Barriers to Container Management Outsourcing as

Business Model Innovation in the Sea Cargo Industry

Submitted by

Erik Preisigke

European Master in Business Studies

University of Kassel

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“It is not the strongest of the species that survives,

not the most intelligent that survives.

It is the one that is the most adaptable to change.”

― Charles Darwin

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Abstract

Title: Barriers to Container Management Outsourcing as Business Model Innovation in the

Sea Cargo Industry

Background: Since the first international sea cargo container shipping in 1966,

containerization has not just been a key enabler of globalization but also shaped international

trade as we know it today. It is a prime example for business model innovation. Nevertheless,

modern sea cargo container logistics still face a lot of problems. Economic, environmental,

and recent political developments cause many challenges. There are a lot of efficiency and

effectiveness opportunities left open. The air cargo industry, on the other hand, seems to be

very innovative. In the last decade, it has become common use in the industry to outsource

the management of containers. The benefits of this business model innovation are cost and

time savings for the airlines as well as decreased environmental impact. It turned out to be a

great exploitation of efficiency and effectiveness opportunities and soon established as a

profitable business model.

Purpose and Contribution: Container management outsourcing has been a huge success in

the air cargo industry, but it is broadly unknown in the sea cargo industry. Hence, the purpose

of this paper is to explain, why this business model had not been implemented in the sea

cargo industry, yet. Therefore, challenges for the implementation of container management

outsourcing in the sea cargo industry shall be identified and evaluated. For this reason, the

research question of this paper shall be: “Why has the business model of container

management outsourcing not been implemented in the sea cargo industry, yet?”

Methodology: Due to the lack of literature, this study takes an exploratory approach. Thus, a

qualitative study will be conducted. Semi-structured expert interviews will be conducted.

There will be two rounds of interviews. First, there will be interviews with experts in air and

sea cargo container management. Second, the result from the first round will be presented to

academic experts in logistics and business model innovation. The results from both rounds

will be analyzed to find an answer to the research question.

Keywords: container management, outsourcing, business model, business model innovation,

institutional isomorphism, sea cargo, efficiency, sustainability

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Table of Contents

Abstract .................................................................................................................................. 3

Table of Contents ................................................................................................................... 4

Index of Figures ..................................................................................................................... 5

Index of Tables ....................................................................................................................... 5

1. Introduction ........................................................................................................................ 6

1.1 Background ................................................................................................................. 6

1.2 Purpose and Scope of this Research ............................................................................ 7

1.3 Structure ...................................................................................................................... 8

2. Theoretical Framework ....................................................................................................... 9

2.1 Fundamental Definitions ............................................................................................. 9

2.2 Institutional Isomorphism ......................................................................................... 12

2.3 Barriers to Business Model Innovation ..................................................................... 13

2.4 The Business Model Container Management Outsourcing....................................... 14

3. Methodology ..................................................................................................................... 19

3.1 Research Design ........................................................................................................ 19

3.2 Data Collection .......................................................................................................... 20

3.3 Data Analysis and Assumptions ................................................................................ 21

Working Plan ........................................................................................................................... 22

Literature .................................................................................................................................. 23

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Index of Figures

Figure 1 – Comparison by Size of TEU (left) and ULD (right) (source: own figure) ............. 14

Figure 2 – The 20 biggest container shipping lines in terms of TEU in 1,000 TEUs on 13th

Aug 2018 .................................................................................................................................. 15

Index of Tables

Table 1 – Working Plan ........................................................................................................... 22

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1. Introduction

The first chapter shall first present the background and thereby, the motivation for this

study. Second, it shall present the purpose and scope of the research. At the end of this

chapter, there will be an overview of the structure of the whole thesis.

1.1 Background

The shape of the modern world economy is characterized by a vast amount of risks and

insecurities. Contemporary developments like advanced globalization or recent political

protectionist progresses impede operation of internationally active enterprises. This

incentivizes enterprises to reconsider their current business models and drives them to exploit

innovation opportunities. Enterprises have to be innovative to survive under harsh

environmental conditions. To paraphrase Charles Darwin, it is the entity most adaptable to

changes survives the others.

It was a time when finding Italian olive oil in US supermarkets or Argentinian Angus

beef in Europe would have proven difficult. On 26th April 1956 in New Jersey, 58 containers

were unloaded from their truck trailers. Those containers were then loaded onto Ideal-X, an

outdated tanker ship, and transported to Houston, Texas (Levinson, 2006, p. 1) one year after

those intermodal containers were commissioned (Teece, 2010, p. 176). This could be labelled

as the beginning of containerization. Since the first international sea freight container

shipping, 10 years later, in 1966 (Talley, 2000, p. 933), the impacts of containerization have

been powerful: it has not just been a facilitator of international trade and shaped its

development, but it has also been a crucial event in the progression of international business

(Nurosidah, 2017, p. 93). Furthermore, containerization has also been one of the major

factors in the 20th century that enabled and accelerated globalization (Bernhofen et al, 2016a).

Nowadays, containerization has become an indispensable part of global supply chains. And

you will have no problems buying goods coming from all around the world. This shows the

global importance of containers and their efficient management.

Containerization is not just “[o]ne of the oldest logistics innovations in international

business” (Nurosidah, 2017, p. 93) but also one of the prime examples for business model

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innovation in international sea cargo container logistics. The transportation of goods in

containers provides several advantages. Containerization decreases theft and damage due to

less handling and inventory due to more reliable and faster transportation (Talley, 2000, pp.

936-937) and facilitates intermodal transportation (Dejax & Crainic, 1987, p. 233).

Nevertheless, modern container logistics and global trade face major challenges like

economic, environmental or recent political developments like protectionism or populism. It

seems that a lot of new problems arise in higher speed than their solutions. Apparently, after

the “big bang” of container revolution in the 1960s, there has been no big innovation in the

management of containers and the innovation potential in the sea cargo industry came to a

standstill.

However, the air cargo industry has come up with an interesting business model

innovation: it has become common use in the last decade to outsource the management of

containers. The benefits are cost and time savings for the airlines as well as increases in

effectiveness and efficiency. Thus, in the air cargo industry container management

outsourcing has as a profitable business model.

In sea transportation, container management outsourcing does not exist so far. Also, the

lack of literature about container management outsourcing in sea cargo shows that this

concept is widely unknown and has not been considered so far.

1.2 Purpose and Scope of this Research

This paper addresses practicians and researchers in equal shares. On one hand, it shall

call attention to the lack of scientific research about container management outsourcing. On

the other hand, it shall incentivize the sea cargo industry to reconsider their current container

management models with respect to efficiency and effectiveness.

Maritime container shipping has a high importance for global trade. More than 22.5

million sea cargo containers exist worldwide. They are continuously moving. World

container throughput in 2017 was 752,000,000 TEU (UNCTAD, 2018), that are more than 2

million TEU per average day! Moreover, it accounts for approximately two thirds of globally

traded goods by value and 80% by volume (UNCTAD, 2017, p. 61). Hence, an improvement

in efficiency could not just have tremendous impact on maritime trade but on global supply

chains.

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Institutional isomorphism explains why organizational structures converge over time.

Knowing that container management outsourcing has been a huge success in the air cargo

industry in terms of cost reduction, container movement efficiency and effectiveness, the

question arises if this business model is transferable to sea cargo containers and what the

barriers are.

Furthermore, even though the concept of container management outsourcing has

received a lot of attention in practice, it has been ignored to a large extent by scientific

research. Therefore, this paper shall evaluate first, the current situations in air and sea cargo

container management. The purpose of this paper is to identify risks and benefits as well as

barriers to the implementation of the business model outsourcing in the field of sea cargo

container management. Therefore, this paper shall evaluate the practicality of this concept in

the sea cargo industry.

For this reason, the research question of this paper shall be: “Why has the business

model of container management outsourcing not been implemented in the sea cargo industry,

yet?” (“Is it applicable to the sea cargo industry and what are the reasons for that?”)

1.3 Structure

The second chapter shall construct the theoretical framework for this thesis. For this

purpose, it shall clarify the scientific concepts of business model innovation and structural

inertia. Moreover, it shall also give an outlook on container logistics. Therefore, it shall

discuss the theoretical foundation of efficient container management as well as the benefits

and risks of outsourcing in logistics functions.

The third chapter shall describe the methodology of the approach used in this Master

Thesis. There will be qualitative interviews. After an introduction of the research design, the

data collection shall be described, and the data shall be evaluated.

The forth chapter shall analyze and discuss the findings obtained through the study. It

shall show the applicability of container management outsourcing in the sea cargo industry.

Last but not least, the firth chapter shall sum up the findings, conclude, and provide an

answer to the research question.

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2. Theoretical Framework

This chapter serves the purpose is to give the theoretical framework for the underlying

problem. Therefore, it will first introduce fundamental definitions of business model and

business model innovation. Afterwards, it will discuss the scientific concept of institutional

isomorphism. Then, this paper shall discuss structural inertia and market entry barriers.

Furthermore, it shall also give an introduction as well as theoretical foundation for the

practical problem that underlies this thesis. It provides information about the current

innovation situation in both, the air and sea cargo industries, give an outlook on efficient

container management and the concept of container management outsourcing.

2.1 Fundamental Definitions

In order to evaluate the practicality of container management outsourcing as a business

model innovation in the sea cargo industry, the fundamental definitions of business model

and business model innovation have to be clarified. Not only scientific research shows its

interest in business models, they have also gained importance in the free market economy

(Casadesus-Masanell & Zhu, 2013; Chesbrough, 2010). Modern drivers like globalization,

technological progress, deregulation, and changes in consumer preferences alter business

environments. These developments facilitate a vast increase in the importance of business

model innovation (Casadesus-Masanell & Ricart, 2010; Casadesus-Masanell & Zhu, 2013, p.

464). Between practicians, the term business model is frequently used and it has already

found its way into everyday language. But both definitions of business model and business

model innovation are not clear in scientific research.

Even though the first mention of the term business model can be traced back to 1954, it

represents a relatively new field of academic research (Casadesus-Masanell & Ricart, 2010).

As a consequence, there is no scientific consensus about the definition of a business model

(Baden-Fuller &Morgan, 2010; Zott, Amit, & Massa, 2011; George & Bock, 2011; Foss &

Saebi, 2017). Due to the non-existent clear definition of business model, it was examined

from many different angles. Spieth, Schneckenberg, and Ricart (2014) categorized

preexisting literature and identified three key roles what business models are about:

Explaining the business (business model is the ability of an organization to explain to its

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external shareholders and internal employees how it is going to make profit), running the

business (operational aspects), and developing the business (business model supports the

management in definition and development of the organization’s strategy). For this paper,

mainly the third role is of interest. Examples are Amit and Zott (2001), Teece (2010),

Casadesus-Masanell and Ricart (2010), Baden-Fuller and Morgan (2010), and George and

Bock (2011).

Amit and Zott (2001, p. 511) define business model as depiction of “content, structure,

and governance of transactions designed so as to create value throughout the exploitation of

business opportunities”. Teece (2010) defines business model as a conceptual architecture of

a business. Casadesus-Masanell and Ricart (2010) describe it as “logic of the firm, the way it

operates and how it creates value for its stakeholders”.

Throughout the existing literature it becomes clear that all these definitions are built

around the creation and capture of value. In other words, a business model allows companies

to create value, keep a share of the additional value within the company, and deliver the rest

of the additional value to its customers (Chesbrough, 2010; Teece 2010). Since there is no

common agreement about a standardized definition about business model in previous

literature, the definition as “creation and capture of value” in an organizational context shall

be used in the context of this paper.

More recently, the focus has turned to the concept of business model innovation. It has

gained attention by scientific research later than business model and it has therefore less

theoretical foundation (Markides, 2013; Foss & Saebi, 2017). As a result, it is not easy to

define business model innovation. The first part, business model, was defined earlier in this

paper as creation and capture of value in an organizational context. The second part,

innovation, can be seen as implementation of new ideas. It comes from the Latin term

“innovatio” which is translated to renewal or alteration. Thus, in its word origin, innovation

describes the act of modifying something preexisting. Combining the definitions of business

model and innovation, business model innovation is an alteration of how to create and

capture value. Casadesus-Masanell and Zhu (2013) have the same understanding: they define

business model innovation as a business’s new approaches for its stakeholders’ value creation

and capture. Spieth, Schneckenberg, and Ricart (2014, p. 237) describe business model

innovation as questions additionally to business models about “novelty in customer value

proposition and […] respective logical reframing and structural reconfigurations of firms”.

Markides (2006, p. 20) defines business model innovation as “the discovery of a

fundamentally different business model in an existing business”. Moreover, business model

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innovation is not a simple modification of an existing business models, but rather “related to

a radical change” (Laudien & Daxböck, 2016, p. 421) or “a fundamental change construct”

(Spieth, Lundberg, & Matzler, 2014, p. 261). It becomes clear that despite the lack of a

common consensus about a definition of business model innovation, there are, again,

similarities in the literature. They can be used to elaborate a definition of business model that

serves the purpose for that paper: business model innovation is an alteration of value creation

and value capture.

The first economic ideas contributed to the concept of business model innovation can

be found in the early 20th century. Thus, it is an old issue that had not been addressed by

researchers for decades. It was the famous economist Joseph Schumpeter (1911) who was

describing a concept which can nowadays be understood as business model innovation. His

definition of this concept is non-materialistic and does not affect products immediately, but

their value (1911). This depiction and the elaborated definition of business model innovation

from modern researchers have surprisingly strong similarities.

According to the elaborated definition, also containerization is a prime example for

business model innovation (Teece, 2010). It was a revolutionary new way to transport goods

that created value by decreasing transportation time and cost and increasing efficiency and

captured it. It is interesting that the best example for business model innovation in the sea

cargo container management industry, of all things, is the innovation that stood at the very

beginning of the industry.

Of course, the success of a novel business model can evoke the envy of competitors.

Business model innovation can result in copycats trying to imitate the new business model.

Copycat organizations mimic successful, innovative organizations (DiMaggio & Powell,

1983). Therefore, it is essential for new entrants to think wisely about either adopting an

established business or competing through the new business model (Casadesus-Masanell &

Zhu, 2013). If the innovating organizations keep on innovating, they will have sustainable

success (Larsen, Markides, & Gary, 2002).

Also, the transfer of an already existing business model from one industry to another

can be seen as a type of business model innovation, as long as it a new way to create and

capture value in the new industry. This can be done by the same organization or, as described

above, by copycats. In this paper, this special type of business model innovation will be

called business model transfer. Anyway, there is one characteristic to add: the business model

innovation in the new industry is a copy of a business model innovation from another

industry. Thus, it had already proven itself and been established in the other industry.

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Container management outsourcing falls within the above elaborated definition of business

model innovation. Thus, its transfer from the air cargo industry to the sea cargo industry

would be an example for business model transfer.

2.2 Institutional Isomorphism

Even if the business model container management outsourcing came with huge success

in the air cargo industry, it did not find its way into sea cargo container management. A

successful business model of an organization spreads across several organizations due to the

fact that organizations are following the same institutional rules to gain legitimacy, stability,

and enlarge their lifespans (Meyer & Rowan, 1977). This phenomenon can be explained by

the theoretical construct that is known as institutional isomorphism as described by DiMaggio

and Powell (1983). This special paper has reached an outstanding attention in scientific

research (Greenwood & Meyer, 2008). It states that structural changes in organizations entail

homogenization of those organizations (DiMaggio & Powell, 1983) and shall be used in this

paper as theoretical foundation. Moreover, it shall be evaluated, why institutional

isomorphism does not apply to the case of container management outsourcing in the sea

cargo industry.

The institutional isomorphism is a theoretical construct that claims that organizational

structures converge over time. As a matter of fact, it describes why successful business model

are imitated by copycat companies. But moreover, it also gives other explanation why

organizations homogenize. DiMaggio and Powell (1985) identify and explain three different

reasons that influence organizational structures by causing processes that homogenizes

organizational structures. They call them mimetic, normative, and coercive isomorphism.

First, mimetic isomorphism states that uncertainty (e.g. poorly understood technologies,

ambiguous goals) moves organizations to take organizations as an example and to model

themselves on those organizations’ structures. This occurs directly (e.g. staff turnover) or

indirectly (e.g. consulting companies or industrial trade organizations) (DiMaggio & Powell,

1987). As a matter of fact, mimetic isomorphism means that organizations imitate successful

organizational structures. Alchian (1950) identifies that especially innovative organizations

are copied by others. This is the case of business model innovation copy cats.

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In addition to mimetic processes, DiMaggio and Powell see also coercive measures and

normative pressure for institutional isomorphic change. Coercive isomorphism results from

pressure from other organizations and from society. For instance, organizations are equally

impacted by governmental regulation such as environmental laws or cultural expectations

such as CSR (DiMaggio & Powell, 1987). Furthermore, professions are changed by mimetic

and coercive influences, as well. This results in increasing professionalization; which means

that employees following the same profession become more and more similar. This also

precipitate aligning structural changes and it is known as normative isomorphism (DiMaggio

& Powell, 1987).

To sum up, institutional isomorphic processes homogenize organizations and their

business models. They make less innovative firms copy business model innovation from

highly innovative firms. In the air cargo industry, container management outsourcing has

developed itself as a profitable business model. Airlines make use of that not just to save

costs, but also to increase their efficiency and decrease their negative environmental impact.

This is a good base for coercive isomorphism. Yet, despite there is theoretically sufficient

ground for institutional isomorphism, there have been no copycats trying to implement the

concept of container management outsourcing in the sea cargo industry. Thus, the business

model container management outsourcing did not prevail in the sea cargo industry.

Scientific research provides a variety of possible explanations why container

management outsourcing, as it is an established business model in the air cargo industry, has

not found its way into the sea cargo industry. Those will be elaborated through the qualitative

interviews and in the final paper; they shall be presented and discussed in the following.

2.3 Barriers to Business Model Innovation

Since the concept of institutional isomorphism does not work out for container

management outsourcing in the sea cargo industry, barriers to business model innovation

have to be identified in order to understand why this business model had not been established

there, yet.

General barriers are conflicts with pre-existing business model or assets or “cognition

in understanding these problems” (Chesbrough, 2010, p. 354). After conduct of the

interviews, barriers to establishment of container management outsourcing will be

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theoretically processed more in detail. Possible theoretical explanation identified so far for

the phenomenon that underlies this paper are first, unwillingness to innovate due to structural

inertia and second, strong market entry barriers in the sea cargo industry.

2.4 The Business Model Container Management Outsourcing

Comparison of Air and Sea Cargo Containers

After discussing the theoretical foundation for this thesis, it shall be given an overview

over the business model container management outsourcing. As a small instruction to this

topic, there shall be a comparison of air and sea cargo containers and the two corresponding

transportation modes. The benefits of both transportation modes are obvious. Sea freight is

cheaper and air freight is faster. As a result, different types of products are moved by aircraft

and ships. Additionally, also the shape of air cargo containers differs from the shape of sea

cargo containers (see Figure 1).

Figure 1 – Comparison by Size of TEU (left) and ULD (right) (source: own figure)

Sea cargo containers are standardized cargo containers for intermodal transportation.

The quantity of sea cargo containers is measured in so-called Twenty-foot equivalent units

(short: TEU). Two main types of sea cargo containers exist: 20-foot-long containers (counts

as 1 TEU) and 40-foot-long container (counts as 2 TEU). There are mainly two types of

ownership for sea cargo containers (Theofanis & Boile, 2009): either possess or lease them.

Container shipping companies own (more than) half of their containers on their own and the

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other half is mainly leased from container leasing companies. For instance, APM-Maersk is

the biggest container shipping line in terms of TEU with 4,031,000 TEU. It owns 56.8% and

charters 43.2% of its TEU (see Figure 2). But even if shipping lines lease some of their

containers, the management of those containers is still done in-house.

Figure 2 – The 20 biggest container shipping lines in terms of TEU in 1,000 TEUs on 13th Aug 2018

(source: own figure, data based on https://alphaliner.axsmarine.com/PublicTop100/)

Air cargo containers are referred to as unit-load devices (short: ULD). Worldwide,

there are 22,660,000 TEUs (Alphaliner, 2018) but just 900,000 ULDs (IATA, 2018). That is

less than 0.5% of all TEUs. They are smaller than sea cargo containers and they are owned by

either the airline or the container management company. Since the aviation industry is very

cost intense, it is always looking for new ways to decrease its operation costs. In addition, the

aviation industry is dealing with a volatile environment, which is a driver for business model

innovation (Schneider, Spieth, & Clauss, 2013). As a result, ULDs are made of lightweight

materials in order to save fuel cost and CO2 emission. They take the shape of a cuboid with

one edge removed. This form allows them to fit into aircraft fuselages (see Figure 1).

Stemming from the variety of aircraft types, different internal company regulations, and legal

requirements, ULD shapes differ a lot. This disallows usage of ULDs in different aircrafts.

Efficient Container Management

Nevertheless, it shall be assumed that the management methods of air cargo containers

are not significantly different from those of sea cargo containers. Resulting from this

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assumption, the factors that drive efficient container management are the same for air and sea

cargo containers.

Already Dejax and Crainic (1987) saw the importance and necessity of efficient

container management. This is the case in both industries. There are mainly two factors that

drive an efficient container, but mainly two: cost and time. In other words, efficient container

management means improving cost factor and time factor.

The first factor is the most obvious one: the cost factor. The cheaper an economic

function is the better. Both, the operations of airline and shipping lines come with high fixed

costs. Hence, they operate under the constant risk of making losses (Notteboom, 2004, p. 88).

To put it in a nutshell, a more cost-effective container management is a better container

management!

Second, there is also the time factor. In the air cargo industry, we can see that efficient

container management contributes to a significant reduction in un- and uploading time. Each

minute that a plane spends on ground additionally to the planned time costs money for the

airlines (Mock, 1999). Also, in the sea cargo industry, the time factor plays an important role

(Harrison & Fichtinger, 2013). However, shipping companies mainly focus on port fees and

tariffs when they decide about the design of their global routes due to their easier

measurability in comparison with those costs resulting from time deficits (Notteboom, 2006).

The time factor mainly consists of transit time and transit variability. Transit time can

be defined as the amount of days that a container needs in order to be shipped from its

departure port to the destination port. Transit variability can be defined as the difference in

time between the scheduled and the actual arrival day (Harrison & Fichtinger, 2013).

Obviously, high transit variability requires high safety stocks at the final destination. Long

transit times lead to high inventory (Little, 1961) and more capital tied-up in inventory

increases the cash-to-cash conversion cycle which affects liquidity of the shipping lines.

Moreover, there are several challenges in container management. Modern container

logistics and global trade are not just facing major economic challenges like a fast-changing

market environment (Notteboom, 2004), but also environmental like growing awareness

about environmental sustainability or recent political developments like rising populism and

protectionism. Those challenges result in small profits or structural problems like the

relocation of those empty containers which is known in literature as the empty container

repositioning problem (ECRP; Dejax & Crainic, 1987; Song & Carter, 2009; Khakbaz &

Battacharjya, 2014). Since the ECRP stems from imbalances in movements of loaded

containers, it makes sense to combine those two types of container movement at an

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operational level (Dejax & Crainic, 1987). Ignoring one of the two types of container

movement by planning the other would neglect one important variable to determine container

movements.

One measure to decrease the amount of empty containers to be repositioned could be

container management outsourcing. In the air cargo industry, it can be observed that

container management outsourcing releases airlines from their problems. Gilley and Rasheed

(2000) describe outsourcing as the decision of purchasing a good or service. Here, it does not

matter whether the product or service was made in-house before (decision to terminate

internalization, vertical disintegration) or it never has been produced in-house (decision to

dismiss internalization). The special case of contracting out of logistic functions is also

known as logistics outsourcing or third-party logistics (3PL). According to Maltz and Ellram

(1997, p. 47), logistics outsourcing “involves acquiring a process rather than a discrete

quantity of parts”. Hence, it can be distinguished from component outsourcing.

Outsourcing comes with a lot of advantages. First, outsourcing represents an

opportunity to decrease costs and therefore, improve profit (Bettis, Bradley, & Hamel). This

effect applies especially in the short-run (Gilley and Rasheed, 2000; Harland, Knight,

Lamming, & Walker, 2005). Especially in the sea cargo industry, there are many problems

with container management that have a high impact on the economic efficiency of a company

(Dejax & Crainic, 1987). Thus, reduction of costs is important here. Less administration and

manual work due to CMO can be translated into cost savings. The external service provider

in the air cargo industry can reduce the fleet size due to high expertise; for instance, ULD

management outsourcing decreases the container fleet by 20% (Jettainer, 2018a). The second

advantage of outsourcing is potential time savings.

In theory, outsourcing has potential to improve the two main factors of efficient

container management, cost and time savings. Moreover, with outsourcing companies can

gain access to external expertise as well as technology. Outsourcing companies can focus on

their core competence, which has been identified as a key driver for business success

(Prahalad, Hamel, 1990). Furthermore, outsourcing can also be used as a “tool [...] to spread

risks” (Quélin & Duhamel, 2003) because it reduces the asset risk of the cargo companies. It

also reduces the financial risk to the container management company (Ellram & Cooper,

1990). In the air cargo industry container management outsourcing has led to an increase in

flexibility, because it presents the opportunity of cross-utilization or “smart pooling”, i.e. a

short-term transfer from cargo carriers in an overstock situation to cargo carriers in an

understock situation (Jettainer, 2018b). As we can see from air cargo industry, container

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management outsourcing has also a positive impact on reduction of environmental pollution

(Jettainer, 2018a).

Inevitably, outsourcing of logistic functions always comes with risks and obstacles. In a

survey with more than 440 respondents, Ellram and Cooper (1990) identified risks as loss of

control over transport, decrease in customer service quality and loss of customer contact,

opportunism of 3PL provider, and loss of internal expertise.

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3. Methodology

This chapter shall describe the empirical study upon which this Master Thesis is based.

A discussion about the research design will be followed by a description of the data

collection and the data analysis process.

3.1 Research Design

Even though the business model of container management outsourcing is well

established in the air cargo industry, there is a lack of research about this phenomenon. Its

benefits and risks are poorly understood. Sea cargo container management outsourcing does

neither exist in practice nor is there any preceding scientific research about it. For poorly

understood phenomena like the one studied in the present paper, Marshall and Rossman

(1995, p. 33) as well as Eisenhardt and Graebner (2007, p. 26) recommend qualitative

research methods.

This study is exploratory; it aims to understand why container management outsourcing

has not been introduced to sea cargo industry and how it could be implemented. Therefore, it

is important to obtain unbiased information. Also, Küsters (2009, p. 20) suggests using a

qualitative approach because open questions generate genuine answers that were not

influenced by the interviewer. Hence, qualitative methods are particularly suitable for this

research which will be qualitative for better in-depth understanding.

There will be two rounds of qualitative in-depth expert interviews. The first round of

interviews aims to find out the differences between sea and air cargo container management,

innovation in the two industries and opinions about outsourcing in general as well as

container management outsourcing. Thus, the first round of interviews will be conducted

among practicians in the fields of sea and air cargo container management and logistics. For

instance, there will be experts from the world’s top 10 liner shipping companies, the world’s

top 10 ports, the world’s top 10 cargo airlines, and from an air cargo container management

outsourcing company. The interviews with air cargo container management experts aim to

fully understand the principle of container management outsourcing as well as its reasons and

facilitators, the interviews with the sea cargo container management experts aims to

understand the structures of their industry and how they manage containers. After conduct

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and analysis of the first round of expert interviews, there will be a second round of

interviews. International researchers in container logistics, supply chain management, and

business model innovation will be consulted about the result obtained from the first round.

The second round aims more to discover potential reasons why container management

outsourcing has not been established in the sea cargo industry, since there has not been any

study about this topic yet.

The first round will consist of five and the second round of ten interviews. Thus, there

will be 15 interviews in total. Both rounds of interviews will be semi-structured and hold in

English, German, and Spanish. In order not to distort the answers of the interviewees, the

interviews will be conducted in their respective work environments. Because most

interviewees work in Europe, it will be possible to conduct the interviews in person. Just one

interview is expected to be conducted by phone call, because of a huge geographical distance.

The average duration of each interview is estimated at 45 to 90 minutes.

3.2 Data Collection

For the first round of interviews, I began by familiarizing myself with the business

model of container management outsourcing in the air cargo industry and general structures

in maritime logistics. Before conduct of the individual interview, I will prepare to each of

them by review the current situation of the respective companies and slightly modifying some

of the prepared key questions. If there are interesting developments with respect to container

management, innovation or outsourcing of logistic processes, I will face them in the

interview. The next step is the actual assessment of the expert interviews. The data will be

collected from October to November 2018.

After analyzing the results from the first round of interviews, the results will be used to

develop and conduct the second round of interviews. Here will be individual preparation for

each interview partner, too. The data will be collected from November to December 2018.

Furthermore, potential biases will be considered by designing and conducting the research

study.

21

3.3 Data Analysis and Assumptions

The leading questions of the expert interview have been pre-tested and the first real

interviews had been conducted. The results obtained so far show that the theoretical

elaboration is on the right track. After conduct of the two rounds of interviews, first, the

transcripts of the interviews will be done. After that, coding will be done.

22

Working Plan

Period Task Description

09/01/18 –

09/30/18

Literature Review

& Topic Proposal

Review of literature about container management in air

and sea cargo industries, understand structures in those

industries, define thesis topic

10/01/18 –

10/31/18

Research Design

& Exposé

Further literature review, design semi-structured

interview guideline, pre-test that framework, hand in the

final exposé

10/22/18 –

11/30/18

Conducting &

Evaluation of

Study

Running the study, transcript and analysis of records,

further literature review about business model

(innovation) and outcome of study

12/01/18 –

12/31/18 Finish Thesis

Finish theoretical and methodological part, write

introduction and conclusion, revise of the thesis

01/01/19 –

01/20/19 Buffer -

01/21/19 Handing In Hand in final version of thesis

Table 1 – Working Plan

23

Literature

I. Container Management, Maritime Logistics, and Outsourcing: Case

Description

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International Journal of Logistics Management, 24(1), 7-21.

24

IATA, 2018, https://www.iata.org/whatwedo/cargo/unit-load-devices/Pages/index.aspx ,

27.10.2018, 19:56.

ISO 668:2013

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29.10.2018, 11:55.

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31.10.2018, 10:25.

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66.

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20.10.2018, 08:44.

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economics, 3(2).

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international business. The Business & Management Review, 8(4), 93.

25

Prahalad, C. K., & Hamel, G. 1990. The core competence of the organization. Harvard

Business Review, 68: 79-91.

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Song, D. P., & Carter, J. (2009). Empty container repositioning in liner shipping. Maritime

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of Economic Issues, 34 (4), 933-938.

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management strategies. GeoJournal, 74(1), 51.

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UNCTAD (2018). Annual Container Throughputs 2010 - 2017,

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II: Business Model Innovation and Institutional Isomorphism: Theoretical

Foundation

Alchian, A. A. (1950). Uncertainty, evolution, and economic theory. Journal of political

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26

DiMaggio, P., & Powell, W. W. (1983). The iron cage revisited: Collective rationality and

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27

Spieth, P., Schneckenberg, D., & Ricart, J. E. (2014). Business model innovation - state of

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research. Journal of management, 37(4), 1019-1042.

III: Research Methods

Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: Opportunities and

challenges. The Academy of Management Journal, 50(1), 25-32.

Küsters, I. (2009). Narrative Interviews. Springer-Verlag.

Marshall, C. and Rossman, G. B. (1995). Designing Qualitative Research, 2nd edition.

Thousand Oaks, CA: Sage.