Maersk has more container ships than anyone else on earth, but it would be a mistake to view the company as a mere freight shipping company. It is also an airline, a trucking company, a port terminal operator and a freight forwarder. Maersk has engulfed a portion of virtually every stage of the global supply chain as part of its ambition to become a one-stop-shop for logistics.
Yesterday (December 16), Maersk struck a deal that offers a glimpse into the future of its business and the future of global shipping. From next year, Maersk will effectively lead the logistics operations of Unilever, one of the world’s largest consumer goods companies. Maersk said in a statement that it will “ensure the operational management of international maritime and air transport” for Unilever from 2022 to 2026.
Starting next year, Maersk will develop and participate in the execution of in-house software, dubbed “International Control Tower Solution”, to manage Unilever’s supply chains. “This is a strong indicator that Maersk’s expertise extends far beyond sailboats,” said Eytan Buchman, marketing director of the freight reservation platform Freightos, who wrote on acquisitions and expansion. from Maersks. “Combined with their other assets and what they’ve built, it’s no exaggeration to assume that this is one more rung of the ladder to end-to-end chain ownership. global supply. “
Agreements like this are known as “third party logistics” (4PL), and they are becoming more and more common. Under this model, a client like Unilever outsources control of all or part of its supply chain to a single logistics giant like Maersk, which can act on behalf of its client to reserve cargo space on ships. and airplanes from other third party freight providers.
These types of deals will become more common as shipping companies expand into new corners of the supply chain, fueled by the multibillion-dollar profits they racked up during the pandemic. It’s not just Maersk; other shipping companies like CMA CGM are also expanding into air freight and freight forwarding, and analysts expect Amazon to launch a competing logistics service next year. The net effect may be a global supply chain increasingly controlled by a few large logistics companies.
Maersk’s backbone to end-to-end logistics
Five years ago, the entire shipping industry struggled to make a profit as a fragmented group of relatively small shipping companies competed fiercely to drive down prices. Hanjin Shipping, the world’s seventh largest shipping company, declared bankruptcy and closed in 2016. Maersk lost $ 1.9 billion that year. On September 22, 2016, the company announced a plan to reinvent itself and put itself on a stronger financial footing. Maersk would sell off its oil business and focus on building a logistics empire, with an emphasis on expanding into other parts of the supply chain that promised more reliable profits than shipping.
Over the next five years, Maersk embarked on a spending spree that accelerated during the pandemic, when the shipping company’s profits soared. It has grown its freight airline, expanded its fleet of trucks, bought freight forwarder Senator International, increased its list of container ships and made a bet on e-commerce by acquiring last mile handling company B2C Europe.
Maersk no longer presents itself as a shipping company. “The company has made the strategic decision to change course,” she wrote in a press release in March. He is now an “end-to-end supply chain and logistics partner” – a more lucrative line of work that earns him money by consulting his clients’ supply chain strategies. and by selling access to its logistics software in addition to shipping costs. it collects by transporting goods on ships, planes and trucks.
Other shipping companies and freight forwarders have followed Maersk’s lead in expanding into 4PL services, according to Buchman. These companies argue that by consolidating the entire range of logistics services into one package, they can increase efficiency and lower prices. But if they succeed in consolidating the logistics industry, they will leave less choice for their customers.
In good times, it might not matter: Customers will benefit from the lower prices and the ease of not having to think about their supply chains. But in times of crisis, like the chaos fueled by the pandemic we are now experiencing, these customers may scramble to find a possible alternative as prices rise and cargo space becomes scarce. Companies will need to weigh these compromises as they exit the current supply chain crisis and rethink their logistics strategies.