Case Study – Maersk Line Case Study – Maersk Line and the Future of and the Future of Container Shipping Container Shipping A. A. Lee Mulkey Lee Mulkey October 29, 2012 October 29, 2012 ME 7366 Global Manufacturing ME 7366 Global Manufacturing Graduate School of Engineering Graduate School of Engineering
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Maersk Line and the Future of Container Shipping.SMU.10.29.12
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Case Study – Maersk Line and Case Study – Maersk Line and the Future of Container Shippingthe Future of Container Shipping
A.A. Lee MulkeyLee MulkeyOctober 29, 2012October 29, 2012
ME 7366 Global ManufacturingME 7366 Global ManufacturingGraduate School of EngineeringGraduate School of Engineering
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
ALM Company – What We Do
Advisory and Project Services for Manufacturers, Marketing Companies and Value Added Distributors
Supply Chain Mgt. & Global Supply Chain Mgt. & Global SourcingSourcing
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%
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
Origins of the Container In 1795 Bejamin Outram Started Carring Coal In Wooden In 1795 Bejamin Outram Started Carring Coal In Wooden
Containers That Could Be Shipped on Canal BargesContainers That Could Be Shipped on Canal Barges In 1830’s The Liverpool and Manchester Railway Started In 1830’s The Liverpool and Manchester Railway Started
Carrying Containers From Canal Barges to Railways Carrying Containers From Canal Barges to Railways WW II Australian Army Used Wood 20’ ContainersWW II Australian Army Used Wood 20’ Containers At End of WW II US Army Used Specialized Containers For At End of WW II US Army Used Specialized Containers For
Ocean ShipmentsOcean Shipments 1952 US Army Coined the Term CONEX (Container Express)1952 US Army Coined the Term CONEX (Container Express) 1955 Malcolm McLean Developed the Modern Intermodal 1955 Malcolm McLean Developed the Modern Intermodal
ContainerContainer
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
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
CompetitorsControlling 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%
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
Container and Other Large Ship Lay Up Hot Lay Up / Cold Lay UpHot Lay Up / Cold Lay Up
As of December 2011 = 210 ShipsAs of December 2011 = 210 Ships
Malaysia, Indonesia, PhilippinesMalaysia, Indonesia, Philippines
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
Designed To Run At Slower Speeds59% 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)
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
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
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
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
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.
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?
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)
More information about Lee Mulkey can be More information about Lee Mulkey can be found at his corporate website: found at his corporate website: www.ALMCompany.com or or www.Linkedin.com/in/LeeMulkeySee his blogs on Marketing Channel See his blogs on Marketing Channel Management, Global Supply Chains, Management, Global Supply Chains, Keeping Mistakes Above the Waterline and Keeping Mistakes Above the Waterline and The CEO, The Supply Chain and the Zone The CEO, The Supply Chain and the Zone of Indifference. “Golden Chains Means Big of Indifference. “Golden Chains Means Big Gains” Texas CEO Magazine:Gains” Texas CEO Magazine:http://bit.ly/LH7OBn