Daily Maersk: A new revolution in liner shipping, or just slick marketing to kill the competition?By james tweed • Sep 13th, 2011 • Category: Containers
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My background isn’t in containerisation, it’s in shipping crude oil, but I have an interest in all things maritime, and so through my work at providing training to the sector with Coracle, to assessing the sector with coraclequiz and through spreading the word about the sector via shippingpodcasts.com, I get invited to a range of press briefings. On Monday September 12th it was the turn of shipping giants, Maersk, to unveil their new product.
The subject being tackled relates to reliability and the Maersk solution is, apparently, revolutionary. The solution is Daily Maersk.
25% of Maersks’ tonnage, that’s over 70 post panamax sized ships, including the Emma Maersk class and from 2013 the Triple E class, will be assigned to this Asia Europe virtual conveyor belt Daily Maersk product. The belt starts with daily cut offs from October 24th and Maersk think their customers are going to love this product because daily cut offs means no need for storage. Just turning up and shipping is going to save them a fortune in supply chain costs, apparently.
The product makes 3 main claims.
Claim 1 is that this product will deliver absolute reliability. This is a BIG claim when you know that 50% of containers currently arrive late. If Maersk are late delivering under this product, then they’ll pay as much as $300 a container in compensation.
Claim 2 is that this product will offer an ease of service like no other. There are currently 19 touch points between Maersk and their customers and so this product is meant to be as simple as buying an airline ticket.
Claim 3 is for improved environmental performance. Sadly, really sadly, when the Q&A started, the environmental impact somewhat fell away. Why? Because the environmental benefit relates to the fact that because the time taken is fixed for this service, vessels won’t have to speed up if they’re running late. Speeding up burns more fuel and because the industry is currently so woefully inefficient, this happens a lot. But, when you factor in the inevitable, and acknowledged fact, that despite penalties to shippers not delivering containers in time, there will still be plenty of unsold space, that means that the environmental benefit is going to be pretty negligible. We were told that the real environmental benefit will come from the Triple E class ships, rather than this product per se.
So,total reliability. Sounds great. So how are Maersk going to achieve this competition killing product?
Actually, it turns out to be a really simple idea. The key part is to make sure that we all understand that we’ve been looking at the wrong statistic when it comes to shipping because voyage times are not important any more… It’s all to do with the wider supply chain and the total time from cut off at port of loading to cargo availability in Europe and with that in mind the explanation of how 34 days is now faster than 28 days was explained. A typical, old fashioned view was that transit from Asia to Europe was, say, 28 days. On top of this you allow 2 days at the port of origin and 1 day at the port of destination. But, with up to 6 potential days of waiting time with weekly cut offs the total could be as much as 37 days. And hence, 34 days as a total delivered time is quicker.
So is Daily Maersk really a new product? Maersk claim that it will lead to inventory reduction for their customers of 50% and that will lead to savings of up to $500 a container. But it seems to me that Daily Maersk is really a clever marketing message. What will the competitors do? Maersk’s literature explains that they don’t believe that the competition can deliver anything like this and so they expect them to differentiate themselves on price. And there lies the reality. Daily Maersk is described by Maersk as a premium product and that whilst they will have to negotiate prices based on the market, they expect to add a premium for this new product. The influx of big ships are already depressing freight rates to Europe and as liner companies order more, and bigger ships, the market is going to become increasingly competitive. Whether changing our perception of what shipping time is is going to be the saviour for Maersk, only time will tell….
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