When Maersk Line CEO Eivind Kolding issued a manifesto to the container industry on June 7 calling for radical changes in the way both ocean carriers and shippers conduct their business, shippers largely welcomed it, but called for more details.
Kolding explained why he issued the manifesto and provided more details on his ideas in an interview with The Journal of Commerce on June 10.
Listen to Maersk Line CEO Elvind Kolding's interview:
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Kolding said he decided to put out the manifesto to move the dialogue between carriers and shippers beyond the focus on freight rates and shift it to a competition based on service, reliability, and the lowest environmental impact on supply chains.
Kolding divided the manifesto into three distinct areas. In the first section he said the industry needs to focus on providing reliable service at fair rates. When asked how shippers and carriers could establish fair rates, which are always the subject of heated contract negotiations, he said this would require long-term contracts for up to three years. “When we know that we have that business, then we actually we can price it quite competitively, and then the customer will know that he will have a freight rate he can rely on,” he said.
Long-term contracts would apply to largest shippers and then to medium-sized shippers, he said. Freight forwarders would still mostly use the spot market, he said, but spot rates would become less volatile after long-term contracts take hold.
In the second part of his manifesto, Kolding called for using more technology to provide greater ease of booking and providing instructions for shipping containers. He urged the industry to develop technology that would enable shippers to easily book space for shipping containers over the Internet, instruct carriers on the requirements for the shipment and then change instruction as conditions change. Kolding said this kind of technology would benefit smaller shippers.
The larger shippers would be connected with their carriers through EDI, or electronic data interface with their carriers. He said carriers should develop technology that would enable shippers to connect with their carriers in the way they prefer.
In the third component of the Maersk Line chief’s manifesto, he called for greater visibility into the environmental footprint created by a carrier’s ships. Kolding explained that increased visibility into the amount of a carrier’s carbon emissions would enable a shipper to choose its carrier on the basis of this, which is becoming more important as retailers demand greener supply chains.
Kolding also called for the establishment of a system of “load protection fees” that carriers would assess on the 30 percent of containers that are booked by shippers but turn out to be “no-shows” when they don’t turn up at the ports of origin. He also called for fees on shippers that don’t meet their volume commitments beyond a 10 percent variance.
--Contact Peter T. Leach at email@example.com. Follow him on Twitter @petertleach.