Maersk Line is teaming up with BNSF Railway to offer day-definite delivery of Asian imports through Los Angeles to Chicago, Memphis, Dallas, Houston and the CSX Railway hub at Northwest Ohio.
Maersk, the world’s largest container carrier, and BNSF seek to build a loyal customer base of importers, especially retailers, who depend upon day-definite delivery to make their supply chains work smoothly.
Maersk revolutionized container shipping last year with Daily Maersk, a daily service connecting key Asian production centers with major gateways in northern Europe.
“We saw the importance of reliability with Daily Maersk in the Asia-Europe trade,” said Tim O’Connell, senior director of trade marketing at Maersk. “Our customers need fluidity to keep their inventories as lean as possible,” O’Connell said.
Maersk’s new Flagship Service requires a close working relationship with BNSF in order to make the intermodal leg of the service from Los Angeles to the inland destinations reliable. BNSF will build the trains at the APM Terminals’ on-dock railyard at the Port of Los Angeles’s Pier 400, and will operate the trains nonstop to the inland hubs.
Maersk will generate the intermodal volume from its large vessels, and BNSF will guarantee day-definite delivery by eliminating intermediate stops from Los Angeles to the inland destinations, said Steve Branscum, BNSF’s group vice president for consumer products marketing. Eliminating stops along the way should improve transit times by one to two days, he added.
Three of Maersk’s trans-Pacific services will be part of the Flagship Service — TP-8 from Shanghai and North China, which deploys vessels capable of carrying 8,500 20-foot equivalent container units; TP-6 from Southeast Asia and South China, also with 8,500-TEU vessels; and the TP-5 service from South Korea and Japan, using vessels of 5,200 to 5,800 TEUs.
The infrastructure is already in place. The vessels all call at the 440-acre APM terminal in Los Angeles. Containers will be transferred from the vessels to BNSF trains at the on-dock railyard. The service builds upon Maersk’s large vessels and marine terminal operations and BNSF’s extensive intermodal network from Los Angeles to inland hubs, Branscum said.
Maersk and BNSF bring the same basic philosophy to ocean and intermodal transportation. In 2007, Maersk shocked the industry by eliminating a number of intermodal services from the West Coast to inland destinations. Maersk at the time said the number of bills of lading to inland destinations had proliferated to the point where maintaining reliable, cost-effective services to so many inland points wasn’t sustainable.
Both Maersk and BNSF were building their services on the concept of density. Intermodal through services from Asia to inland U.S. destinations require a consistent flow of containers to major hubs. BNSF was making the inland hubs more attractive, and efficient, by developing them as intermodal logistics centers, attracting large distribution warehouse operations to extensive tracts of land around the rail hubs.
Now with its network in place, the railroad can team up with Maersk to provide a steady volume of containers that will allow BNSF to build full, long trains leaving Los Angeles on time and arriving at the destinations on specific days that meet the requirements of retailers and other importers.
“If they need day-definite delivery for pickup in Chicago prior to the weekend, we will provide it,” O’Connell said.
While rapid transit times to inland destinations are important, offering the fastest transit to each destination isn’t essential. Maersk’s customers say reliability is the key factor in inland intermodal transportation, something they can plan their pickups and deliveries around, said Craig Mygatt, senior vice president of inland operations at Maersk.
Nevertheless, Maersk and BNSF guarantee that the total transportation time from Asia to the inland destinations will be attractive and competitive. For example, the Flagship Service offers 19-day transit from Shanghai to Chicago; to Houston, 22 days; to Dallas-Fort Worth, 18 days; to Memphis, 21 days; and to Northwest Ohio, 21 days. Competitive transit times also are offered to inland U.S. destinations from Yokohama, Busan, Yantian and Hong Kong.
BNSF’s interline intermodal service to the CSX hub in Northwest Ohio fills a major gap for importers in a region rich in warehouses and distribution centers. Until CSX opened the hub in North Baltimore, Ohio, last year, serving distribution centers in Ohio and Michigan was a challenge, because trains had to pass through the congested Chicago area, Mygatt said. Now, intermodal trains bypass Chicago and proceed directly to the CSX hub.
Branscum said CSX’s Northwest Ohio operation complements BNSF’s logistics parks in Chicago, Memphis and Dallas as established destination hubs that are attractive to retailers, direct importers and third-party logistics providers. BNSF and Maersk see similar possibilities down the road for expanding the Flagship Service to other major hubs, such as New York, Atlanta and Kansas City.
The Flagship Service was designed with importers in mind, but strong growth in U.S. exports to Asia in recent years also figured into the equation. A major challenge facing exporters in the interior U.S. is generating a steady, predictable supply of empty containers to carry their export cargoes to Asia. Inland import hubs provide the answer to that problem.
“Exporters are looking for a constant volume flow inbound so they can plan for export shipments two to three weeks out rather than one week out,” Mygatt said.
Therefore, in generating U.S. exports, the Flagship Service can be a “big game-changer,” O’Connell said.
The Flagship Service is not a “guaranteed” product; there are no penalties for non-performance, he said. Maersk and BNSF, however, expect at least 95 percent on-time performance. Maersk noted Drewry Shipping Consultants in London reported that in the first quarter of 2012, Maersk’s TP-5 and TP-6 services were running 100 percent on-time.