”” tab_font_weight=”” pagination_font_weight=”” title_font=”Lato” title_font_size=”12pt” i_taxonomies=”364, 365″ d_i_filter=”364″]