Kim Fejfer is waging a war on waste at his company’s container terminals. As CEO of APM Terminals, Fejfer views increasing productivity at the 56 terminals it owns or operates around the world as akin to auto racing. “It’s a little like a Formula One race where you see the port call as a pit stop,” he said. “What really matters is to reduce the length of the pit stop.”
Fejfer admits his Formula One analogy may not be exact in an industry where slow-steaming has become the standard on the major east-west trades, but with ever-bigger ships and ever-higher bunker prices, he says ports and shipping lines can’t afford to operate in separate silos.
“In general, we have low productivity in our ports,” Fejfer told The Journal of Commerce. “We have low reliability in carriers. There’s too little trust and sharing of information among the parties, so there’s a huge opportunity to be taken here.”
To that end, Fejfer is targeting investment of about $3 billion in terminal expansion, equipment and technology that will boost productivity in 2012. The company, the terminal-operating arm of A.P. Moller-Maersk, is working with internal and external teams to identify and eliminate the waste “that occurs every day in our business.” It’s also investing in more productive cranes and other equipment at the terminals it’s upgrading.
One of Fejfer’s goals is to partner with shipping lines to exchange more information on ship sizes, arrival times and cargo. “We are seeking to work together to unlock the hidden value and make it a joint project, rather than this procurement exercise that we sometimes face,” Fejfer said. The company aims to use information technology and EDI interfaces with carriers to exchange information and “take a proactive attitude to help each other.”
Fejfer points to APM Terminals Yokohama, the company’s most productive terminal, as a model. The terminal, which averages 48 container moves an hour, ranks with the most productive terminals in the world.
But not all of the APM terminals can match the Yokohama terminal’s record. “What we see is that there is a huge variation just within our own company,” Fejfer said. “We focus on our good performers and focus on what we can learn from the good performers like Yokohama. The trick is to find out what they do and how we can make that into global standards so that we can upscale our productivity on a global level.”
The company’s program to improve productivity already is showing some results. At the Callao, Peru, terminal, crane productivity more than doubled to 26.57 moves per hour per crane and gate turnaround time decreased 49 percent to 28 minutes in the first 29 weeks after APM began operations there.
Productivity improvements also are showing up in the company’s return on investment, which reached 13.1 percent in 2011. Although down from 16 percent in 2010, stripped of one-time gains from the sale of terminals and facilities in slower-growing markets, 2010’s ROI was 10.4 percent.
“This shows that APM Terminals is tracking well toward our long-term goal of being the best and most profitable global port operator in the world,” Fejfer said. “Profitability is our license to grow.”
APM Terminals’ profit declined 18 percent in 2011 to $649 million from $793 million a year earlier, when it recorded those gains from divestment and other extraordinary items. The profit in 2011 before gains and special items was $611 million, 24 percent higher than the adjusted profit for 2010.
APMT — the world’s fourth-largest terminal operator after PSA, Hutchison Port Holdings and DP World, according to Drewry Shipping Consultants’ “Global Terminal Operators Annual Review and Forecast 2011” — is weaning itself from dependence on Maersk Line ships for its terminal volumes. In 2011, the total amount of containers handled, weighted by its share of terminal ownership, increased 8 percent on a like-for-like basis to 33.5 million 20-foot equivalent units.
Its customer base consists of more than 60 shipping lines. Volumes from customers outside the ownership sphere increased 11 percent year-over-year and constitute 46 percent of all volumes handled.
The divestments of slower-growing terminals are part of APMT’s strategy to refocus investment in terminals in emerging markets and other fast-growing regions of the world. “Our efforts are tilted toward the high-growth markets — Africa, South America, eastern Europe and other high-growth markets in China, India and Southeast Asia,” Fejfer said. “We have a philosophy of actively managing our portfolio. We always try to improve and get things to work, but, ultimately, if a certain facility is not delivering profits or volumes, then it doesn’t necessarily belong in the family.”