Something has not worked for years in world trade: the giant of the seas calls for a radical change in supply chains

World trade has evolved very quickly in recent decades and supply chains have not kept up. It is the main conclusion of known as ‘giant of the seas’the Danish shipping company A. P. Moller-Maersk. The ‘colossus’ of world maritime transport calls for rethinking processes and urges other shipping companies to radically restructure in order to survive.

“The way in which supply chains have worked in recent decades is no longer adequate,” said Ditlev Blicher, president of Asia-Pacific of the shipping company, in a statement to the press collected by Bloomberg. “We believe that this environment of increased volatility is here to stay, and it is likely to accelerate.”

World trade has been rocked by major shocks in recent years, as the pandemic and the ukrainian war have wreaked havoc on shipping lanes. But even before of the pandemic, it was obvious that supply chains had to change, according to Blicher.

Shipping companies have repeatedly tried to streamline their operations, but have not been able to overcome the bottleneck derived from the thousands of actors acting for individual parties throughout the supply chain. It is increasingly urgent to invest in smarter technology and logistics networks that go beyond increasing transport capacity, says Blicher.

Maersk, which has the second largest container fleet in the world according to Alphaliner, wants to become an integrated logistics provider connecting land, sea and air. The company launched a strategy last year to expand its air cargo services.

Maersk and another ‘colossus’ of the sector, MSC (Mediterranean Shipping Co.) agreed last month to end their partnership, which allowed both companies to share ships on some of the most lucrative routes in the world. Blicher has confessed that the alliance, which will end in 2025, was not the direction Maersk wanted to take.

Although MSC has the largest fleet in the world, it continues to actively increase its shipping capacity to maintain its top position. Maersk, for its part, is cutting expenses and you want to build a system that allows you to better control cargo flows.

Containers often experience numerous delays on their way to their destination in the event of ‘black Swan’ (mishap), says Blicher. But a better strategy would be to have Warehouses spread across different ports, assures. That would allow Maersk to consolidate shipments from different parts of Asia into one convenient hub, giving more flexibility to ship to where demand is greatest.

“We are building a structure that allows us to take a container from China, another from Vietnam and another from Cambodia to a port like Singapore and open them,” explains Blicher. “Then we put them together and the customer can send them where they’re needed at the time.”

saving 2022

This series of approaches is not incompatible with the fact that the shipping companies obtained great benefits during the pandemic. Spot container rates hit a record as shipyards ground to a halt, prompting a shortage of vessels to meet rising demand for e-commerce goods. Now, with weaker global demand as major economies battle inflation, companies have been canceling trips to align capacity.

“In the last 12 months it was not difficult to make money: if you had something that could float and carry your container, it was not difficult,” says Blicher. “Now, capabilities matter.” Yet the Danish group results in 2022 have been remarkable. The main industrial group in Denmark, presented this Wednesday a record net profit of 27,351 million euros in 2022, 63% more than the previous year.

The still high freight rates and the rise in demand, especially in the first part of the year, boosted the result, as recorded in the balance sheet. “2022 was an exceptionally strong year for Maersk. The record financial results were driven by strong performance across all segments in abnormal market conditions in the first half,” said company CEO Vincent Clerc.

In the fourth quarter, net profit fell 18% year-on-year to 4,646 million euros. Billing amounted to 16,623 million euros, representing a 4% drop compared to the same period in 2021.