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Container lines get closer to customers with logistics, but may not suit all

Photo: SMF LinkedIn page SMFNewConversations2.jpg
Top container lines are investing in logistics and the supply chain companies to get closer to their customers, but it may not be a good fit for all.

Moderating the Singapore Maritime Foundation’s (SMF) New Year Conversations 2022, Hor Weng Yew, Chairman of the foundation, highlighted the recent moves by container lines to expand further into the supply chain.

Panelist Jeremy Nixon, CEO of Ocean Network Express (ONE), the sixth largest container line, noted the top three lines – Maersk, MSC, and CMA CGM, had started invest more, not just into the landside of the business, but 3PL logistics and integrated supply chain strategies.

“Obviously, that's driven by getting closer to the customer and trying to offer a pure end-to-end solution,” Nixon said. Good balance sheets at the moment were also a driving factor.

Last year saw Maersk making multiple supply chain deals including the $3.6bn acquisition of LF Logistics, cloud-based logistics start-up HUUB, e-commerce with Visible Supply Chain Management for $838m, and B2C Europe Holdings.

MSC has made a EUR5.7bn ($6.4bn) offer for Bolloré Africa Logistics, while CMA CGM is  acquiring “most” of Ingram Micro’s Commerce & Lifecycle Services activities in a $3bn deal.

However, logistics is not a new sector the likes of CMA CGM and Maersk, something that was noted by Lars Kastrup, Co-President & Executive Director of Pacific International Lines (PIL), who has held senior positions at both companies in the past. He noted that 15 – 18 years ago when he headed up Maersk in France out of 700 employees some 500 worked in logistics.

Kastrup explained that growth into logistics had happened organically. “It's a natural thing, simply because you have your customer base, and you just add services to your customers.” On top of this container lines added strong IT solutions for supply chain management.

The change recently is that growth is no longer organic, but through acquisitions made by lines with large profits.

Kastrup described logistics as business that added to “customer stickiness”.

“It helps to keep your customers definitely, and it is also a second, or third leg, to the liner of business where many carriers are now adding terminals, and it's a stabilising factor. Also it's a cargo generator for the carriers,” he said.

However, he did not believe that investing in logistics and supply chain acquisitions were a “one-size-fits all” solution for container lines.

“There's also maybe opportunities because some carriers decide not to go that way. So maybe that will open opportunities for these carriers to develop more business with those who are exclusive logistics companies,” Kastrup commented.

A liner company that is not looking move into investing in acquiring logistics companies is ONE.

Nixon said while they were watching developments very closely, they were “quite humble” and just a point-to-point container operator.

“Until we do that very, very well, and are fully invested in our fleet, and our digital solutions, and terminal requirements, I think we'll be we'll be keeping out of that sector and leaving it to the big boys to get on with.”

He added that too many of ONE’s clients were 3PL forwarders.