A.P. Moller - Maersk
3.5 million TEUs
20,568 TEU Maersk Madrid
2017 will go down as a historic year for A.P. Moller – Maersk (Maersk Group) and the supply chains it serves.
It was a year of high stakes for the carrier. In 2016, Maersk Group lost $1.89 billion as both its oil and container shipping businesses suffered from depressed rates. The previous year was not much better, with the company recording just $925 million in profits.
Industry watchers would note the past two years have seen a depressing market for shipping lines, with few emerging out of the red. But that’s hardly an excuse for investors in the world’s largest ocean carrier by capacity.
Something had to change – and it did.
Maersk Group proved itself resilient to not one, but various challenges in the past year, and committed to a renewed vision aimed at reimagining how it services shippers. For its vision and execution, Supply Chain Dive recognizes A.P. Moller – Maersk is an example to follow as its 2017 Company of the Year.
A year of shake-ups, but few disruptions
When the world depends on ten-or-so carriers to transport most products, an event that shakes up a single company can prove disastrous – and 2017 was full of risk events for Maersk Group.
This year alone, Maersk Line’s parent company survived a large-scale cyberattack, bought out one of the world’s top 10 shipping lines, and restructured its service network to adapt to a new set of ocean alliances.
Sept. 22, 2016
A.P. Moller – Maersk says it will split oil and logistics divisionsRead More
Dec. 1, 2016
Maersk Line acquires Hamburg SudRead More
Dec. 15, 2016
Maersk said to eye supply chain solutions futureRead More
Feb. 8, 2017
A.P. Moller – Maersk appoints digital-focused chairmanRead More
Feb. 20, 2017
Maersk Line adjusts transportation networkRead More
March 5, 2017
Maersk Line and IBM pursue blockchain pilotRead More
March 16, 2017
2M + H strategic cooperation launchesRead More
April 6, 2017
Maersk’s Damco tests digital freight forwardingRead More
June 8, 2017
Maersk Line offers financing for U.S. customersRead More
June 13, 2017
CMA CGM buys Mercosul from Maersk LineRead More
June 27, 2017
Maersk Line hit by cyberattackRead More
Aug. 17, 2017
Maersk says it expects $1B in profitsRead More
Aug. 21, 2017
Total buys Maersk OilRead More
Sept. 20, 2017
A.P. Moller – Maersk sells Maersk Tankers to holding group subsidiaryRead More
Maersk Line transformed itself in 2017
Any of these events alone could have led to service disruptions, leading to a loss of trust from shippers and subsequent loss of business. The cyberattack, for example, cost Maersk Group up to $300 million through two weeks of disruptions to APM Terminals, freight forwarder Damco, and Maersk Line’s operations.
Yet, the company proved persistent and its clients loyal despite a few hiccups.
“We received an enormous amount of people wanting to help, customers that wanted to help provide IT staff, provide office premises, whatever we needed in order to get going,” Maersk Group CEO Soren Skou said during the company’s Q2 earnings call, recorded by Seeking Alpha.
“The message was very clear, particularly from our large customers: we think you're going to work your way through this and if we can help you do that, we'll do so,” he said. “So I don't see that there's any negative long-term impact.”
A new vision to serve digitizing supply chains
The company’s greatest accomplishment lies not in its change and crisis management, however, but its ability to see and test new waters as supply chains continue to shift.
Maersk Group set its transformation up in June 2016 when it tasked its management with reviewing the company’s operating structure. In September 2016, it concluded the company’s energy and logistics assets needed vastly different overhauls, and decided to split its assets into two independent business units – Transport & Logistics and Energy – at the start of FY 2017.
“This will increase the strategic flexibility by enhancing synergies between businesses in Transport & Logistics, while ensuring the agility to pursue individual strategic solutions for the oil and oil related businesses,” said then-Chairman of the Board Michael Pram Rasmussen.
Hidden in that statement was a recognition the company could achieve greater heights if it acted not just as a carrier, but as a full supply chain solutions provider. This way the company could bring its ocean carrier, terminal operator, freight forwarder, towage and cold chain subsidiaries under one roof.
However, success would require a heavy focus on digitization. How else could a company successfully integrate services among its many, distinct logistics providers? As Skou said at the time, technology can help provide “world-class solutions for customers, while at the same time capture functional cost synergies and better utilization of existing assets.”
So, in February, Rasmussen resigned as chairman of the board, to be replaced in March by Jim Hagemann Snabe, a former CEO of SAP known for his expertise in supply chain digitization.
A host of new services for shippers
The change in leadership made the new vision crystal clear, and for the rest of the year, Maersk Group’s Transportation & Logistics division delivered on its promise.
In March, Maersk Line announced it would partner with IBM for a blockchain pilot. A month later, in April, its forwarding unit Damco announced it would launch “Twill,” a digital freight forwarding service for the China to U.K. trade lane. And in June, Maersk Line unveiled a new service to offer financing for U.S.-based customers.
Now, A.P. Moller – Maersk expects to record $1 billion in profits in 2017.
The drastic shift in fortunes is likely more due to an improving market than its own actions, but the company’s year-long efforts to transform itself into a full supply chain solutions provider are nonetheless a case study into the importance of a clear, company-wide vision magnified by strong leadership.
Already a global giant, Maersk has little to lose in expanding its scope to service the full supply chain. In 2018, we expect to see the company move from pilot projects to full solutions as it diversifies its revenue stream. A successful transition means it will be increasingly less reliant on rates, and more so on its services, which would allow it to survive future economic downturns.
CORRECTION: A previous version of this article incorrectly cited the market cap for A.P. Moller - Maersk.