Daily Maersk – A product of slow steaming....

One of the major challenges facing by the container lines today is the mismatch between the supply and demand of fleet capacity. While cargo volumes have badly affected since 2009, capacity has continued to rise strongly as vessels ordered earlier continued to be delivered during the recession period . And many big vessels like Maersk’s Triple-E 18,000 teu vessels, currently under construction, are expected to enter the trade in 2013.   

 

Continuing growth in global container capacity coupled with sluggish volume , forced liners to lay up ships to manage capacity. Some liners skipped several individual sailings and suspended many services as a measure to manage over capacity .  
 

Another option the container liners introduced to mitigate the over capacity was the introduction of slow steaming. The speed of the ship is reduced considerably so that it will be necessary to deploy more number of vessels to meet the same demand or to maintain the same frequency.  As per Alphaliner, Paris based industry analyst, by December 2011 around 7 million teus had been absorbed, which otherwise would have been a surplus,  through this measure. It also helped the liners to make huge savings on the bunker cost when the international fuel cost was rocketing up. As per reports , the bunker cost (380 cst) was under USD100 in July 2009, which had gone up to USD750 by 2011 beginning !

 Daily Maersk Programme

 

 In 2011, Maersk Line launched Daily Maersk, providing customers with a ‘conveyor belt’ service between selected ports in Asia and Northern Europe.  Maersk Line ,  with largest vessels and  market share, introduced this service using the slow steaming technique. This new product was born out of necessity – to cope with the rising bunker cost and to soak up the extra capacity due to new vessel deliveries. The Maersk way of turning the negatives into positives !   

 

                                                       

A daily service between Asia and North Europe with reliable on-time delivery expects to set a new trend in liner shipping . Changing shipping from the weakest to the strongest link in the supply chain ! Until now, customers had to adjust their production schedules and supply chains according to shipping lines’ schedule, which was not so reliable. The engine behind Daily Maersk is 72 vessels operating a daily service between six ports in Asia (Ningbo, Shanghai, Yantian and Tanjung Pelepas, Laem Chabang, Jakarta) and three ports in Europe (Felixstowe, Rotterdam and Bremerhaven) - a giant ocean conveyor belt for the world’s busiest trade lane ! The much awaited 20 Tripple E vessels are expected to join this service from 2013 onwards- economy of scale , by all means ! As per the Line’s website they have transported over 2,00,000 containers with 98% reliability for the first year of operation.
 

 When you book a Daily Maersk service , Line will provide you with a promised transportation time which indicates the date that the container will be available for collection or onward transport at the location indicated in the Booking Confirmation. Regardless of which of the 6 Asian ports the cargo is loaded at, the transportation time – from cut-off to cargo availability – is fixed.

                                    

As per the programme the customer can enjoy a daily cut-off, which means that cargo can be shipped immediately after production without the need for storage. The main attraction of the programme is that the timely delivery promise is backed up with monetary compensation .  If cargo arrival is delayed by 1-3 days, Maersk will pay USD 100 per container to the customer. If delayed by four days or more, the pay back is USD 300 per container !
 

Maersk Line CEO, Mr. Eivind Kolding says “We set out to design a service that takes the stress out of our customers’ lives, to change shipping from the weakest to the strongest link in the supply chain. After all, shipping is only around two percent of our customers’ total cost. And yet our unreliability has until now forced them to shape their production plans and inventory around it,”

 Re Grouping of Carriers in response to Daily Maersk

To compete more successfully against the Daily Maersk programme  ,   Mediterranean Shipping Co (MSC) and CMA CGM  formed a partnership covering the Asia –Europe , Asia-Southern Africa and all South American Services. Both companies are known as strong independent liners, especially MSC, the second biggest line which grows organically and maintained its family ownership throughout the crisis period. With this unexpected announcement they literally stunned the observers !

 

                                    

Within a month’s time, The Grand Alliance ( NYK , OOCL, Hapag-Lloyd) and The New World Alliance(Hyundai, APL, MOL) formed the G-6 Alliance. Similarly Evergreen joined forces with the CKYH(COSCO, “K” Line, YML , Hanjin) Alliance.  

 

 

In short  within a few months of commencement of The Daily Maersk Programme , the Asia – Europe service landscape had changed, literally.