Thursday, February 01, 2007

Intermodalism Is "FUNDamental" at Maersk

Caught this article on the American Shipper know, it kind of makes me chuckle. Is the trade imbalance causing this "re engineering" effort...or is it the cost of all the big ships Maersk is buying? Either way, customer service will suffer and shippers and importers are going to pay more, for less.
Let the "attrition game" begin for the big carriers and their very vulnerable customers...
Maersk restructuring inland services, citing trade imbalance

A plan by Maersk to change how it handles inland cargo in North America could have far-reaching consequences for the container shipping business.

Maersk said it is “fundamentally reengineering” its entire North American network, ending routine intermodal service to some inland rail ramps and concentrating cargo over fewer routes.

Maersk said the changes are being "caused by the trade imbalance and rising rail and trucking costs in North America. These costs are not on a cyclic path, they are on a relentless upward trajectory," the company said.

The changes are meant to reduce costs and “provide sustainable round trip compensation for container transportation costs.”

Attendees at the annual dinner of the New York-New Jersey Foreign Freight Forwarders and Brokers Association Wednesday night agreed it was a bold move by the world’s largest container carrier. They were unsure whether it would be imitated by other companies, but said some competing lines would likely seek out Maersk customers in the areas where it is ending intermodal service.

Logistics companies think there might be opportunities to work with Maersk in helping them retain those accounts by transloading cargo near the ocean ports and arranging inland moves.

Maersk has already announced plans to increase rates to selected destinations, and has announced plans to optimize Pacific trades capacity by phasing out three vessel strings. It also said it is pulling out of the Port of Halifax because of low container volumes and restructured service to the Middle East and Indian subcontinent.

Now Maersk said it is “streamlining the North American inland transportation network by focusing inland rail traffic on significantly fewer routes.”

American Shipper has been contacted by Maersk customers seeking additional information about the planned changes, and others have supplied descriptions or documents describing the plans, one of which said inland delivery points may be eliminated “where cargo density does not ensure round trip cost recovery.”

Maersk said customers will benefit from “faster and more reliable service delivery based on less complex routes that are better managed and administrated.”

Sources say they have been told many of the changes to intermodal routing will go into effect May 1, when the new contract year for much Far East cargo begins.

“The business environment for container shipping in the U.S. and Canada has changed in a fundamental way,” Maersk said in a written statement. “The current shipping industry service model in which acceptance and pricing of end-to-end rates is driven overwhelmingly by the ‘market perception’ of port-to-port ocean leg vessel capacity supply and demand does not make sense any more.

“The reality today is that the growing U.S. trade imbalance significantly reduces export cargo contribution to round trip costs on land and at sea. Additionally, the ‘bottlenecks’ and primary transportation cost drivers in North America have shifted from the ocean leg to the inland leg of the transport,” Maersk continued.
"Shipping back more ‘air’ and getting less for export cargo puts pressure on the import revenues to cover rising roundtrip costs,” it said.

“At end of the day Maersk has a very complex, cost-ineffective intermodal system,” said one source familiar with the planned changes. “They have found there is a lot of money to be saved.”

According to documents describing the planned changes, Maersk will stop using 66 rail ramps in North America and remove service from 18 inland destinations.

They are the U.S. cities of Denver; Council Bluffs, Iowa; Ft. Riley and Kansas City, Kan.; Salt Lake City, Utah; Minneapolis-St. Paul; St, Louis and Kansas City, Mo.; Buffalo and Syracuse, N.Y.; Omaha, Neb.; Arcadia, Wis.; and Auburn, Maine. In Canada they include Calgary and Edmonton, Alberta; Winnipeg, Manitoba; Saskatoon, Saskatchewan; and Moncton, New Brunswick.

Immediate confirmation of this list could not be obtained by Maersk; a spokeswoman noted the plans have been undergoing revision as they have been developed.

The company will also reduce the number of rail routes they use and link ports to specific service areas. Maersk said the changes being planned would reduce 250,000 rail entries to 50,000.

One forwarder said that in the past, Maersk and most other carriers would “accommodate virtually every shipper’s routing request.”

A shipper, for example, moving a container to Chicago might ask that his box be routed through New York, Baltimore or Norfolk. He might prefer a certain port because, for example, Customs officials in that port might be particularly knowledgeable about a commodity or easy to work with.

Maersk said now each port will be matched to a specific “service zone” in North America that will be efficiently served by the simpler network of high-density rail cargo.

As part of the changes, Maersk may add additional calls at some ports and reduce calls in others, but a spokesman said they would not be eliminated entirely in any city other than Halifax.

Maersk said that for inland destinations with high cargo volumes, there might be two or more ports of entry, while areas with less cargo would be served by a single port.

Speaking on background, some forwarders and non-vessel-operating common carriers believe that other carriers will follow Maersk’s lead. They also say that some carriers are likely to target shippers located in inland areas where Maersk is ending service.

They also believe that Maersk will continue to offer service to those locations, especially to prized customers, albeit at higher prices.
"albeit at higher prices" HA! Just wait...


Blogger WowWorldEvents said...

Wednesday, October 22, 2008
Intermodalism? Small to Medium Enterprises and Assosications take note!
Intermodalism? Small to Medium Enterprises and Associations take note!

John Lyman Business Chronicles

Small and Medium Enterprises and Associations fight uphill battles for international trade; especially, when confronting large corporations with significant influence on trade route shipping and competitive modes of delivery.

Not too long ago, I was asked by two of the most influential small business associations in Ecuador and Taiwan to work within their associations to determine which members might be able to establish international trade and might exercise spheres of influence in developing new, alternative trade routes.

Ecuador, the largest Latin American benefactor of multi-country trade agreements, wanted to work with their Federation of Exporters to develop an alternative trade route that bypassed the Panama Canal - "The Amazon Route to The Gulf of Mexico".

Taiwan, one of the most influential of the Greater Asia Pacific trade associations, wanted to establish new trade routes and to employ new technology that would deliver or receive products or services via newly established and small business friendly markets.

Ecuador offered a company that needed chemicals to assist the textile mill; however, larger competitors who have established priority on freight was stifling product competitiveness.

Taiwan offered a company that needed new markets for their textile chemicals; however, larger competitors who have established priority on freight was stifling product competitiveness.

A new, alternative trade route and freight forwarding portal had begun!

Hence the beginning of small and medium enterprise thinking of what should certainly now take note of "Intermodalism".

Small and Medium Enterprises and Associations moving international shipments via container using sequential transportation modes (water, air and land) while making use of the most efficient cost-effective methods to move goods. An entire new set of terms have developed around this concept of intermodalism.

If you are building or recapturing market be intelligent and build your bridges and load centers smartly.


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