Shipping firm ONE steams ahead with nimble efficiency

Few people probably have heard of the Japanese shipping company that made ¥2 trillion in profit for two years in a row.

When the joint venture, Ocean Network Express, posted an after-tax profit of $16.76 billion — five times more than a year earlier — for the business year that ended in March 2022, the jaw-dropping result startled investors because, compared with Japanese listed companies, ONE was behind only Toyota Motor Corp. The following year, it posted $15 billion in profit after tax.

These profits benefited its three Japanese shareholders and helped them mark record profits as well, although forecasts are unclear for the maritime transportation market and it is widely believed to be extremely volatile.

What supported ONE’s rapid growth is its business philosophy to always keep a global perspective and focus on operational efficiency without sticking to the slow conventional Japanese way of doing business. “In order to survive the dynamic and severe global competition, we needed to seek a new way — something that is neither an old Japanese way nor a Western way,” ONE’s Managing Director Yasuki Iwai said in a recent interview, part of a monthly series by Naonori Kimura, a partner for the consulting firm Industrial Growth Platform Inc. (IGPI).

Headquartered in Singapore, ONE was founded in 2017 when three big Japanese maritime transportation firms — Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen — integrated their weakening container shipping businesses to survive the intensifying global competition. The three had achieved substantial growth during the 1980s and 1990s, when the Japanese economy was thriving, but their market shares then dwindled during the country’s subsequent three-decade economic downturn. Meanwhile, overseas shipping firms flourished in the expanding global logistics market, driven particularly by China’s surging demand for raw materials. After the failure of the U.S. investment bank Lehman Brothers caused a global financial crisis in 2008, many shipping firms turned toward mergers, acquisitions and alliances to survive, Iwai said.

By the time of ONE’s launch, the three major Japanese firms’ container shipping businesses had each shrunk to a mere 2% or so, according to Iwai. The three invested 38%, 31% and 31% into their joint venture, which became the sixth-largest shipper in the world, although it is still far behind European shipping giants.

Today, ONE services more than 120 countries with a fleet of over 200 vessels. It has a total of 11,000 workers, and the Singapore headquarters is a particular symbol of workforce diversity, with 19 nationalities.

The rapidly growing firm aims to play a leading role in the industry mitigating its environmental impacts. ONE’s homepage cites estimates by the International Maritime Organization that growing maritime traffic due to rising international trade is expected to result in a nearly threefold increase in greenhouse gas emissions by 2050.

In 2019, ONE developed a sustainability strategy focusing on four areas of priority: environmental, social and governance issues plus operational excellence. Iwai said ESG is one of the most important factors determining a shipping firm’s fate in global competition. With an increasing number of countries and businesses pledging to achieve net-zero carbon emissions by 2050, shipping firms are responsible for emissions that vary depending on the fuel they choose and how much they use, Iwai said.

Also, a smaller container shipping firm like ONE cannot beat shipping titans on economies of scale without operational excellence. “By achieving greater efficiency in asset utilization and yield management with the power of information technology and human resources, we can fill the gap with others enjoying economies of scale or offset their benefit,” Iwai said.

ONE has improved its operational efficiency since its foundation. For example, various sensors onboard vessels track navigation, engine functions and any accidents. The company analyzes the massive amounts of data produced, along with external factors such as weather and ocean conditions, including winds, tides, currents and waves, as well as data on port congestion. Also, it has improved the efficiency of its overall operations by checking data on fuel costs and profitability. Moreover, ONE tied up with university experts last year to improve its operational efficiency by using, for example, autonomous technologies, alternative fuels and greater digitalization.

“Teamwork has been very important” for achieving operational excellence, Iwai said. “We bring together captains who are experienced navigators, people who specialize in vessels’ functions and people who know a lot about fuel. We bring them all together to realize operational improvement.”

In order to bolster a team spirit among members from different nations, ONE created eight business credos as its “core values.” Iwai said, “I honestly believed that we needed something spelled out so we could share it with each other.”

The first credo is to be “lean and agile” to break through conventions, because one of the big reasons that many Japanese companies failed to grow in the country’s “lost decades” was that they were slow to make decisions and take action, Iwai continued.

The second one is “teamwork,” meaning to “respect individual diversity to build a team that can work together to create new value,” the homepage says.

Third is that the joint venture should choose “best practices” even when competing proposals are made by people with different business backgrounds based on the three original shipping firms. To “meet challenges” is also important because without that spirit, it wouldn’t be able to boost its smaller market share, Iwai said.

He also said “quality” and “reliability” mean ONE wants to protect the aspect of Japanese corporate culture that aims for high-quality services. “Innovation” is essential when trying new things. Lastly, “customer satisfaction” means that the company always works with its customers and cannot grow without satisfying them, he said.

“To our company, human resources is our core and we invest in them,” Iwai said. “I believe we don’t have any unnecessary sectionalism.”