NEW YORK, July 5, 2011 (RISI) -Complaining about the container shipping lines has almost become an international pastime. A lack of on-time delivery, shifting rates, a burdensome complexity for moving cargo from point to point, and a growing concern over pollution from the largest vessels on the oceans; these are only the top of the list. Combine these obstacles with the challenge that containers have become the de facto mode of shipping overseas and traditional bulk carriers bristle at the suggestion to put cargo in a box. But all that may be about change, according to Maersk Line CEO Eivind Kolding.
Speaking at the Terminal Operations Europe Conference (TOC) in early June 2011, Kolding issued a "manifesto" that outlines the need to reshape the face of the shipping industry. Saying it must embrace a radical change, Kolding demanded that shipping adopt a wide sweeping view of how business should be improved to "assure itself of a license to operate in the future."
Bulk carriers have argued about box vs box-hold for years, claiming that containers cannot give the specialized attention that cargos like forest products require. This kind of bickering, however, has not stopped a steady stream of bulk cargo flowing into containers, especially when box rates are more favorable. As the largest liner shipping company in the world, Maersk Line has been one of the container lines gaining ground and knows there's plenty of room to grow in forest products transport.
"Ease of business is one of our main strategy differentiators," says Tim Child, director of sales at Maersk Line for the market segment that handles forest products. "We have a dedicated team to address the needs of our customers and ensure they are satisfied and have a positive experience with us."
Kolding wants Maersk Line to change container shipping. Despite the fact that containerization has revolutionized world trade, now is the worst time to get comfortable, explains Kolding. Leading the conversation with a new platform "Changing the way we think about shipping", and a published manifesto "The new normal," Kolding points out that container shipping lines were once the drivers of change, but have become stagnant in responding to the needs of their customers.
"Every successful and well-established service business in the world is only one surprise product launch away from being left behind," says Maersk Line CEO Eiving Kolding.
Container shipping "is a model that disappoints customers," says Kolding. "One in every two containers is late, shipping lines are a nightmare of complexity and the industry creates more pollution than Germany."
Using iPods and iPhones as examples, Kolding says that twice Apple gave "customers what they wanted before they knew they wanted it." It is this possibility that should be driving the shipping industry to change its business practices now. "In the face of competitive innovation, every successful and well-established service business in the world is only one surprise product launch away from being left behind."
Other European shippers endorsed Kolding's call for change at the TOC, but also said they have been promoting the same changes for decades. The European Shippers Council agreed that change is needed but was reported to question if Maersk could practice what they preach.
"Kolding faces a heavy legacy to try and overcome," said Nicolette van der Jagt, as reported by the Journal of Commerce. "Schedule reliability has been getting worse in recent years, slow steaming has been introduced without discussion with customers and extended lead times have caused real problems for many shippers."
Shipping containerized forest products is a key part of the Maersk Line export portfolio for North America and the company has a dedicated trading desk to work with customers shipping forest products. "Wastepaper, craft board, wood pulp and lumber are key commodities of the export business plan and we want to capitalize on global market opportunities from and to North America, Europe, South America and Asia," says Child.
Maersk Line has identified three primary areas where it can begin to satisfy future customer demands: unmatched reliability, ease of business, and best environmental practices. Kolding says these are not only fundamental challenges but are "fantastic opportunities".
The first of these areas, ease of business, could begin to show results immediately. Later in 2011, a new version of maerskline.com will be launched, which will provide customers with improved "eTools", including 24/7 access to up-to-date cargo tracking, fast online rate quotes, online booking capabilities, and electronic documentation submission and retrieval options.
"We know customer loyalty comes from satisfied customers," says Child, "customers who feel valued and cared for. At Maersk Line, all parts of the organization focus on the customer experience."
Customer satisfaction scores have been rising and Maersk plans to depend more on that feedback for a constant review of their efforts with customers. "We are also focusing on the end-to-end accountability of customer shipments throughout the shipment lifecycle with proactive shipment management," says Child. These efforts will include enhancing visibility to cargo, invoicing, bills of lading, and exception handling matters.
An artistic rendering of the new Triple-E class vessel for Maersk Line, which are touted to produce less carbon dioxide and consume less fuel than competing vessels. (courtesy of Maersk Line)
Consistent delivery windows
Many of these gains will accomplish little if on-time delivery is not addressed. While Maersk Line reports a better reliability average than the industry, Kolding says this still isn't good enough. "Schedule reliability is important to all customers," says Kolding, because "reliability is a key driver of customer value."
According to Drewry Shipping Consultants, Maersk Line (global) has led the container liners with a reliability score of 70.2%, compared to an industry average of 55%. The score is based on a schedule arrival time within 24 hours. However, with nearly one out of every three shipments late for Maersk, reliability becomes a major consideration.
"When shipments are late, it can potentially cost customers lost revenue and profit and, for some, a critical time delivery," says Child. "By providing consistent delivery windows at the ship and inland, it provides customers with easier supply chain planning and avoid penalties for missing delivery windows."
Maersk Line is gearing the design of their network to deliver comprehensive coverage of key markets, with reviews for how to improve service and reliability. The plan is to work with customers more closely on commitment forecasting, which in turn will lead to higher levels of reliability and allow capacity to be properly allocated.
Environmental improvements have not been left out. Maersk Line recently contracted ten additional Triple-E vessels to add to its fleet. These vessels will be introduced into service beginning 2013. The Triple-E, with an 18,000 TEU capacity, is the largest vessel of any type on the water today and it comes with impressive environmental characteristics. Producing 50% less CO₂ per container moved than the industry average on the Asia-Europe trade lane, the Triple-E vessels are expected to consume approximately 35% less fuel per container than the 13,100 TEU vessels used by competing container lines.