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Supply chain management is a key success factor in trade and manufacturing businesses. The ease of flow of goods through the supply chain from the point of manufacture to the end customer, its optimization and cost reduction plays a great role in impacting the profitability of an organization. Failure of supply chain impacts market acceptance and the customer perceptions of a company and its brand.
Managing the complete supply chain is an intricate process and needs complete control over the logistics and transportation. Globally, there are large organizations that provide shipping services and the top five companies – PSA International, Hutchison Port Holdings, APM terminals, DP World and COSCO Group account for approximately 30% of the global transport. Some of them like the DPM and APM terminals are active in acquisitions and greenfield development, while ICTSI and TIL are known to be active portfolio development. Different strategies for different operators!
Many shippers were selling stakes in terminals to raise liquidity for their operations, however they were all retaining the majority stake. This is the key point to be noted in the common strategy of these players. This strategy indicates that terminal operations are a key issue in this line of business and they would like to have the controlling stake.
In the middle of 2013 there was a prediction that there would be consolidation in this business and many mergers are to be seen. Also, it was predicted that many local players like China Merchants, Gulftainer, Bollore and Yildirim are waiting in the wings to expand globally.
Maersk is the world’s biggest container shipping company and in a recent report they acknowledged that there is a tremendous over-capacity that is likely to last for as long as almost 5 years. What created this over capacity is the fact that before the 2008 economic crisis, there was an order for new vessels that constituted almost 50% of the existing capacity then. There were two approaches possible – one to cut costs or cut capacity. Maersk led the industry in cutting capacity to protect price lines and this would benefit the entire industry. Maersk sets the trend.
The challenge Maersk now is not capacity but to sustain its leadership position and consolidate it further. This is possible by only getting into terminal operations. They also have been cutting costs by reducing fuel costs and using better ships.
Ports are the points at which transshipment happens from one mode of transport to the other. This is where the link between the maritime transport and inland transport happens and they are the interface in the inter-modal transport system. The competitive advantage of a port is predominantly its location and its capacity to have linkages with inland transportation.
A port's ability to efficiently handle cargo along with specific supply chains and this is where Maersk would have a competitive advantage because of its existing strong shipping position. Maersk is one of the trusted shippers for many large organizations and they depend on it exclusively for all their supply-chain needs.
In an economic angle a study strongly suggests a collaborative approach to maritime and logistics businesses. Many business organizations are focusing more on their complete supply chains. Most of them are focused on increasing reliability and reduction in the adversarial nature of the relationships in the complete supply chain. In the same paper Heaver further presses an urgent need to set aside individual interests, but to focus on “actions to improve system outcomes.”
With all the discussions above it is easy to come to a conclusion that Maersk will be at a competitive advantage with having interests and expanding its interests into port operations.
Today there is already evidence in the general business practice and a need for maintaining complete control over all the aspects of the supply chain. Maersk has its presence established in maritime transport and as well as inland transport.
The only key component missing in their complete solution is the port operations. Looking at it from a holistic point of view, it is apparent that Maersk would be benefitted from entering into port operations.
Port operations and services are a different ball game and needs a different kind of skills. Port services are not restricted to its own shipping and supply chain solutions, but Maersk must consider building capacity over and above its own requirements. This way port operations can significantly contribute to its revenue and profitability.
It is apparent that it is only advantageous to Maersk by entering into port operations. They can also aggressively increase their portfolio of operations and services that would enhance capacity utilization and this would be a double advantage to Maersk.
There seem to be not many companies with the capacity of Maersk having own port operations. Given the size of its container capacity and shipping capacity, port operations will enhance the competitive advantage they enjoy in the market. Port operations will further allow them to offer better services with higher levels of reliability to their customers and thereby creating a better and positive branding for themselves. So it is a positive movement for Maersk to enter into port operations and management to its advantage.
References
Drewrey. (2013, August 27). Drewry's Top Ten Global Terminal Operators. Retrieved from Drewry: http://www.drewry.co.uk/news.php?id=232
HEAVER, T. D. (2012). Improving Efficiency in Port and Maritime Logistics: The role of collaborative relationships. Singapore: First Annual International Workshop on Port Economics. Retrieved from http://www.fas.nus.edu.sg/ecs/events/pe2011/Heaver.pdf
Ole Mikkelsen, S. J. (2013, October 2). Maersk Line sees shipping overcapacity for five years. Retrieved from Reuters: http://www.reuters.com/article/2013/10/02/us-nordic-summit-maersk-idUSBRE9910LB20131002
Radhika, A. D. (2012). The new role of seaports as integral parts of global supply chains. EXCEL International Journal of Multidisciplinary Management Studies.
Soren Skou, C. M. (2013). Reuters Nosrdic Investment Summit.
