Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Maersk Line and the Future of Container Shipping.SMU.10.29.12

11,067 views

Published on

Harvard Case Study

Maersk Line and the Future of Container Shipping.SMU.10.29.12

  1. 1. Case Study – Maersk Line andthe Future of Container Shipping ME 7366 Global Manufacturing Graduate School of Engineering A. Lee Mulkey October 29, 2012
  2. 2. Lee Mulkey Bio  Founder and President ALM Company  President and CEO Wenaas USA, Inc.  President and CEO Purchased Parts Group, Inc.  Senior Associate Indian River Consulting Group  President and CEO Briggs – Weaver, Inc.  Executive VP and CFO Sammons Distribution, Inc.  VP and CFO Vinson Supply Company and Continental Emsco Company  Started or Managed Over a Dozen Companies In Europe, Mexico, Canada and Asia  MBA – International, University of Dallas
  3. 3. ALM Company – What We Do Advisory and Project Services for Manufacturers, Marketing Companies and Value Added Distributors Supply Chain Mgt. & Global  Global IT Systems, Sourcing Performance Optimization and Security Building Private Brands  Global Expansion Restructuring / Interim / Crisis Mgt.  Export Compliance & Training Capital Sourcing
  4. 4. About Maersk Line  Flagship Company of A. P. Moller – Maersk Group (Danish)  A. P. Moller – Maersk Group $60B Revenue in 2011  Segments:  Maersk $27B or 45%  Oil & Gas $12.6B or 21%  Retail and Banking $20.4B 34%
  5. 5. A. P. Moller - Maersk  115,000 Employees  130 Countries  Founding Family Trusts Control 58% of Share Capital and 76% of Voting Rights  Family Not Known For Explicit Commitment to Environmental Issues; However Reputation of Company Worldwide Extremely Important
  6. 6. Origins of the Container  In 1795 Bejamin Outram Started Carring Coal In Wooden Containers That Could Be Shipped on Canal Barges  In 1830’s The Liverpool and Manchester Railway Started Carrying Containers From Canal Barges to Railways  WW II Australian Army Used Wood 20’ Containers  At End of WW II US Army Used Specialized Containers For Ocean Shipments  1952 US Army Coined the Term CONEX (Container Express)  1955 Malcolm McLean Developed the Modern Intermodal Container
  7. 7. Maersk Line  Worlds Biggest Container Shipping Company – 660 Owned or Chartered Vessels,17% of Industry Operating Fleet  47% Owned / 53% Chartered  Maersk Ships Average 8 yrs. / Competitors 12-15  It’s Vessels Make Over 70,000 Port Calls Per Year
  8. 8. Maersk Line  Over 100,000 Customers  Long Term Contracts (Appx. 1 Yr.) Vs. Spot Price • 50% Long Term • 50% Market Spot Price Customers  25% Key Customers Like Wal-Mart, Nike, Tesco  15% Key Freight Forwarders  60% Small Customers and Other FF
  9. 9. Competitors Controlling Capacity Company Owner Share Maersk APM Foundation 17% MSC Aponte Family 14% CMA CGM Group Saade Family 9% Hapag-Lloyd Balin Consortium 4% COSCO Chinese State 4% APL Temasek (Singapore) 4% Evergreen Chang Family 4% CSCL Chinese State 4% Hanjin Shipping Hanjin Group 3% MOL Mistui 3%
  10. 10. Business Conditions  First Ever Annual Loss 2009  Global Recession  Industry Over Capacity (Vessels Lay Up)  Commodity Pricing (Strong Price Sensitivity)  China Changing Focus From Export Economy To Domestic Market Driven
  11. 11. Container and Other Large Ship Lay Up  Hot Lay Up / Cold Lay Up  As of December 2011 = 210 Ships  Malaysia, Indonesia, Philippines
  12. 12. Cost and Security Issues of Lay Up  Cold Lay Up $1,000/day | Hot Lay Up Much More  $450B In Shipping Company Debt For Laid Up Container, Bulk and Tanker Vessels Worldwide  Security Issues: Environmental  Personnel & Crew  Physical Factors (Terrorist, Theft, Fire, Other)
  13. 13. Maersk’s Strategy  Three Fundamental Challenges to Differentiate Itself From the Industry:  Unreliability  Complexity (Hard To Do Business)  Environmental Impact
  14. 14. Reliability  Goal To Become Industry Leader  Already Leader in On-time Delivery at Appx. 80%  New Goal Is Further Improvement … Reduce Customer’s “Just In Case Inventory”  “Daily Maersk” Asia – Europe Route 95% On-time Goal … Requires 70 New Vessels  All Service Ports Operate Entirely As Planned  On Other Routes Work With Terminal Partners To Reduce Time In Port by 30%. Already Achieved 10% Reduction
  15. 15. Simplicity  Immense Paperwork Flow To Move Goods  Streamline and Digitize Much Of The Paperwork  Order and Follow Cargo Online  Simplified Documentation Process  Track Cargo  Automatic Notification  IT System Interface  Improved Customer Service
  16. 16. Environment … “Sustainability Strategy”  Industry Environmental Impact:  Ship Exhaust Emissions From Bunker Fuel Considered a Large Source Of Greenhouse Gas Emissions  Thought That Climate Change Occurring Because Of Greenhouse Gas Emissions From Human Activity  Maritime Shipping Accounts For 3.3% of Global Emissions  Bunker Fuel Releases 2,000x More Sulfur Than Diesel Fuel
  17. 17. Worlds Largest Ship Engine  12 Cylinders  2,300 Tons  95,000 HP  102 RPM  250 Tons/Fuel/Day  Made In Korea  Wartsila – Sulzer RTA 96-C  Maersk Emma
  18. 18. Manufacturers Of Largest Marine Engines Wartsila – Sulzer Finland MAN B&W Germany
  19. 19. Other Shipping Environmental Issues  Ballast and Waste Water  Garbage  Scrapping Old Ships
  20. 20. A. P. Moller – Maersk Group Strategy ...“Sustainability”  Four Key Themes:  Environment and Climate Change  Health and Safety (Includes Piracy)  Social Responsibility  Responsible Business Practices (Similar To SOX, FCPA and Dodd-Frank)
  21. 21. Maersk Line Environment Goals  Maersk To Become Global Leader In Low-Carbon Shipping  Lead The Industry Toward Zero SOx Emissions  Reduce It’s Impact On Marine Environment Achieving These Goals Would Meet the Group’s Environmental Sustainability Initiative.
  22. 22. Types Of Basic Containers Basic Containers 20 Dry Ocean Frt. 40 Dry Ocean Frt. 40 Collapsible Flat Rack 20 Open Top 40 Open Top 45 High Cube 20 Reefer 40 Reefer 40 High Cube Reefer 20 Flat Rack 40 Flat Rack 20 Tank
  23. 23. Actions To Date  Slow Steaming (Save Fuel & Less Emissions) Speed Reduced By 27% … What was impact on customers supply chain? Sulphur Emissions Reduced, But Fuel Costs Increased From Using Diesel Fuel While At Berth. Diesel Fuel $250/Ton Higher. Developing Scrubber Technology To Clean Exhaust Gases For Future Vessels
  24. 24. Actions To Date  Protecting Marine Environment:  Chemical-free Ballast Water Technology On 100% Of Owned Fleet  All Waste From Owned or Chartered Vessels Disposed of In Ports  Strategic Partnerships with Research Institutions and Customers to Provide Research on State of Worlds Oceans
  25. 25. Actions To Date  Technical Changes:  Ordered 20ea. 18,000 TEU (Twenty Foot Equivalent Units) Triple-E Vessels - $3.8B For Asia-Europe Trade. World’s Largest By Capacity http://www.worldslargestship.com
  26. 26. Triple-E Vessels Advantages / Disadvantages  Designed To Run At Slower Speeds  59% Lower Unit Cost & 50% Lower CO2 Emissions / Container Than Industry Average  “Cradle-to-Cradle Passport” End of Life Decommissioning  So Large Only Select Ports Can Handle  Risk of Industry Overcapacity if Everyone Orders Bigger Ships (Competitors Are Ordering Bigger Ships)
  27. 27. New WAFMAX and SAMMAX Fleet  West Africa Max (WAFMAX)  $2.0B, 22 Ships, 4,500 TEU’s  Largest Vessels Deployed On West Africa Routes  South America MAX (SAMMAX)  $2.2B, 16 Ships, 7,450 TEU’s  Shallow Draft … 39 Feet  Largest Vessels Deployed In South America
  28. 28. More Action Taken  Existing Vessels:  $10Mea. Waste-heat Recovery Systems For Many Vessels  New Hull Coatings  Environment Certified Shipyards to Scrap Ships … Increased Cost $20M on 10 Vessels.  New Fuels … Biofuels
  29. 29. Selling Sustainability  Maersk Wanted To Be Industry Leader In Providing Transparency and Environmental Information To Customers  Provided Monthly Customer Scorecards  Educate Customers On Environmental Impacts Of Transportation Industry  Customer’s Reaction Was Environmental Concerns Are Good, But Price Is Most Important
  30. 30. Conclusion  Soren Skou, CEO Maersk Line:  Concerned Sustainability Approach Not Working With Customers  Concerned It Would Not Allow Differentiation Between Maersk and Competitors  CMA CGM, Hapag-Lloyd had CO2 Calculators To Measure Carbon Footprint Of A Shipments Journey  APL Named Sustainable Shipping Operator Of The Year For 2010
  31. 31. Current Update  Shipping Cost of 20’ Container From West China To Port of LA in 2009 = $700; Today = $2,000 / 286% Increase  May 2012 Increased Rates 30% (Price Fixing With Competitors?)  Global Recession Continues, European Volumes Continue To Decrease, Current Estimate 4% Global Increase In Volume For 2012  Lost Record $599M 1st. Qtr., $227M Profit 2nd. Qtr.
  32. 32. Choice Of Assignment Questions  Should Maersk Line Change or Create A New Strategic Plan? Accuracy Of Strategic Forecast?  Should A. P. Moller – Maersk Group Consider A Strategic Redeployment (Sale) Of Maersk Line?
  33. 33. Big Picture Issues  Can A Commodity Item or Service Command A Premium Price?  The Cost to the World Economy Caused By the Dogma of “Human Activity Causing Global Warming and That Global Warming Is Bad”?  Impact On Continued European and US Recession  Impact of Cap and Trade (Tax)
  34. 34. More information about Lee Mulkey can befound at his corporate website:www.ALMCompany.com orwww.Linkedin.com/in/LeeMulkeySee his blogs on Marketing ChannelManagement, Global Supply Chains,Keeping Mistakes Above the Waterline andThe CEO, The Supply Chain and the Zoneof Indifference. “Golden Chains Means BigGains” Texas CEO Magazine:http://bit.ly/LH7OBn

×