Monday, September 12, 2011

Container Freight Undergoes A Facelift With Guaranteed Daily Service

Maersk Take the Fight to Opponents
Shipping News Feature

DENMARK - UK – ASIA - EUROPE – In a bold move designed to out manoeuvre their rivals Maersk, the largest container shipping line in the world, today announced what they consider to be the first major step forward in box transportation for well over a decade. ‘Daily Maersk’ will offer guaranteed delivery times from four Asian ports to three major European hubs for any FCL freight deliveries every day of the week.

Speaking at the London launch Eivind Kolding, CEO Maersk Line said that from the company's inception in 1928 very little changed from the monthly schedules offered until in the late 1940’s when twice monthly services appeared. Even with the introduction of containerisation weekly schedules failed to appear until the 1990’s since when little if anything had changed. He said it was Maersk’s intention to offer shippers a ‘conveyor belt’ service with Maersk becoming a natural extension of a supplier’s production line.

The service schedules were arrived at after Maersk embarked on a protracted dialogue with their major customers and indeed the product is principally aimed at the heavy hitters, the regular clients with extensive contract commitments to shipping large quantities, which is not to say that spot purchase clients will not necessarily benefit from the reduced delivery times Maersk feel are attainable.

The discussion with stakeholders produced three clear requirements including reliability, all shippers were keen to know exactly when their goods would arrive at the destination port as currently around 50% of TEU’s fail to meet the original estimated times of arrival. Complicated systems were another bugbear, consignors wanted a one stop, one touch system rather than the nineteen or so inputs required to send a box on its way which currently exists. The third request was to ensure that wherever possible the customer could claim to maintain their green credentials by utilising a system that was as clean as could reasonably be expected.

‘Daily Maersk’ is the product of these discussions and Maersk are so confident of its success they are to pay compensation for every container that fails to meet the deadline they have underwritten. The company will pay customers who sign up to the system compensation of $100 for a delay between one and three days. Should the freight arrive 4 days late they will hand over $300. Needless to say Maersk have written in get out clauses for bad weather, port strikes etc.

Of course there is a downside, at present up to 50% of booked boxes fail to arrive at the port in time to meet the cut off times, or indeed at all, and to the container companies this simply means lost revenue. Containers booked under the new system which fail to arrive will be subject to a penalty which presumably will be negotiated with individual shippers (those which deign to agree to it). Maersk see this system as a way to directly influence the current overbooking problem.

The new schedules, from Ningbo, Shanghai, Yantian and Tanjung Pelepas to Bremerhaven, Felixstowe and Rotterdam, will occupy 70 vessels of the company’s fleet, around 25% of Maersk Line’s TEU carrying capacity. Despite the mention of the intent to make the service as green as possible it simply may not be feasible with traffic levels as they are. Only by running the newer, larger yet more efficient vessels closer to their full capacity can reduced emissions of CO2 per tonne be achieved. To ensure vessels make their guaranteed time targets it may even be sometimes necessary to abandon the current slow steaming policy, designed to conserve expensive fuel and reduce pollution levels, simply to stick to schedules.

Maersk will be charging a premium for the service, obviously a matter for individual negotiation by their major clients, but they will not abandon normal services which may prove a bonus for the occasional spot shippers who will often find their cargo shipped immediately on the first available vessel regardless of their status. At the press call today Eivind Kolding told the assembled journalists and business leaders:

“This is the first time compensation will be paid by a shipping company and this is to underscore our confidence in this product. We have been in discussion with a number of customers, including Sony, and they have expressed approval. ‘Daily Maersk’ responds to some key concerns by ensuring on time delivery in Northern Europe. How can we do this? By upping capacity and spreading port calls and having a back up plan for every vessel. All the customer needs is total transport. We see larger customers with sophisticated management systems taking advantage of this and reducing their warehousing needs.

“Currently the quoted transit times means port to port, without taking into account waiting times in both loading and discharging ports, plus a range of other delays. This is completely irrelevant to the customer, if you buy a book from Amazon are you interested in when they posted it via a parcel service? No, all you want to know is when will it arrive, with ‘Daily Maersk’ that is what you get.”

To emphasise his point Maersk showed a video interview with Adam Rashid, Sony’s Logistics Manager who said:

“This daily system makes it easier to sell goods before they arrive, typically ships currently arrive 1½ to 2 days late causing things like extra drivers etc to make up time pushing costs up. Inventory reduction is the biggest single issue for us, now we can plan more efficiently. Also the system brings simplicity, we can work with one or two carriers and this makes it possible, if this becomes the standard it will change the shipping industry.”

No partnerships with other lines will be involved in the provision of this service and, before anyone believes this will be rolled out globally, even Maersk admit that the daily cut off system is currently only feasible on the busy Asia to Europe run. Cynics will note that Maersk are due to collect a lot more of the bigger container vessels they have on order within the next year or two and they need cargo to fill them but there is no doubt that other box carriers will feel a chill down their spines at what is a very inventive and bold move to completely dominate the Asian European freight trade.

The first daily cut off will be on the 24th October, the guaranteed transportation times to the three European ports (Bremerhaven, Felixstowe and Rotterdam) are as follows. Ex Ningbo – 36 days, ex Shanghai – 34 days, ex Yantian – 30 days and for Tanjung Pelepas – 26 days. Transportation time is defined as from the cut off date issued for the departure port and the availability of the cargo at the port of destination. If cargo arrives early there will be no demurrage charges until the agreed cargo availability date has passed.

Around seven million forty foot equivalent units pass from Asia to Northern Europe annually and Maersk currently shift over one million of them. With this set of schedules it is obvious that the Danish giants intend to take up as much of the market as possible by concentrating more than ever on the companies responsible for the bulk of this traffic. The end result remains to be seen but as this scheme takes shape at least two of Maersk’s main rivals will be looked at very closely by industry analysts should it result in an upswing of tonnage for ‘Daily Maersk’.

Photo:- The giant Emma Maersk in port.