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Team 8_2M(Final)
Team 8 presented information on 2M, a vessel sharing agreement between Maersk and MSC, the two largest shipping companies. Under 2M, they aim to make more efficient use of their vessels' capacities by integrating routes and communication. This is intended to save an estimated $350 million annually by reducing costs through improved fuel efficiency, port efficiency, and vessel utilization now that their combined 185 vessels service 21 routes. While opportunities include economies of scale and a more competitive service, challenges may include lack of standardization and potential regulation issues. The presentation outlined 2M's implementation process and initial outcomes after 6 months of operation.
Team 8_2M(Final)
- 1. Team 8: Ates,Hoang, Mackay, Metz, Prudencio essel HARING
- 2. WHAT IS 2M? 1st2nd 2 Largest Shipping Companies1 Under-usage of Vessels’ Capacity2 VESSEL SHARING AGREEMENT 3
- 3. WHY 2M? Declining FreightRate 1 ↑ Vessel Orderbook 2 SHANGHAI CONTAINERISED FREIGHT INDEX • Index Start 2009 (used as Reference Freight Rate) • Hit “ALL-TIME LOW” in September 2015 ↑ Vessel Size 3
- 4. HOW DID 2MDERIVE? 1 • ↑ Fuel & Other Operating Cost • ↓ Margins (Market Demand) • Wasted, Un-used Capacity • ↓ Freight Rate; ↑ Orderbook 2 • P3: Maersk, Mediterranean, CMA CGM • Integrated Management LONDON CENTER 3 • by Chinese Government • Monopoly Concern (3 world largest shipping lines) • Integrated MGT in LONDON??? 4 • CMA CGM withdrawal • Maersk & Mediterranean remains • LONDON CENTER’s New Function Locating vessels 5 • Opp. & Threats • 2M Implementation • 2M Offering
- 5. WHAT 2M OFFERS? Efficientuse of Ships’ Capacities 1 Additional International Shipping Routes 2 A more efficient global shipping/ maritime transportation network Integrated Communication between Maersk & MSC 3 ~ 100% 21 routes18 routes The use of MEGASHIPS
- 6. • Maersk Saving:$350 million (MSC to follow) Potential Saving $350 million 1 • Efficiency: ↓ Cost/container (Vessel Utilization) ↓ CO2 Emission ↑ Port Efficiency (Load 1 ship at once) ↑ Fuel Efficiency (↓ waste) 2M OPPORTUNITIES & THREATS Opportunities Threats • 2 largest shipping lines in the world Economies of Scale 2 • ↓ Cost & Freight Rate: Combined Capacity • ↑ Service Level: More competitive Competition from other VSAs 1 97%oftheWorldFleet East-WestTrade Gov. Regulation, China 2 ↓ Flexibility to Adjust Strategy 3 ↓ Freight Rate 4
- 7. 2M SUCCESS &FAILURE FACTORS Factors of Success The use of Megaships 1 MSC OSCAR- World Largest Megaship: 19,000 TEUS • Combine all available routes of each company Services/ Routes Variety 2 • More routes > Either Maersk or MSC alone • Develop new Routes/ Services under 2M Increase in Customer Accounts 3 • No Joint Head Quarter Government Regulation 1 • ↓ Efficiency: Management & Operation • Inconsistency in service performances Lack of Standardization 2 • Lack of Comm. about Demand Forecasting • Low Coordination in response to Demand ∆ ≠ Factors of Failures
- 8. 2M IMPLEMENTATION PROPOSAL & LEGALPROCEDURES COMBINED ROUTE & CAP. PLAN INTEGRATED INFO CENTER GMC REVIEW, REVISE & EXPAND 1 2 3 4 • Revise P3 Plan after CMA CGM withdrew • Involved Authorities: China (MOT), US FMC, European Commission • Terms on: No of vessels, loops, capacity sharing • Combine routes to offer customers 21 routes instead of 18 routes • Develop Schedule, Port calls, etc. • Allocate shipping capacity on each route • London Center is used to integrated information on ship locations only. • Ship loading & other procedures is handled by the ship owners • Start implement 2M • Test for the optimal number of ports, routes, ships and capacity • Gradually increase the system capacity 185 Vessels • Maersk: 110 ships • MSC: 75 ships Allocation (All routes) • Ports: 212 • Maersk: 55%; MSC: 45% Ships Cap. & Speed: • Avg.: 14,000 TEUS • Speed: 19.8 knots/h Orderbook: • Maersk: 9 ships/ $1.1 bil → Avg Cap: 14,800 TEUs 6 MONTHS 6 MONTHS WITH STEP 2 10 YEARS
- 9. 2M IMPLEMENTATION Allocation ofShipping Capacity (Example) Asia-North Europe - West/ Eastbound Loop 2 Loop 1 Loop 3 Loop 4 Loop 5 Loop 6 Asia-Mediterranean Westbound AE20 AE11 AE12 AE15 AE3 Asia-Mediterranean Eastbound LOOPS ARE BASED ON • Dif. Depart • Dif. Destination • Dif. No. of Ports ALLOCATION IS BASED ON • Competitive Advantage • Regional Specialty OTHER ROUTES • Transatlantic • Transpacific
- 10. 2M IMPLEMENTATION The OverallRoutes of 2M
- 11. 2M INVESTMENT &INITIAL OUTCOMES Investments Initial Outcomes • To coordinate Vessel Location only London Integrated Center 1 • Vessels are loaded & serviced by its owner • Without 2M, still purchase NEW VESSELS Purchase of New Vessels 2 • With 2M, purchase LARGER VESSELS • Maersk 2015: Order 9 new vessels, $1.1 BILLION • Low World Fuel Price Insignificant Changes 1 • Only 6 months into VSA • 2M expanding fleet (185 208) However, New Investments 2 • 2M adding new routes (21 24) • 2M adding new port calls (212 291) • Direct Port-to-port pairs (788 1,036) Cooperation with Japan MOL 2 August2015 ANTICIPATED SAVINGS: $350 MILLION
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