The Logistics Giants of the Seas
Interview with Richard Bingham, Trade & Marketing Director of Maersk Deutschland A/S & Co. KG
With over 300 offices in 114 countries and 29,700 employees on land and at sea, Maersk Line is the largest container shipping company in the world. A total of 630 container ships are traveling on all ocean routes for the shipping company founded in 1928 - serving 59,000 customers on all continents. The headquarters is located in Copenhagen. Wirtschaftsforum spoke with Richard Bingham, Trade & Marketing Director of Maersk Deutschland, about the difficult situation in container shipping and how Maersk is mastering the current challenges in this 'mysterious' industry.
Wirtschaftsforum: Mr. Bingham, what fascinates you so much about the container industry?
Richard Bingham: Oh, it's kind of a mysterious industry. Most people don't know much about it, but everything you own was once shipped in a container across the seas. Did you know, for example, that the crew on a giant container ship is only 13 people strong?
Wirtschaftsforum: What is special about your market?
Richard Bingham: The container shipping industry is a sector with high investments in fixed assets, especially container ships. It takes about two years to build a ship. And no one can predict how demand will develop at that time. This makes it difficult to adapt when global demand becomes increasingly volatile and unpredictable. It's kind of a vicious circle.
We see that our growth rates are decreasing and decide that we need larger ships. Then the question arises, how do we fill these ships. This can be achieved by lowering prices to attract more customers. At the same time, competitors are doing the same thing, while global demand is decreasing. We as an industry need to adjust to lower growth. At the same time, it is important to understand that container shipping is a mass market with very similar services. This means that it is crucial to keep costs under control and to increase efficiency.
Wirtschaftsforum: One way to increase efficiency in this highly competitive environment is the digitalization of business processes. How far have you progressed in this area?
Richard Bingham: As an industry, we are still not as far along as we could be. We still receive orders via fax. We use drones to deliver items to ships, but digital order processing is a tough nut to crack. It involves very high investments in IT to connect hundreds of customer platforms into one digital IT landscape.
Wirtschaftsforum: Recently, the South Korean shipping company Hanjin Shipping has filed for bankruptcy. Do you foresee more cases like this affecting the industry, Mr. Bingham?
Richard Bingham: Yes, we will see more consolidation in the next 12 to 18 months. The outlook for most container shipping companies is not very good.
Wirtschaftsforum: What is Maersk's market position, and how do you see its development for the current year?
Richard Bingham: Maersk is globally number one, with a global market share by shipping capacity of 13.5 to 14%. In 2016, freight rates have so far decreased significantly, but we believe that we have reached the bottom this year. In the first six months, we were even able to increase the transport volume. However, the price for this was about 10% lower revenues.
Wirtschaftsforum: Maersk has a global network, with offices in almost all ports around the world. How is this an advantage for you?
Richard Bingham: We are present worldwide. That is a decisive competitive advantage for us. If things are not going well in one region, we can easily compensate through other regions. And it is also good for our customers. This way, they can reduce the number of their suppliers and receive the same high standard worldwide.
Wirtschaftsforum: If you had to summarize, Mr. Bingham, how does Maersk differ from the competition?
Richard Bingham: We keep our promise and fulfill the customer's order, reliably, flexibly, and as environmentally friendly as possible. Customer satisfaction is our top priority, more than with other shipping companies. Everything we do is solely for the purpose of providing the customer with an optimal solution for their transportation problems. Moreover, we continuously invest in new equipment, in ships as well as IT solutions. That is why we are number one. I once read that our competitors wait six months after we have introduced something new. If it then works, they imitate it. There is no better confirmation.
Wirtschaftsforum: What are your plans for the next three to five years?
Richard Bingham: We expect freight rates to rise again and that consolidation on the supplier side will continue to increase. In this context, we want to especially expand our digital services and make it easier to collaborate with us.