Maersk CEO Soren Skou this week restated and expanded on his vision to transform the world’s biggest container line into a “global integrator of container logistics” in three to five years, connecting and simplifying its customers’ supply chains.
“When we talk about this, we want to paint the picture of UPS, FedEx, DHL and the courier and express package industry − because that is an industry where you deal with just one party, if that’s what you want to do when you ship your goods. So that’s the picture I would like you to have,” he told investors and media this week at the company’s latest Capital Markets Day event in Copenhagen.
The transformation strategy focuses in part on providing customers with a simple end-to-end offering of products and services, Skou explained.
“What this means is that we want our customers − the people that ship stuff from one end of the world to the other − to be able to do that in just dealing with Maersk. So we want to be able to carry the box from one port to another, be able to provide the inland service, custom house brokerage, finance the goods, insure the goods, and whatever other services – consolidation, and so on − which are maybe relevant for our customers.”
The strategy also focuses on providing a superior end-to-end delivery network. Although the companies within Maersk’s Transport & Logistics division already offer inland distribution and other end-to-end services, these were currently only used by a small fraction of Maersk Line’s customers – because they were not sufficiently attractive to those customers.
“For us, this means two things: firstly, having a competitive network that has great geographic coverage, competitive transit times, where reliability is high and is generally delivering a great physical product. But it also means having a network that is cost-competitive − because we are strong believers that in our industry the likelihood that we would be able to create a service package that is so good that we can charge a meaningful premium and be able to sustain a high-cost culture is simply not realistic.”
He continued: “If we get it (the strategy) right with this company (as a global integrator), it will help us drive higher-level returns, less volatility in earnings, and less reliance on container freight rates between China and Rotterdam.”
Skou concluded: “We are building a company that is a global integrator of container logistics − a company very similar to UPS and FedEx; and I hope they will be considered peers of ours when we are done with this (transformation) journey in three to five years; a network-based, asset-based global logistics company, that has steady earnings at a reasonable level and that has multiple sources of revenue − some that are not asset-based − that generate cash every year and that are able to grow earnings.”
Skou originally introduced the idea in December 2016at a previous Capital Markets Day event in which he outlined the future of Maersk’s newly created Transport & Logistics division. The idea was to tap into the growing US$1 trillion broader logistics and supply chain market, not just a “stagnating” US$190 billion container shipping market.
Highlighting the “value in integration”, Maersk said at the time: “Integrating its services, the division is looking at a large market. Thus, global transportation and logistics, which includes inland services, container shipping, freight forwarding, supply chain services and more, has an annual value of approximately US$1 trillion. And it is growing in line with GDP. Container shipping, in comparison, is a US$190 billion market, with stagnating growth.”
Skou commented: “Our unique position in transport and logistics gives us a solid starting point to build on. We will meet the needs of the customers for end-to-end services and by doing so we will improve returns though revenue growth, cost cutting and other benefits.”