Read this week’s top read, written by Head of research, Nick Bailey: How to solve a problem like globally integrated container logistics. Published 25th September 2018 in Logistics Briefing – To receive FREE news & briefs weekly, written by logistics industry experts click here 

The new A.P. Moller – Maersk continues to take shape amid further restructuring as the group drives towards becoming an integrated, comprehensive provider of end-to-end container logistics solutions. Following the realignment of Twill under the Maersk brand, is the news that both Damco and shortsea subsidiaries MCC Transport, Seago Lines and Sealand are next for reorganisation.   

Maersk’s long needed to address challenges at Damco. The forwarder managed around 660,000 TEU and more than 200,000 tonnes of airfreight in 2017, while operating in more than 100 countries. But despite revenue of $2.7bn last year, it’s only been profitable (at the EBITDA-level) for two of the last five years. From January 1st 2019, Damco’s supply chain management services – which essentially boil down to sea freight consolidation services – will be brought into Maersk’s Logistics and Services division.

That means the combination of businesses generating revenues of $778m (on the Damco side) and $5,570m (Maersk’s Logistics and services division) in 2017. Overall, the integrated business will have “one management team, one sales force, a strong product organisation and one customer experience organisation.” The senior management team will centre around one Maersk-er, Vincent Clerc, Chief Commercial Officer of Maersk, and one Damco-alum, Klaus Rud Sejling, CEO of Damco who will be Head of Maersk’s Logistics and Services Products, reporting Clerc. The rest of Damco, which as Maersk puts it “serves customers requiring air freight or multi-carrier options in ocean freight,” will remain as is.

At the same time, Maersk announced another restructuring. MCC Transport, Sealand and Seago Lines will merge and collectively become “Sealand – A Maersk Company”. MCC Transport has a significant position in the intra-Asia feeder trade with operations in 14 Asian countries, while Seago is an important player in the European shortsea trade. Operationally, the changes at the new ‘Sealand – A Maersk Company’ may not run so deep with the combined entity continuing to operate independently with the teams at in Singapore (MCC), Copenhagen (Seago) and Miami (Sealand) remaining unchanged.

So why the change? Firstly, Maersk views itself as a “global integrator of container logistics,” and through that lens the Damco move seems a reasonable one to make. Maersk started its announcement of the reorganisation by stating that it was making the move to “combine its offering for ocean products and supply chain services to be able to offer more comprehensive end-to-end logistic solutions for cargo owners.” While it’s easy to focus on the ‘combined ocean and supply chain services’ bit of the statement, perhaps the more important part is the ‘for cargo owners’ bit – as with Twill, Damco’s move brings a set of competencies, experiences and processes in-house that make it easier to deal with Maersk directly (and, a cynic might say, easier to remove a middleman between it and the BCO). The MCC/Seago/Sealand move can be seen in the same light. That move offers “a simplified naming structure [to] help strengthen brand recognition and ensure clarity of choice” – in other words, a rebranding that lets the BCO that they’ve really have got Maersk taking care of their goods.

Offering end-to-end solutions is a pillar of a lot of growth strategies in 2018, especially in the forwarding and sea freight market, and Maersk has made several moves in recent weeks to push its end-to-end capability into a new light. Integrations of this sort are not always easy, and as Ti has written about in the past, unlocking the value of end-to-end solutions is as much about internal operational coherence as it is about external brand coherence.

Maersk is selling the announcement as the opportunity to build a “wider product offering from one team, a clearer brand structure, and a strong digital foundation” on which it can build the end-to-end solutions and coherence it’ll need. Regardless, what emerges is a vast container logistics business. Its performance will be closely monitored for signs that Maersk is on the right track, which will be nothing new for the management teams in Copenhagen. Another completely not new thing they’ll undoubtedly have to deal with is speculation over the future of Damco – where exactly does it fit into Maersk’s vision of being an integrated container logistics provider now?

Source: Transport Intelligence, September 25th, 2018

Author: Nick Bailey