Trading Places
Necessary independence ?
By Peter Tirschwell
Customer demands for neutrality inevitably lead carrierowned forwarders to be structurally independent .
Recent transactions in logistics reinforce a truism dating to the early days in container shipping : logistics service providers may exist within a carrier organization , but their customers ’ demands for neutrality will inevitably lead them to be structurally independent .
As carriers have engaged in a slew of acquisitions following record profits earned during the pandemic , that truism continues to play out , with one exception : Maersk , the outlier in building an integrated model in which logistics and carrier functions are under the same roof and brand . And even Maersk ’ s approach has in recent weeks come under scrutiny .
When CMA CGM on Feb . 29 completed its acquisition of Bollore ’ Logistics , which will become part of its CEVA logistics unit , and Mediterranean Shipping Co . ( MSC ) on March 21 moved forward with its purchase of 42 % of Lyon , France-based forwarder Clasquin , there was no question as to the independence both businesses will retain within a larger carrier organization .
For CMA CGM and MSC , those deals continue a trend of taking full or partial ownership stakes in logistics firms but keeping them organizationally independent . When CMA CGM acquired CEVA in 2019 , it considered rebranding CEVA as CMA CGM Logistics but decided against it . MSC acquired 15 % of Savino Del Bene in 2015 and raised its stake in the Italy-based forwarder to 23 % in 2021 , but Savino continues to operate with full independence .
Earlier eras bear a striking resemblance to the present . Containerization pioneer Sea-Land Service started a third-party logistics provider ( 3PL ) called Buyers Consolidators , hoping to tap into higher-margin logistics services and reduce its exposure to boom-and-bust freight rate cycles .
APL Logistics , which started under the historic trans-Pacific carrier American President Lines , was never integrated into the larger organization , but it survives as an independent 3PL owned by Kintetsu World Express . NYK Logistics , part of the same group that owns ocean carrier NYK Line , was rebranded as Yusen Logistics in 2011 .
Forwarders were able to establish themselves in the market because carriers withdrew from serving smaller BCOs , preferring to concentrate on larger firms but also preoccupied with operating large asset-based networks .
“ Why did the forwarders get into the business ? Because carriers , whenever they lost money , started to close down sales offices , they started to close down services ,” Otto Schacht , former head of sea freight at Kuehne + Nagel , said during the Journal of Commerce ’ s TPM24 conference in early March .
As the industry has evolved , the ideal strategy has repeated itself : keep forwarding and ocean carriage independent while offering customers the option to leverage the forwarder ’ s relationship with the carrier to create an integrated service . Typically , only a small percentage of customers choose that option ; most rely on forwarders ’ space allocations across carriers and services .
Even as carriers like CMA CGM and MSC hold stakes in logistics firms , others remain strictly in the carrier camp . Hapag-Lloyd , for example , said in a January presentation that it has “ no intent to move towards offering integrated logistics solutions beyond door-to-door container transport .”
The revolutionary nature of the Maersk integrator strategy has led to complexities the company has had to navigate . Even though it closed ocean forwarding subsidiary Damco in 2020 , its retention of contract management responsibilities on behalf of origin purchase order management clients led some carriers to decline to carry cargo for those clients , not wanting to directly expose their rates to Maersk despite assurances of an internal firewall . That , along with Maersk turning away from the large forwarder market to go all-in with cargo owners and recent financials perceived to be disappointing , has led to a public airing of skepticism regarding the integrator strategy .
“ I believe that what CMA does is the better solution ,” Schacht told TPM24 . “ Time will tell whether the Maersk solution works because customers still separate contract logistics , overland , sea freight and air freight tenders .”
There are signs Maersk may be listening to its critics . Maersk CEO Vincent Clerc alluded to CMA CGM ’ s approach in a Feb . 8 earnings call , noting “ we have one company in CMA that has been able to house both a 2PL offering and a 3PL offering under the same roof and has been able to do that , as far as we can see , successfully .”
In the same call , Clerc confirmed that Maersk is considering purchasing for-sale forwarder DB Schenker , an acquisition that would put Maersk back into the forwarding business given the core role of forwarding in DB Schenker ’ s business .
“ We are skeptical of Maersk ’ s ability to integrate a large freight forwarding asset within its integrator strategy mainly because of potential dis-synergies regarding DB Schenker ’ s sizeable air and sea freight forwarding division ,” Barclay ’ s analyst Alexia Dogani wrote in a research note .
email : peter . tirschwell @ spglobal . com
54 Journal of Commerce | April 8 , 2024 www . joc . com