Tuesday , December 11, 2018

The Ocean’s Great Dane

Charlotte’s role as a global hub for international commerce extends beyond the Catawba River to the high seas. Within the city limits are corporate, sales and marketing offices for 11 of the world’s major shipping lines. But there is little to compare among Orient Overseas Container Line, Horizon, Cosco, Evergreen Line, Maersk Line, Hyundai and Yang Ming.

 

Maersk Line is the luxury yacht to their river rafts. With over 25,000 employees, 600 steamships and 100,000 customers worldwide, Maersk Line is the largest container shipping company on the planet.

 

The Copenhagen-based company first docked in Charlotte in 1999. Their office was in Barclay Downs—the former Charlotte base for SeaLand. The building choice was hardly a coincidence. In 1999, SeaLand, the company that invented container shipping, was purchased by what was then A.P. Møller-Maersk Line. The buyout included vessels, containers, related container terminals and lease obligations.

 

The formidable Sea-Land name did not entirely disappear with the takeover. The new container company became Maersk SeaLand Services. But simplicity eventually won out and in 2006 the Danes opted for Maersk Line. Maersk Line Agency, USA, is the North American container division of Maersk Line.

 

The Barclay Downs office near the South Park Mall stayed active for the next two years. In early 2008, Maersk dramatically expanded their Queen City presence. They combined the east-coast and mid-west customer service, land and oceanside operations and a majority of their finance functions at 9300 Arrowpoint Boulevard on the city’s southwest side. Maersk had purchased the 346,000-square-foot building from Royal & SunAlliance in 2006. It became a model of environmentally friendly renovation.

 

Going Intermodal

 

Maersk is not a name that easily rolls off the tongue. It is pronounced as if the “a” were absent—Mersk. Say it quickly and it sounds like a major drug manufacturer.

 

“For my first five years with the company, my mother thought I worked for Merck,” chuckles Tim O’Connell. Since July, the 41-year-old O’Connell has been senior vice president of North American (NAM) inland operations. Also in Charlotte are Kevin Hickey in charge of customer service, Cindy Ott over human resources, and Al Gebhardt, in charge of liner operations.

 

The Charlotte consolidated office is one of the newer developments in the company that A.P. Moller and his father Captain Peter Maersk Moller founded in 1904. The father-son team had just a single freighter. By the mid-1950s, Maersk had freighters in the plural, but they and other steamship companies were slowly evolving into container carriers, the paradigm-shifting invention of North Carolina native Malcolm McLean.

 

Fast forward to the late 1970s and Maersk and others evolved again into door-to-door product delivery systems. Since 1977, steamship lines have interacted with rail and trucking companies in what the world has come to know as intermodal shipping.

 

Although Maersk is headquartered in Florham Park, N.J., O’Connell refers to the Charlotte office as a “dual headquarters” with Florham Park. The commercial functions are in Florham Park, while O’Connell, Hickey, Ott and Gebhardt handle operations, customer service and HR in Charlotte.

 

O’Connell is well-suited for his role. He started with Maersk immediately after graduating from the University of Scranton in 1995. He liked the company’s philosophy right from the start. And they liked him. Maersk has moved the Pennsylvania native through customer service, pricing, sales, information technology, trade and marketing, and now inland operations for all of North America.

 

What did Charlotte have going for it?

 

“Obviously, we already had a presence at the old SeaLand office at South Park,” says O’Connell. Among the other factors in Charlotte’s favor, O’Connell found a ready source of excellent resources, a sensible work-life balance, proximity to all of Maersk’s major suppliers and customers, the airport, great people, good colleges and jobs from entry level to executive. Charlotte’s growing role as a center for national and international conferences also played a part.

 

“Charlotte enables us to attract a really good and diverse workforce,” attests O’Connell. “Aside from that Charlotte is just beautiful. I love it here,” he adds.

 

O’Connell also commented on Maersk’s resurrection of the SeaLand brand announced earlier this year. “For our North American business, one of the key markets is Latin America,” he explains.

 

Maersk has struggled with how best to serve that market. For answers, they looked to Seago, its intra-Europe/Mediterranean and MCC, Seago’s intra-Asia counterpart. These short-haul, small-customer operations served as a model for the new SeaLand.

 

“As it turns out, the SeaLand brand carries a significant amount of weight in Latin America. In short, having a brand connected to the beginning of this industry is important and something that really resonated.” Headquarters for the new SeaLand will be located in south Florida.

 

Growing Wise

 

Inquiries like these into innovative models of customer service are not typical of the shipping industry. In their 2014 book, Creating Global Opportunities, authors Chris Jephson, a former Maersk senior executive, and Henning Morgen, a company historian, back up this assessment with a telling anecdote.

 

In 1978 an advertising agency was asked to celebrate the 50th anniversary of Maersk Line’s services between the U.S. and Southeast Asia with a video documentary, wrote Richard Milne in a book review. Maersk McKinney Moller, the longtime CEO and company figurehead, watched the video, thanked the people involved then shelved the film. Instead, he sent a personal letter to each top customer because it was more in keeping with what his father would have wanted.

 

O’Connell acknowledges, “The container business kept growing and growing (in the second half of the 20th century), but the industry itself didn’t really grow. Volume-wise, yes, there has been growth, but how we think about business and global trade is somewhat antiquated. We are not really in the main stream of using e-commerce, efficiency programs and lean operation. For years the industry has been plagued with terrible results. Return on capital is very bad.”

 

He then addressed the how-to-fix-it question. The answer is a third wave of evolution, says O’Connell; an evolution that builds on the foundation provided by containerization and door-to-door logistics.

 

“Our business is maturing,” he says. “We are starting to understand how to best use data, facilitate trade and serve our customers in a more efficient and meaningful way.”

 

O’Connell points to Soren Skou, the global CEO of Maersk Line, as a leader in an evolving industry. Skou learned his leadership lessons the hard way. During his first two months on the job—January and February of 2012—Maersk Line lost $500 million. That’s $9 million a day. At that rate, the company was headed for a $3 billion end-of-year disaster. Instead, Maersk Line had a $461 million profit in 2012, but Skou admits that even that was not a good return on what the Maersk conglomerate had invested in Maersk Line.

 

Under Skou, Maersk has adopted an even more green approach to fuel reduction and cost containment. In 2013, the company had reduced its carbon dioxide emissions per container shipped by 25 percent. Maersk had targeted 2020 for a reduction of that magnitude. Congratulations were short-lived, however. Skou raised the percent to 40 by 2020. The 50-year old MBA from IMD Switzerland also upped the ante on how the company is organized, serves its customers and meets its delivery schedules.

 

Maersk Line recently reported a profit of $547 million for the second quarter of FY 2014. The container shipping division helped drive up the Maersk Group’s half-year earnings by 42 percent.

 

Growing Larger

 

Skou is overseeing the launch of Maersk’s new Triple E class ships, the largest ships in the world. The Triple E designation plays well for marketing department spinmeisters: economy of scale, energy efficiency and environmental improvement.

 

Maersk Line initiated the E Class in 2006 with the Emma Maersk and Estelle Maersk. Each holds the equivalent of 14,770 20 by 8 by 8 ft. containers (TEU). All eight Maersk E Class sister ships begin with the letter E.

 

Triple E Class container ships—20 ordered, 10 delivered—are even larger. Each will measure a quarter mile long and hold 18,000 TEU on its 19 decks. The highly computerized EEEs will part the waves at 23 knots with a skeleton crew of 22. One kilowatt of energy per ton of cargo will propel a Triple E 114 miles. Compare that to a jumbo jet that travels a mere third of a mile using the same amount of energy per ton of cargo.

 

Charlotteans who tour the Maersk building at Arrowpoint will find a large model container ship with thousands of tiny boxes nestled in its hull. “That’s one-third the size of a Triple E,” says O’Connell. The largest ship Maersk docked on the U.S. east coast was 10,000 TEU. More typically, it is 7,500 TEU.

 

With all classes of container ships—large, larger and largest—port selection is a major concern for O’Connell. His port roster includes Wilmington, Norfolk, Baltimore, Newark, Charleston, Savannah, Mobile, Houston, Los Angeles, Long Beach, Seattle, Vancouver, Halifax and Montreal.

 

“Larger ships place greater demand on a port,” says O’Connell. Cranes have to be large enough to reach over ships like the Triple E’s expanded hull. Ports have to be deep enough; rail lines and roads must be efficient and accessible.

 

Another port decision issue, says O’Connell, is customer density. He cited Gildan and the Port at Wilmington as an example. Textile giant Gildan has a distribution center in Eden, N.C., that receives finished goods imported from Central American manufacturers. In 2012, Gildan increased its use of Eden and the port at Wilmington to export textiles to countries in the European Union.

 

Maersk shifted Gildan’s import and export business from the port at Charleston to Wilmington. “One thing that really matters to Maersk is how our customer needs to be served,” says O’Connell.

 

While markets in Central America, Africa and Asia are exploding, the elephant in the room is always China. “Our company has a very long history of doing business in China,” says O’Connell.

 

In early 2015 Maersk’s trans-Pacific, trans-Atlantic and Asia-Europe business will enter a new evolutionary phase. That’s when a 10-year vessel sharing agreement between Maersk Line and Mediterranean Shipping Company (MSC), the so called 2M partners, is expected to go into effect. The agreement will mobilize the capacity of 185 container ships and possibly result in a 30 percent share of the total Asia-Europe container market.

 

That is less than what Maersk, MSC and France’s CMA CGM hoped to gain from a proposed three-way vessel sharing agreement they floated in 2013. Known as the P3 Network—the P standing for parties—it would have controlled 40 percent of the trade detailed in the 2M arrangement. P3 was scuttled in June 2014 by the Chinese due to competition concerns. The quickly hatched 2M plan did not need approval from the Chinese Commerce Ministry.

 

Only a few major and minor industries in the world are outside Maersk’s 100,000-plus customer base. When meeting the rare non-user, Tim O’Connell first talks about needs, schedules, price and corporate fit.

 

Then it’s a discussion of Maersk’s strong brand, long history, financial stability, good network and customer service.

 

He concludes with a notion voiced by many in the container industry: “What’s not to like?”

 

“There are a number reasons to use Maersk. I think most importantly it’s centered on our philosophy of constant care. Whether that be for our customers, and delivering their promise to their customers, our business, our partners and their business, or our colleagues and creating a rewarding place to work, we work hard as company to ensure we have a strong balance and intent focus on delivering results.”

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