Moves by container shipping carriers and terminal operators to extend their scope to a wider supply chain is a risky business, says Drewry’s managing director Tim Power.
The seasoned maritime adviser was not shy of expressing his scepticism about such a path being taken by some companies, such as Maersk and DP World, who are keen to tap new sources of growth with their core business immersed in a saturated market.
“What DP World is now creating is not a port business, but a maritime conglomerate,” Mr Power told the 2019 Maritime Silk Road Port Forum in Ningbo on Friday.
As part of its efforts to become a “global trade enabler”, the Dubai-headquartered port giant, for example, has made a string of acquisitions, including P&O Ferries, Unifeeder, Drydock World and Topaz.
“Of course, they will say there are synergies in these businesses, but actually I think the synergies are very little,” said Mr Power.
For example, P&O Ferries and Unifeeder offered an interesting position in the intra-European shortsea trade, but the two could hardly make any difference to DP World’s core terminal business, he argued. And Drydock World, an offshore service provider, had no relation to container shipping, he added.
In the case of Maersk, the Danish giant is aiming to overturn the current way in which shipping lines are operating and create a new integrated total logistics business that is similar to UPS and FedEx.
“This is a complete transformation, and very ambitious and, in my opinion, extremely risky,” said Mr Power.
Whether it is carriers or ports, the avenue to such diversification is coupled with four key risks, he further pointed out. The first one is competing with customers, with whom the close relationships might be compromised.
“If you are DP World and you are offering end-to-end supply chain services to customers who are using Maersk Line, what is your shipping line’s customers going to think of you?”
And it was the same for Maersk when it was facing its freight forwarder clients, Mr Power added.
The other risks are loss of management focus, with the dilution of core commercial purpose, failing to manage the expanded spectrum as the services and the customer base become more diverse, and internal conflict caused by more complex operating structures as well as misaligned business unit strategies.
“It’s all very well to say we are going to offer end-to-end logistics services, but that’s hard to do,” Mr Power said. “If you do it wrong, you’ll kill your core business and the new business.”
Improving productivity, increasing hinterland connectivity, establishing logistics zone and embracing digital platforms are instead the prescription he gave to port and terminal companies longing for future success.
“If I were you, I would stick to things that directly related to your port, and leave the end-to-end to other people,” he said. “Do the first four, you’ll have a very bright future.”