Maersk CEO outlines plans to become integrator of the seas
Maersk to look like FedEx, UPS, DHL in three to five years, Skou vows.
The CEO of Danish container line giant A.P. Moller-Maersk laid out one of the most ambitious strategies in liner shipping history yesterday by vowing to transform Maersk into a global integrated carrier to match the likes of FedEx Corp., UPS Inc., and DHL Express over the next three to five years.
Speaking at the company's "Capital Markets Day" event in Copenhagen, Søren Skou said the overarching mission is to deliver simplified, interconnected, end-to-end services with Maersk being the customer's only point of contact. As Skou envisioned, Maersk would expand or deepen penetration in areas like trade finance and facilitation, and warehousing and distribution. A soup-to-nuts strategy would enable Maersk to charge a decent premium for its services, and make it less reliant on volatile freight rates for its profits, Skou said.
In the past couple of years, liner overcapacity has crushed carrier margins while benefitting shippers, freight forwarders, and beneficial cargo owners. Maersk lost US$1.9 billion in 2016, only its second annual loss in 70 years. The company reported a US$356 million profit in 2017, which was below analyst expectations and was characterized by Skou as unsatisfactory. "We are not where we want to be" at this point, he told the gathering.
Work has already begun on the strategic shift, which Skou called "pretty complicated, with multiple dimensions."
Memphis-based FedEx, Atlanta-based UPS, and German-based DHL are considered "integrators" in that they combine the physical and technological components of transport and logistics under their respective roofs. The companies have spent decades, and many billions of dollars, to develop what are known as "custodial control" global networks, where the carriers manage every step of a shipment's physical movement and the information technology support that comes with it. Because much of their international traffic is composed of urgent deliveries, goods of high value, or a combination of both, the carriers have precise and exacting service requirements and invest heavily in the latest track and trace technology to meet their commitments.
The container line industry does not put a premium on speed because of the slow-moving nature of its assets. However, its customers expect reliable booking and sailing information so they can best manage their supply chains. The industry is generally considered to be behind the curve in deploying IT systems that provide real-time container shipment visibility. In addition, container lines have stakeholders to work with, such as freight forwarders and non-vessel operating common carriers (NVOCCs), as well as dockworkers, terminal operators, and customs authorities.
Skou also said that the industry needs to continue consolidating, an indication that despite a more equal balance between supply and demand in recent months, it is still plagued by overcapacity. Maersk's US$4.39 billion acquisition of German liner Hamburg Süd, which was approved late last year by regulators in multiple countries, now means that one of every five containers worldwide moves on a Maersk vessel, according to Skou. Maersk, the world's largest liner company, has the scale it needs to help further its transformation, he added.
Join the Discussion
After you comment, click Post. If you're not already logged in, you will be asked to log in or register.
Feedback: What did you think of this article? We'd like to hear from you. DC VELOCITY is committed to accuracy and clarity in the delivery of important and useful logistics and supply chain news and information. If you find anything in DC VELOCITY you feel is inaccurate or warrants further explanation, please ?Subject=Feedback - : Maersk CEO outlines plans to become integrator of the seas">contact Chief Editor David Maloney. All comments are eligible for publication in the letters section of DC VELOCITY magazine. Please include you name and the name of the company or organization your work for.