Moderating the Singapore Maritime Foundation (SMF) 2022 New Year Conversations, Hor Weng Yew, Chairman of the foundation, highlighted recent steps taken by container lines to further develop in the supply chain.
Panelist Jeremy Nixon, CEO of Ocean Network Express (ONE), the sixth largest container line, noted that the top three lines – Maersk, MSC and CMA CGM, have started to invest more, not just in landside business, but 3PL logistics and integrated supply chain strategies.
“Obviously that’s driven by being close to the customer and trying to offer a pure end-to-end solution,” Nixon said. Strong balance sheets at present have also been a determining factor.
Last year, Maersk entered into several supply chain agreements including the $3.6 billion acquisition of LF Logistics, cloud-based logistics startup HUUB, e-commerce with Visible Supply Chain Management for $838 million, and B2C Europe Holdings.
MSC has bid 5.7 billion euros ($6.4 billion) for Bolloré Africa Logistics, while CMA CGM is acquiring “most” of Ingram Micro’s Commerce & Lifecycle Services business in a $3 billion deal.
However, logistics is not a new sector like CMA CGM and Maersk, which was noted by Lars Kastrup, co-chairman and chief executive of Pacific International Lines (PIL), who has held senior positions at both companies in the past. He noted that 15 to 18 years ago, when he ran Maersk in France, out of 700 employees, some 500 worked in logistics.
Kastrup explained that the growth in logistics happened organically. “It’s a natural thing, just because you have your customer base and you just add services to your customers.” In addition to these container lines, powerful IT solutions have been added for supply chain management.
The recent change is that growth is no longer organic, but via acquisitions made by high-profit lines.
Kastrup described logistics as an activity that added to “customer loyalty”.
“It helps to definitely keep your customers, and it’s also a second or third step towards the business line where a lot of carriers are now adding terminals, and that’s a stabilizing factor. It’s also a freight generator for carriers,” he said.
However, he did not believe investing in logistics and supply chain acquisitions was a “one-size-fits-all” solution for container lines.
“There may also be opportunities because some carriers decide not to go that route. So maybe it will open up opportunities for those carriers to develop more business with those who are exclusive logistics companies,” Kastrup commented.
A shipping company that does not seek to invest in the acquisition of logistics companies is ONE.
Nixon said that while they were watching developments very closely, they were “pretty humble” and just a point-to-point container operator.
“Until we do it very, very well and are fully invested in our fleet, digital solutions and terminal requirements, I think we will stay out of this business and leave it to the big boys. care to continue.
He added that too many of ONE’s customers were 3PL forwarders.
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