Oocl Malaysia Is A Shipping Company Information Technology Essay

For the past decade, we have seen the increased of organizations embracing e-commerce as a strategic move to boost survival and to increase their profits. What exactly is e-commerce? Also known as electronic commerce, it is the buying and selling of goods and services on the Internet, especially the World Wide Web. [] In short, it refers to the use of the Internet and the Web to transact business. More formally though, the term e-commerce is about digitally enabled commercial transactions between and among organizations and individuals. Commercial transactions here involve the exchange of value, example, money, across organization or individual boundaries in return for products and services. [] 

The increase of firms and companies adopting e-commerce indicates the importance of e-commerce nowadays. There are four major reasons why companies are implementing e-commerce in their business. Firstly, the current and latest trend is towards e-commerce. Since internet is so mainstream these days, with majority of the households having a computer, laptop, or mobile devise, Internet has became a part of their daily lives. Secondly, most modern businesses are adopting e-commerce as part of their strategic move, as they recognized the popularity of the Internet and its convenience in online transactions. Thirdly, E-commerce helps connect businesses and consumers closer than ever before. It also helps reduces workload as it is able to eliminate the tedious tasks of calling for transactions and utilizing of e-mails. [] Lastly, engaging in E-commerce is the necessary step nowadays in making the business grow further. Due to the ease in getting things done online, more transactions can be done. This may encourage growth in the business and increase profitability for the company.

The following report will discuss on the implementation of e-commerce in Orient Overseas Container Lines Malaysia (OOCL), a shipping company. The company’s background will be briefed and an analysis into its competitive advantage will be done. Thereafter, it will discuss on the implementation of e-commerce, the social and ethical issues anticipated. Lastly, recommendations will be given.

Company Background

OOCL Malaysia is a shipping company, owned by its holding company in Hong Kong. It provides shipping and containerized transportation services to exporters, importers and traders in Malaysia. Its main business is to sell its containerized vessel space for purpose of transporting goods, from one end to another. Besides that, it also engages in supply chain management and offers customers comprehensive coverage of east-west trade corridors, with some of the fastest transit times in the industry. Through a network of local branches and offices, OOCL Malaysia offers an excellent international network of agents.

2.1 Mission Statement

The company’s corporate mission is to be the most innovative international container transport and logistics service provider. It aims to provide a vital Link to world trade and to create value for its customers, employees, shareholders and partners. [] 

2.2 Company Structure

In terms of company structure, OOCL Malaysia is made up of the following departments :

Sales and marketing department

Customer service department

Documentation department

Finance department

Operations and handling department

These five main departments work in integration to provide the best services to its clients.

2.3 Business process

Business process refers to the manner in which work is organized, coordinated, and focused to produce a valuable product or service. [] In OOCL, every department has its own functional business process. For example, in the sales and marketing department, each sales are provided with a certain target market, based on their service routing. For example, sales A will be responsible to identify customers shipping goods to china ports, sales B will target clients selling goods to Europe market and so on. Once this is established, the sales will then aggressively seek out their respective target customers and make them aware of their services and further selling these services to them. Likewise, other departments have their own functional business processes. In OOCL, the operations department will look into the daily inventory (here, containers available), monitor its inwards and outwards movement and provide a daily report on the inventory level in its container depot. The condition of the containers will also be monitored and any damages or complaints from customers, they will pass on to the customer service department to handle the individual complaints. These are part of the major functional business processes in OOCL Malaysia.

2.4 Business Strategy

In terms of business strategy, OOCL Malaysia emphasizes on its four core values, namely, to be people focus, customer focus, striving for excellence through quality and emphasizes on community responsibility. The company believes that its people are its most important assets and by having the right people for the right job, they are able to meet their customers’ needs, by being customer focus and by treating their customers as their partner. OOCL believes in long-term, mutually beneficial relationships with its customers and create value through collaboration to enhance customer competitiveness. The company tries to see things from the customer’s perspective, understanding and anticipating their requirements. [] The 3rd core value that the company emphasizes upon as part of the business strategy, is striving for excellence through quality. This is done by seeking continual improvement and striving to do the right things right the first time. The company also adopts quality tools to achieve and ensure performance excellence [] . Lastly, OOCL Malaysia places great importance on community responsibility. It believes that its success depends on the customers and its communities. In this sense, they maintain high safety standards and demonstrate their concern for the environment and adopt an ethically sound code of conduct. By focusing on these key areas, OOCL Malaysia believes that they will be able to provide a higher level of service and satisfaction to its customers.

Besides the above too, OOCL Malaysia has recognized the importance of internet and e-commerce. A website and homepage has been set up and the company has started to provide e-commerce solutions to its clients. The website of the company is : http://www.oocl.com/malaysia/eng/. By providing e-solutions, the company aims to improve its efficiency and service levels. This too forms part of the business strategy of OOCL Malaysia.

2.5 Relationship with other entities

OOCL being in the shipping and logistics industry, needs to maintain a good working relationship with various entities, for example, the port, the terminal, depot operators and government agency like Ministry of Transport and customs authority. The company ensures that information exchange between these entities are timely and accurate so that any minor problem detected will be resolved immediately. Also, by adhering strictly to the government’s and customs regulation and requirements, the company ensures that they are in good working relationship with these organizations and thus being able to run their business smoothly without much problem. By paying timely to the suppliers example to the port and terminal also, the company ensures that its vessel is able to berth on time and thus no disruption on its vessel routing and transit time from one port to another.

The next section will discuss on the company’s competitive advantage and the key differences before and after the adoption of e-commerce.

Competitive Advantage Analysis

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals [] . This is the ultimate goal of any businesses. There are two basic types of competitive advantage identified by Michael Porter, namely : cost advantage and differentiation advantage. Porter’s five forces is a framework for the industry analysis and business strategy development. [] This particular model provides a general view of the firm, its competitors, and the firm’s environment. In this model, five competitive forces shape the fate for the firm. The five forces are : Traditional competitors, New market Entrants, Substitute products and services, Customers and Suppliers. [] The following section will provide an analysis into OOCL Malaysia’s competitive advantage and business by using Porter’s Five Forces.

Traditional Competitors

All firms share market space with other competitors. For most industries, the intensity of competition from their rivals is the major determinant of the competitiveness of the industry [] . For OOCL, there are not many competitors in the industry, since the nature of shipping business is oligopolistic in nature, whereby the market / industry is dominated by a limited number of sellers. However, to capture and maintain the market share, OOCL needs to constantly strive to maintain its competitive advantage trough constant innovation, besides ensuring good pricing and quality service. Besides that, to ensure competitiveness, the company must also place great emphasis on technological advances. Companies that are successful with introducing new technology, will be able to charge higher prices and achieve higher profits, until competitors imitate them. [] Since there are limited competitors in the shipping industry, OOCL has a good advantage and will be able to remain competitive in the business as long as constant innovation, fair pricing, uses of technology and good quality services are provided at all times.

New Market Entrants

Profitable markets will tend to attract new players and firms. This will result in many new entrants, which will compete in terms of pricing and service level. Eventually, profit will be drawn down. Thus, a firm’s competitiveness and its competitive advantage will be largely determined by the ease of entry into the industry. For OOCL Malaysia, new market entrants do not pose a huge threat to the company, as there are certain barriers of entry. Firstly, to start a shipping business, huge capital investment is required. Not many firms can afford to purchase vessels or charter vessels and have a strong financial backup to operate and run the business. Secondly, government policies in place do not allow new entrants to enter the market easily as certain guidelines and requirements have to be met first. With these barriers in place, the threat of the entry of new competitors are not so easy and this provide OOCL with a competitive edge in the industry, as competition is not so great.

Substitute Products and Services

The more substitute products and services available in an industry, the less a company can control pricing and the lower its profit margin will be. [] Similarly, if there is an ease of substitution and a large number of substitute products and services available, the company will lose its competitive advantage in the industry. In the case of OOCL, the only substitute is air transportation. This means that if a customer does not want to ship out his cargo by sea, he has the option of sending the goods out by air, which is much faster than by sea. As with sea, air transportation also provides solutions in moving goods from one end to another. However, this mode of transportation comes with a much higher price and costs. Thus in terms of pricing, it will deem not to be as competitive as that of sea freight. In this case, OOCL will be able to maintain its competitive edge in terms of competing with its substitutes.

Customers

The forth force in Porter’s model is the bargaining power of customers (buyers). This is also described as the market of outputs : the ability of customers to put the firm under pressure, which also affects the customer’s sensitivity to price changes. [] The power of customers grows if they can easily switch to a competitor’s products and services, or if they can force a business and its competitors to compete on price alone in a transparent marketplace where there is little product differentiation, and all prices are know instantly. [] For OOCL, although there are not many competitors due to its oligopolistic nature of the industry, price war often happens. This is particularly so in recent years as the few main shipping lines available in the market are increasing their vessel capacity, by buying larger vessels. The growth of the vessel capacity outweighs the growth of exports and imports worldwide, and along with the economic crisis experienced lately, the situation further creates an imbalance between total container space required and total container space available. In view of these, shipping lines are competing for the limited goods or cargo available in the market and to ensure that their vessel capacity is utilized in maximum, price war is very common. In this sense, customers will be able to put the company under pressure, as they can easily switch to its competitors at the slightest price drop. Hence, the company will lose its competitive advantage as customers are now able to force the company to compete on price alone, since there is little product differentiation here.

Suppliers

The market power of suppliers can have a significant impact on firm profits, especially when the firm cannot raise prices as fast as its suppliers. [] This is also know as the bargaining power of suppliers. When there are only a few substitutes, the suppliers can be a source of power over the firm, They may refuse to work with the firm or charge excessively high prices for unique resources. For OOCL, its main suppliers are container depot operator (where OOCL will store their inventory, i.e. their empty containers inside) and the terminal itself. In terms of container depot operators, there are about 15 of them in the market. Since there are quite a number of depot operators, the suppliers do not have the bargaining power and OOCL can work with the depot operator which can offer the best pricing and level of service and hence will be able to maintain its competitiveness in the market. On the contrary, there are only two container terminals in Port Klang iself, which acts as the suppliers for shipping line. One being north port and the other, Westport. The terminal basically provides berthing space for the shipping line, laborers and operational workers to the shipping line. Since there are only two container terminal available in Port KLang, OOCL has limited bargaining power when it comes to vessel’s operational costs payable to the terminal. In this sense, the terminal has the source of power over the company and can influence the competitiveness of the company.

Facing with all these competitive forces, as elaborated above, OOCL realized that it can use information systems to counteract some of these forces. Realizing the importance of information systems and E-commerce in today’s trend, OOCL has adopted e-commerce as part of its business strategy to attract more customers and clients.

Prior to E-commerce, OOCL has to engage a large number of employees to manually receive bookings for container space for their customers. Bookings are taken from their customers via telephone. This not only increases the tele-communication costs, but at times, when phone lines are utilized or congested, the customers will have problem getting response from the customer services and have to keep dialing the numbers. Also, when customers require sailing schedule from OOCL, the customer service has to entertain them on the phone and have to fax or e-mail the schedule over to the customers. At times, when faxing over is not on time, there will be complaints by the customers. With E-commerce and information system in place, OOCL has utilized the function of the internet and at a click of the mouse, customers can now book vessel space on line and obtain the sailing schedule on the internet, without having to incur extra time and cost. OOCL, on the other hand, has been able to cut down on human resources and achieve a lower operational costs. This is the low-cost leadership strategy which is enabled by using information technology and system. Therefore in this case, OOCL should continue to improve on its e-commerce functions and carry on in adopting this technology to create more value to its business. This will ensure that the company remain competitive in the industry.

Apart from above, product differentiation is another strategy enabled by using information technology and systems. Prior to the adoption of e-commerce, bill of ladings are generated by OOCL’s documentation department and customers have to physically go to OOCL’s office to collect the document. This practice is the same as with other shipping line in the industry. However, realizing the need to remain competitive, OOCL created a system which allows its clients to go online to their website to down load and print the bill of lading in their own premise. This not only saves time for the customers, but also saves costs. In this sense, OOCL has greatly changed the customer convenience in using their existing services. Till now, OOCL is the only shipping line in the market which provides such facility to their clients. In terms of product differentiation, OOCL is able to differentiate itself among its other competitors by providing such conveniences to its clients. Thus, it is evident that the adoption of e-commerce helps the company in gaining extra advantages over its competitors.

One more significant advantage of having e-commerce is that the company can use information systems to enable a specific market focus, and serve this narrow target market better than others [] . By having online bookings to purchase vessel slots and space, data are easily made available. OOCL will know which of its clients requires what kind of service mode and structure, to which area they normally send their goods to. By having such data in hand, they can have a detailed analysis and will be able to serve their clients better by improving on their service routing and transit time. Also, they will be able to target the niche market and put extra effort in promoting areas that are not so commonly frequented by its clients. Prior to the adoption of e-commerce, OOCL was not able to manage its database accurately and response fast enough to the changing needs and trends in the market. In this sense, adoption of e-commerce is seen as a competitive advantage to OOCL.

Ethical and Socal Issues

When using the Internet and E-commerce, it is important to consider the many aspects of ethical and social issues. In the implementation of e-commerce, OOCL needs to consider the relevant ethical and social issues that may be encounter. The issue of protecting individual and corporate privacy posts as a major ethical issue in this case. When clients of OOCL signs up for their e-commerce transactions, which ranges from booking, payment, downloading and printing of bill of lading, and to payment and container tracking, they have to provide their full company and individual details to OOCL. Currently, there isn’t any privacy policy in place within the company and any of the customer service and documentation personnel in OOCL can gain access to the data of the clients. In this sense, privacy violation and transaction security breaches might happen. Also, there is no guarantee in the company that its staff with access to the clients’ database will not sell the information to its competitors. In view of these, OOCL should implement self-regulation as a means of preserving their edge in the market place. On top of that, they should have a privacy and protection policy in place to ensure that ethical issues of such do not occur. These policies should also be made to its clients subscribing to their e-services. There are generally accepted guides to ethical behavior which are adopted by professional organizations. OOCL should study further into this and subscribe to at least the minimum standards to avoid unethical issues from surfacing. Otherwise they will risk losing the trust of their customers, which will adversely affect their business too.

Besides privacy issues, there are a few ethical issues which need to be given attention to in OOCL. For instance, on line sailing schedules. The schedules provided on line, will be sent out automatically to its customers on a periodical basis. Based on the vessels’ arrival date and departure date, its customers will thus choose the particular vessel that they require to move their goods. However, at certain times, the schedules provided are not updated, and manipulation of date of vessels sometimes occur. When this happens, the clients will not have the correct information about the departure and arrival of the vessels and hence will not be able to plan properly. Problems can arise also when certain perishable goods that are time sensitive are shipped out. When shipments are delayed due to wrong information, its consequences can be quite serious. Another issue that relates to ethics is that most of the time, the websites and photos posted over the internet can be misleading and does not reflect the true picture of the company. OOCL in trying to attract more customers and clients, have designed a very thorough and detailed webpage, with photos and services which sometimes do not really represent the actual condition and services provided by the company. In this attempt to increase their market share and to bring in more clients, OOCL may have “over sold” their efficiency and services. In this sense, the company should employ a team of people to constantly monitor and provide the correct information posted on their webpage, and to ensure that the information is relevant and reflect the true picture of the organization’s operations and functions. Only through this, the company and build on the strength of information systems and e-commerce to gain a competitive advantage in the industry.

Along with the power of technology, the negative social costs of introducing information technologies and systems are beginning to mount. [] For example, in OOCL, employees may be expected to monitor work from their house and monitor customers’ booking and documentation requirements even after office hours. With the adoption of e-commerce and information systems, the traditional boundaries that separate work from family and just plain leisure will be weakened. This is especially true in OOCL as the nature of business of moving goods internationally requires fast response to customers’ requirements. Also, being international linked between offices globally, urgent information between agents and offices are required. Hence, in this case, it creates an imbalance in the life of its employees, as the work time now extends far beyond the eight-hour day. To maintain work family balance, OOCL perhaps can introduce flexi hours working scheme to its employees and allow certain of its employees to work from home. Another of the social issues that arises is that with the adoption of e-commerce, OOCL now can reduce its workforce as minimal manpower is required, since everything is now computerized. Clients now, can access most information through their website and can subscribe to their e-services for their requirements. In this case, staff layoff will happen and some employees will find themselves without a job. To prevent this, OOCL perhaps can consider transferring them into their Information technology department, as back up personnel, or perhaps retain its employees but cut down their working hours and pay. In this way, the company will be seen as socially responsible.

Implementation

The key tool for delivering e-commerce services is the business website. This must be specified, designed, hosted and maintained [] . E-commerce essentially means selling products and services on line and although it sounds simple, a sophisticated content management system is required. A quality Website with professional development and attentive management is required. There are a few key steps in the implementation of e-commerce, which OOCL should adhere to [] .

Firstly, OOCL must ensure that it has a market, and that there are customers that will purchase its services on line. In order to ascertain this, the company must conduct a survey with its existing customers, to get an indication on the demand for the e-commerce implementation. Thereafter, the company can set out to offer one. In the case of OOCL, the company has identified the demand and has ascertain the market for e-commerce.

After ensuring that there is a market for the e-commerce implementation, the next step is to consider a “clicks-and-motar” strategy. This approach is the most effective and economic as its combines traditional retailing resources with an online e-commerce presence. In this approach, transactions can be initiated and finalized either at the website (“clicks”) or at the physical site (“mortar”). This is the strategy that OOCL is adopting at the present moment. The customers have a choice to either place booking on line, or can still go through the traditional mode of placing a booking by phone. They can also choose to pay the sea freight on line or physically make payment to OOCL by going to the company.

The next step in carrying out the implementation of e-commerce is to make purchasing an integrated experience. Most consumers or customers look to the internet or web for information and may initially use it to find out about the product or services. Once they are familiarize with the website and find it easy to use, they will more likely to use it and purchase services or products on line. Also, if their personal details and purchase history can be securely stored for use in subsequent purchase, they will find using e-commerce an easy and convenient experience. In OOCL, its major services are listed on the website and detailed shipping routes are provided. By just clicking on the areas that they want to ship to, they are able to see the routing and shipment dates easily. Also, their personal details are stored and this makes it simple and easy for subsequent bookings or purchase.

Fourthly, when implementing e-commerce, the company has to plan on how to deal with the fundamentals. This means, to address issues with regards to content, pricing, fulfillment, payment, returns, support and security. For OOCL, a company website and e-commerce is already in place. The company must see that its content in the website must be updated frequently. Next, pricing must be considered. In view of the intense competition, OOCL does not list its pricing on the internet. The ocean freight levels and tariffs are not published and customers will still have to obtain the rate from OOCL via e-mail or fax when required. In terms of fulfillment, precise information about their service status is essential. In OOCL, customers are able to track their container and obtain information about which port the container is, and when roughly their cargo will arrive in destination. This part or tracking requires careful management and involve high costs. The next point to consider before implementation of e-commerce is in terms of payment. OOCL needs to consider the kind of payment mode. Also to consider is the supporting function. How can OOCL support the services selling on line? There must be a support function on the website to answer basic questions by customers. Lastly, security poses a main concern. OOCL must have in place a security policy to avoid fraud and hacking of computer systems.

Next, for successful implementation of e-commerce, OOCL must create an easy-to-use purchase process. The company must keep the steps as simple as possible and provide the information clearly at the top of the web page. This can be done by purchasing the right software for its e-commerce operations. Lastly, OOCL in carrying out its e-commerce functions, must ensure that it has a capable team in place. Daily maintenance must be carried out and technical problems must be fixed, new contents must be published and old contents removed. By following the key steps outlined above, OOCL will be able to successfully implement its e-commerce function and adds value to its business, thus creating a competitive edge in the industry.

To determine the benefits of adopting e-commerce, the costs and benefits must be calculated. In investing in e-commerce, there will be an immediate cash outflow, caused by investment for hardware, software and labor. Therefore, the company must have a clear budget allocated in the implementation. A realistic budget allocation will be RM5000 per month for maintenance of the website and for technical support. With the implementation of e-commerce in OOCL, there will be clear changes in its key business process. As mentioned above, booking will be done online instead of by phone and fax. Customers will have to key in all the details of the cargo that they want to send instead of being done by the customer services previously. In terms of marketing and sales, instead of calling up customers and to find out their service routes etc, the sales person can now rely on the data base in their computer system to understand better the needs and requirements of their customers and the areas that they normally ship to. Next, since sailing schedules are now online, there is no need for the customer service department to prepare the schedules manually and fax over to the customer. On the operations side, instead of calling the depot operators to get an update on the inventory movement, the operations person can now monitor its equipment status on line, as OOCL has now in place a portal vendor, whereby a direct linkage with its vendor is made available on line and OOCL can check, at any time, the movement of its containers, in and out from the depot. These all are changes in the key business process which increases efficiency and effectiveness.

Once the e-commerce is implemented, a simple e-commerce marketing plan to create awareness in the target market on the availability of e-commerce for OOCL must be created. Without which, customers will not be aware of the existence no matter how well designed the e-commerce site is [] . Here, to arrive at the marketing objective of creating awareness in its target market, a proposed marketing plan with emphasis on one of the four ‘P’s, that is, Promotions, will need to be carried out :

Firstly, to create awareness among its customers, OOCL will need to position its website within search engines to get maximum exposure. It can include optimizing the site through key words, link popularity, or banner ads. Almost everyone uses one of the 3 major search engines, that is, MSN, Google and Yahoo. By positioning its website within these search engines, it can effectively generate visitors to its websites and create awareness. Next, OOCL can also use the simple method of e-mailing advertising campaigns. It can create awareness among its target customers by sending out advertising leaflets by e-mail to inform them about its e-commerce sites availability. In terms of off line promotion, OOCL can promote its website through personal selling, whereby its sales person can visit the individual existing and new customers, and promote their website accordingly. Also, it can advertise its website in local shipping magazines and newspaper to create awareness and attract more visitors and customers to its e-commerce site.

Conclusions and Recommendation

Based on above report and analysis, it can be concluded that e-commerce plays an important part in business organization and thus in OOCL too. By having an effective information system and e-commerce site in place, the company can derive much benefit from it, for example, reduced workload, improve employees’ performance and hence increase company’s revenue. OOCL will be able to gain competitive advantage in the industry if its e-commerce adoption is implemented effectively and accepted well by its customers.

The above report has also shown that by using information technology and system, OOCL was able to adopt the low-cost leadership strategy, product differentiation strategy and specific market strategy. All these combined, provided with OOCL a competitive edge in the shipping industry as it is able to differentiate itself among its other competitors.

Although there are many benefits of using the Internet and E-commerce, OOCL should be aware of the ethical and social issues that exist. Besides security and privacy issues, OOCL must also ensure that information published on its sites are correct and updated and no manipulation of data of information should exist. On the negative social issues that arise from adopting e-commerce, like staff layoff, and work life imbalance, the management of OOCL must also find a solution to minimize such occurrence.

Today’s service industries could not operate without information systems. It is a foundation for business in the 21st century. There is a growing interdependence between a firm’s ability to use information system and e-commerce and its ability to implement corporate strategies and achieve corporate goals. In carrying out the implementation process, there are key steps that the company must take, for maximum efficiency and benefit. Since E-commerce is gaining popularity and importance, it is recommended that the management of OOCL constantly upgrade and maintain its website and internet functions. Careful budgeting and changes to the key business process must be made, to fully utilize its e-commerce sites. However, merely having a sophisticated site is insufficient if it is unable to bring the customers to view and use the site. In this sense, therefore, a marketing plan which focuses on promotional activity must be aggressively carried out. Lastly, the company must invest in its human resources functions, to ensure that a team of capable and supportive employees are available to carry out its objective of promoting and maintaining its existing site. It is hoped that the investment in information system and e-commerce, the ultimate objectives and mission of the company, which is, excellence, new services and business models, customer and supplier intimacy, competitive advantage, survival and profitability will be achieved.