The space-sharing pact APL and MOL announced last week on their intra-Asia services was hardly the largest slot agreement in the shipping world. It wasn’t even the biggest that’s been signed in the last couple of weeks.
That award, of course, goes to Mediterranean Shipping and CMA CGM, with their expansive accord stretching across major trade lanes around the world, an agreement that because of its scale seems to be close to a true alliance rather than a simple vessel-sharing agreement.
But the APL-MOL tie-up, like the MSC-CMA CGM deal, is part of a larger movement across the transportation world, one that encompasses carriers, logistics providers and, yes, even shippers. That is, businesses across the shipping spectrum are looking at how to manage transportation not as an amalgam of loosely aligned but largely discreet operations aimed at extracting the greatest return on investment on each single piece of equipment, but as a network, integrated with common purpose but not built just on the brand name on the side of the assets.
That network strategy is partly what has helped forge the so-called rail renaissance — freight railroads, we’ve found, are more focused on broad management of fluid networks than on managing the turns of the individual cars that form the components of network operations.
A seemingly unlikely statement in support of network economics came at The Journal of Commerce TPM Asia event in October in Shenzhen, where Wal-Mart’s Rob Kusiciel said the world’s largest retailer was trying to manage its huge shipping volume as a network rather than just, well, a lot of separate decisions about separate containers.
Logistics providers are getting networked.
Panalpina, a pioneer of scheduled, network operations in air forwarding, has been announcing a series of less-than-containerload services in different parts of the world this fall. Those announcements join similar launches by CEVA Logistics, DHL Global Forwarding and even trucker ABF Freight System that, taken together, suggest space agreements backed by the stronger volume commitments consolidators can offer are an increasingly significant part of international shipping relationships.
In the shipping industry, the idea of managing networks will be behind the consolidation in 2012 that already appears to be taking shape in 2011.
The carriers increasingly will look to manage networks that may include their own branded ships, or the vessels of others. The combinations may come about through mergers and acquisitions, but the MSC-CMA CGM agreement shows they do not have to.
Some shippers are showing unease with the agreements. The prospect of market dominance by MSC and CMA CGM, said Jean-Louis Cambon, head of the European Shippers’ Council’s maritime transport council, “has to be a worry for shippers looking for service and price differentiation.”
But rates, and returns on investment, are simply too low to let alternative strategies go by. MOL finds the idea so compelling the carrier is undertaking an even greater pact with A.P. Moller-Maersk in the tanker business that will have the carriers and a handful of other partners jointly operate a pool of about 50 very-large crude carriers in coming years.
Each operator would rather manage a network, because managing vessels just hasn’t been working.