Damco chief discusses Maersk Logistics consolidation
A.P. Moller – Maersk Group this week has begun marketing Maersk Logistics' supply chain management activities and Damco's forwarding activities together under the Damco name this week.
The combined organization has about 10,500 employees at 272 offices in 93 countries in Africa, Asia, North America, Europe, Middle East and Latin America.
Rolf Habben-Jansen, chief executive officer of Damco, said the two organizations had been operating together for several years, but for historical reasons had continued trade under the two well-known industry brands.
Maersk acquired the Damco Sea and Air forwarding business as part of its 2005 purchase of P&O Nedlloyd. (The Damco name can be traced back more than a century, when the van Dam family registered the company C.W. H. van Dam & Co. as barge operators on the Rhine River in 1905.) Maersk Logistics origins go back to 1977 when the use of containers in the liner services increased dramatically and the company began offering consolidation services.
'We felt that it was probably appropriate at some point to put it under one name, because in the end we create only unnecessary confusion and additional complexity not only within our own company but also with customers and certainly with potential customers by having two names,' Habben-Jansen explained.
The company considered, then rejected, developing a third brand name. “In these times, moving ahead at some stage is probably as important as trying to find exactly the best name. In the end, a name is a name, and it is all about what you do with it,' he said.
The company opted for Damco because, 'however strange it may sound, the Maersk brand is so strong, it is very difficult to build up a separate identity for a logistics business under that name.
'We are building up a logistics business, which although it cooperates quite closely with Maersk Line as one of our key suppliers, is a business in itself,' he said.
While four years ago Maersk Line supplied more than 75 percent of the company's lift by sea, today it is less than half.
'We are key clients or customers of most of the major lines today,' Habben-Jansen said. But he expects Maersk's share will remain high because 'many customers have had long-term relationship with Maersk. There is all the logic to continue that if it is happy partnership from both ends.'
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Last year the Damco and Maersk Logistics had sales of about $2.8 billion, and shipped more than 500,000 TEUs of ocean freight, more than 60,000 tons of air freight, and handled the equivalent of 2 million TEUs of cargo for its supply chain management customers.
Maersk said its logistics activities were severely affected by the economic crisis, which substantially reduced volumes compared to the same period of 2008.
'The market is going down 20-25 percent and we will be more or less in that range,' Habben-Jansen said. 'The second quarter was a bit better than the first quarter and our bottom line is actually in line with last year and our cash performance is better than last year,' because of cost control measures taken by the company.
The A.P. Moller's midyear report said the segment had an after-tax loss of $3 million compared to a profit of $10 million in the first half of 2008, which was positively affected by gains from the sale of warehouse facilities.
Habben-Jansen said last fall the company implemented a savings program, flattening its organization by taking out a couple of layers of organization and reducing head count by about 12 percent. The company then added to its sales force in the second quarter, which he said has already helped boost second half volumes.
Traditionally the retail sector has been a strength for the company and will continue to be a core area, but that it hopes to use its knowledge of the retail industry serving customers like Nike and Wal-Mart 'to penetrate other sectors of the consumer sectors and also technology' who also have inbound supply chains from Asia, he said.
Today about 35 percent of its business is ocean freight, 15 percent air freight, 30 percent supply chain management and the remainder logistics in places like Asia and Africa.
Habben-Jansen said the company would like to invest more in air freight and see it become a bigger part of its overall business in the next three to five years.
In recent years, he said the company's biggest growth has been in Asia, and while China has been hard hit by the global recession, 'we are beginning to see signs of recovery.'
Habben-Jansen said environmental work will be an increasingly important offering for Damco. 'In the past two years, we've done about 70 projects with customers, helping them figure out carbon footprint and what initiatives they can take to bring that down.'
He said his company has found that in most cases 'if you are trying to reduce carbon footprint you can reduce cost.'
For example, increasing use of sea rather than air transport can reduce costs, as can getting better cubic utilization out of containers — it's both less expensive and greener to ship 50 cubic meters of cargo in a single container than to split it into two boxes.
With the economic downturn, Habben-Jansen said the company found some customers, particularly on the forwarding side of its business, taking a shorter-term, more 'tactical' approach to logistics, putting more cargo out for short-term bids in late 2008 and in the first quarter of 2009.
Damco worked with shippers to take advantage of falling rates during that period, but he said with a strengthening market, shippers are once again beginning to spend more time thinking about long-term strategy. ' Chris Dupin