would enter into strategic agreements with the 3PL. “With
this transaction, CMA CGM aims to grow its presence in the
logistics sector, a business closely related to shipping,” the
company said when announcing the purchase. In mid-July,
CMA CGM won regulatory clearance of its investment.
BEEFED-UP SERVICE MENU
Box line users, for their part, give the carriers marks for
getting beyond the rate wars and leveraging their global
networks to add more heft to the relationship. “What we
like is carriers specializing [in] something other than price,”
said Peter Friedmann, executive director of the Agriculture
Transportation Coalition, which represents agricultural
and forest products exporters.
Underpinning the carriers’ strategy is the belief that
customers would pay more for services like door-to-door
delivery with real-time visibility, compliance labeling, kit-
ting, supply chain services (design, planning, management,
optimization, and enhanced visibility and control), cus-
toms brokerage, and warehousing and distribution. This,
in turn, would allow carriers to break the vicious cycle of
dependency on low freight rates. “We want to build a busi-
ness that can deliver good returns, more consistent returns
than what we have today, providing high cash yields and
able to grow both revenue and earnings on a less volatile
basis,” Skou said.
A potential stumbling block is carriers’ neutral/in-house
nonvessel-operating common carrier (NVOCC) affiliates,
such as Maersk’s Damco or Japanese carrier NYK Line’s
Yusen Logistics, potentially alienating large freight forwarder accounts. These two entities conceivably could both seek
to provide competing value-added services, the forwarders’
bread and butter, directly to the BCO.
Maersk seems to be moving in that direction, given its
announcement in late September that Damco Supply Chain
Services and Maersk’s Ocean Product value-added services
would be combined and marketed as Maersk products and
services. In the same announcement, the company said that
Damco’s freight forwarding business—which serves customers requiring airfreight or multi-carrier ocean freight
options—will continue to operate as a separate and independent business under the Damco brand—a move that
will enable the unit to focus solely on freight forwarding.
Swiss forwarding giant Kuehne + Nagel Group “gained
significant new business mainly with its integrated digital
solutions” during the first half of 2018, it reported in July. It
handled 2.289 million TEUs (twenty-foot equivalent units)
during that period, 172,000 more than in the comparable
2017 timeframe, it reported.
Forwarders, and to a lesser extent NVOCCs, generally
don’t compete for major shippers’ underlying linehaul
business because those tariffs are set under terms of
pre-negotiated service contracts. However, poaching smaller account business is fair game.
Maersk looks to its expanded service offerings to bolster
its annual return on investment (ROI) to 3 percent, up
from the 1 percent reported during each of the past five
years, said Vincent Cui, general manager, supply chain
planning and value-added services for Shanghai, China-based Damco China Ltd., a neutral NVOCC. Damco,
Maersk’s wholly owned third-party logistics firm, generates
two-thirds of its annual revenue by providing value-added
service in Asia, Cui said.
FIRST THINGS FIRST
Carriers could not embark on such a major change of
direction without first getting their capacity house in order.
Though it has been a slog with peaks and valleys, they seem
to be making progress. A spate of ship alliances, mergers,
