Smooth sailing: How Maersk overcame the COVID-19 logistics challenges with agility and good planning
Christopher Cook, Managing Director, Maersk UAE, Oman and Qatar, shares his perspectives on the most significant challenges and opportunities as a result of the coronavirus pandemic, and the impact on logistics in the last year
What were the three biggest supply chain challenges that your company faced in the midst of the pandemic?
The COVID-19 pandemic brought upon the entire logistics sector challenges that were truly unprecedented. The first and foremost challenge that we faced was to keep our employees safe and healthy while ensuring that our customers’ supply chains continued to function uninterrupted. We had to protect our employees – both office-based as well as the ones on the frontline – without whom we cannot serve our customers. While we moved all office-based employees to work from home almost immediately as the pandemic broke out, our seafarers on the frontline were exposed the most as they crossed international borders around the world picking up and delivering cargo for our customers. Ensuring their physical safety and mental wellbeing was truly the biggest challenge for us. After all, global trade is the backbone of the global economy and in the absence of smoothly functioning supply chains, neither global trade nor the global economy was going to survive the blow of this pandemic. On this background, the single largest challenge that we faced was keeping our vessels sailing, as well as our ports, terminals, warehouses, and depots operational, while protecting our employees and ensuring the flow of goods did not stop despite lockdowns.
While we were leaving no stone unturned to keep the supply chains running, the next big challenge for us was to manage the pace of the supply chains. The whole world went into lockdowns at some point in time. However, the staggered timings of these lockdowns in different geographies around the world meant that the demand and supply equations were disrupted. This led us to prioritize the movement of certain pandemic-essential cargo while other cargo had to be stored away till demand from the market picked up. Managing the speed of supply chains thus became a very critical aspect of managing the crisis times of the pandemic.
Finally, it was the change in the way the business operated and its quick adoption across the industry that posed as a challenge. For example, shipping and logistics has traditionally been a sector that heavily relies on paper-based physical documentation. With social distancing coming into force, documents had to be digitalized quickly, payment modes had to be shifted to online and almost every human interaction had to be taken out of the equation. While we at Maersk were already prepared for this, it was a challenge to get all the stakeholders in the entire complex journey of cargo who had to be brough to the same level of readiness.
What immediate measures did you take to manage and mitigate related risks as well as make your supply chains more resilient?
The immediate measure that Maersk adopted was around the three priorities that were set by our executive board – protecting our people, supporting our customers, and helping the society fight the virus.
We moved all our office-based employees to work from home, created strong IT infrastructure to support our entire global workforce to work remotely and ensured that their safety was not compromised. We took care of our seafarers and frontline workers by providing them all the necessary PPE kits, setting up a system to ensure that they didn’t get overworked and fatigued and remained safe wherever they were.
For our customers, we ensured that their supply chains remained uninterrupted despite the external challenges around lockdowns. We established ‘emergency teams’ or ‘war rooms’ to deal with the emerging situations, gathered and collected intelligence from all the relevant markets, and then started making informed decisions based on this intelligence. With Maersk’s global coverage and with our own people in markets around the world, we were quickly able to start sharing that obtained local knowledge to help our customers make decisions and arrangements for their shipments.
Making supply chains more resilient is a process that has only started recently, and we managed to implement this resilience quickly in our vast network to ensure that our customers got exactly what they required. This meant adjusting vessel sailings to meet the demand and supply, repositioning containers as per the needs of the market, creating alternative solutions and services to help customers speed up (for example: air freights) and slow down their supply chains (for example: warehousing and storage solutions).
How have Maersk’s technological capabilities evolved over the last year? Although a technology-centric view is vital to outmanoeuvre pandemic-related setbacks, do you foresee any potential challenges arising from the application of new technology?
Maersk is at the forefront of evolving technological capabilities, and the pandemic has confirmed that is where the industry needs to be. Maersk set out on the digitalization journey long before the pandemic hit all of us. We already had several ongoing digitization projects with customers, local authorities, banks, customs etc., which accelerated during the pandemic and suddenly, everyone was looking for digitized solutions to overcome the many restrictions arising from the pandemic.
Today, Maersk is able to provide its customers an end-to-end experience of getting instant quotes and confirmations, booking of a shipment, tracking the shipment and paying for the shipment digitally through a single platform of Maersk.com or the Maersk mobile app. Products such as Maersk Spot, which are truly digital solutions for bookings in a short term, saw increased adoption among our customers for the ease they provided especially during the highly constrained lockdown period. Remote container management platforms and applications such as Captain Peter allows our customers to monitor the vital parameters of their refrigerated cargo from the comfort of their home or office and get notifications if anything goes out of acceptable range. Our customers have access to visibility solutions such as TradeLens, which is a blockchain powered platform, that gives them access to complete transparency and visibility of their cargo across multiple stakeholders through its journey. Not only visibility, but TradeLens also allowed customer to transfer electronic Bills of Lading instead of manually sending them.
Any change in existing processes and systems is bound to bring some challenges along with it. For example, with the high adoption of technology and digital systems, cybersecurity continues to be a big threat to the industry. Lack of digital adoption and acceptance to change across the board could be seen as another challenge – if every stakeholder doesn’t get on board, we risk not being able to capitalize on the full potential of technology.
How did challenges such as the increase in shipping rates, the closure of borders, and disruptions to the supply chain impact your business. Equally how did you respond to these challenges?
We spent the initial phase of the pandemic helping our customers gather information and knowledge about disruptions in the key markets. With our experience and strength of our network, we ended up responding quite swiftly and effectively to the disruptions and developed great alternative solutions for our customers. Most significantly for the Middle Eastern market, we were able to rapidly convert overland shipments into sea shipments which helped our customer overcome the border closures on land. Much of the intra GCC trade moves on land, but once the borders started closing, we had to dispatch our customers’ shipments via sea, and get the supply chain mechanics lined up properly at the origin, and most importantly also at the receiving end with the customers of our shippers. Significant amount of time and resources were spent on helping our customers convert over-land supply chains into sea supply chains. Our Hub solutions enabled customers to store their finished good closer to the customers’ locations instead of their own warehouses. Whenever required, certain shipments were moved to air freight for rapid transits while others had to seek storage options to slow down the supply chains.
How are you prepared to address the growing drive towards sustainability and carbon neutrality? Do you anticipate these trends to exert significant influence on the shipping industry?
Around half of Maersk’s 200 largest customers have set – or are in the process of setting – ambitious science-based or zero carbon targets for their supply chains, and the figure is on the rise. At Maersk, we are committed to our own sustainability targets and are striving hard to ensure that we implement carbon-neutral shipping in the future. Our goal is to achieve net zero CO2 emissions by 2050 and to achieve this, we had promised to put the first carbon neutral vessel on water by 2030. We recently announced that we will in fact be seven years ahead of schedule for the carbon neutral vessel as we will operate the world’s first carbon neutral liner as early as in 2023.
Maersk is addressing decarbonization and sustainability through various actions. In its very first year (2020), several of our customers used Maersk ECO Delivery, the first carbon-neutral solution in the shipping industry. By shipping with Maersk ECO Delivery, one helps to decarbonize ocean freight today using biofuels instead of fossil fuels. The fact that this large uptake happened during the slowdown months of 2020 proves how keen our customers are to decarbonize their ocean freight. The uptake is led by consumer brands in fashion and technology, but the trend is picking up in retail and other industries across geographies.
What was the impact from the IMO 2020 coming into force at the start of last year on shipping companies? How did the new regulation coupled with disruptions from the pandemic impact your planning, profitability, and enforcement of the new rules?
The IMO 2020 came into effect from January of the last year and to be able to fully comply from day one, we were already prepared much before its actual implementation. So technically, we had already transitioned before the disruptions from the pandemic started impacting the logistics.