DB Schenker: ‘We want to make logistics simple’
In an exclusive conversation with DB Schenker’s Global Ocean Freight Head Diederick de Vroet, Cargotalk gets his views on the global cargo scenario, the growing Asian market and what new services they have in the pipeline for cargo and logistics players.
Q: First off, what is your opinion on the global ocean cargo scenario 2013-2014?
If we look at growth figures for the global ocean cargo industry, we expect the market this year will grow between 3-4%. It’s my personal opinion that we will probably see similar growth figures for 2015. We shouldn’t be too pessimistic that it
is less than what we were used to in the last, let’s say 15 years, where the global market has seen growth figures that were anywhere above 8-9%, sometimes 10-11%. I believe that those days are generally over and the industry and the participants in the industry whether that are companies, service providers like us, just have to deal with the fact that there is less growth. Q: …but Europe is still coming out of recession
Europe is still struggling. It’s still coming out of the recession. There are a few bright spots, with Germany as one example. We see positive signs for the US economy. Asia despite signs of slowing down is still growing. We still see growth potential for our business based on this, and in the ocean freight market at 1.4%, we still have a huge market potential to grow, whether the market grows or not.
Q: So, if you were to take a pick among all of the regions, US, UK, Asia, Europe, where would you
Hapag and CSAV are both existing partners. I would say that this merger, and also the relationship between DB Schenker and HapagLlyod, merged with CSAV, will increase overall opportunities.”
Diederick de Vroet
Senior Vice President Global Ocean Freight, Schenker AG put your money for the next three years?
In terms of growth, one of the areas I would focus on the most is Asia. If you look at the inter-Asia trade and the development, the growth figures should be somewhere between 25-30 million TEU. I think there is a huge potential; so definitely, we will focus on developing this particular trade. Q: How are you going to make your mark in this market?
By listening to our customers. So, it’s less around geographical focus, saying we are going to try and develop a certain country or a trade lane. We will try and focus on customers, whether that is new, potential business or existing customers where we have existing relationships. We will basically help those customers sell in the inter-Asia market more, by offering them competitive prices on the traditional freight-forwarding services, also adding supply-chain solutions to help them sell their product in this market competitively.
Q: As of now, India cannot handle sea vessels of and bigger than Panamax ships. How does that impact the shipping in India?
We see a trend if you see the Asia to Europe trade, where carriers deploy every big vessels, the larger size now being over 18,000 TEU. The consequence is that this is currently the only trade where shipping lines see that they can deploy these large vessels. So the other capacity is cascaded to different
trades. Currently, we see 9-10,000 TEU’s being deployed on the Asia to US traffic, and we already see 8,000 TEU vessels being deployed between Asia and South America. Now, as a comparison, we have never seen this vessel size, particularly on trans-pacific as well as on the Latin America trade ever before and big vessels have that cascading effect on those trades. The question for us is if the rate fallibility that we see on the Asia to Europe trade can be repeated on those trades, as well because of the over- capacity situation.
Q: What do you feel about the role of forwarders and container shipping?
The last 10-15 years have seen a continuous shift between the market share and the increase in market share by the NVOCC’s. First there are the traditional shipping lines which have partly to do with the services that the NVOCCs as an industry are offering to their customers, and the services that carriers do not particularly offer in every market. So the ease of doing business with an NVO is first several direct shipping lines, if you want to compare shipping lines to NVO’s. There’s flexibility, one-stop shopping, EDI, billing, all these issues are covered in the relationship between an NVO and a customer.
Q: What would you say about global alliances in the cargo shipping industry?
If you look at the industry over the last 10-15 years, we have seen continuous types of consolidations and these were typically lines buying other shipping lines. For example, the P3 consolidation where three large shipping lines in the world decided to put all their assets into one neutral network company with a subsidiary in Singapore. The main reason for these shipping lines to do what they do is to find a better, lower cost base to offer services on the complete east-west trade line.
Q: What can you say about the Hapag and CSAV merger?
I believe that they will save costs by merging the two companies, optimising procedures, using a single IT system and finding synergy between them. Hapag Lloyd has been an East-West operating carrier, whereas CSAV being South Africa-based has been a North-South carrier. From a perspective of network compatibility, they fit together very well.
Q: And how will it impact DB Schenker?
Hapag and CSAV are both existing partners. I see both their synergies and no obstacles. I would suggest that this merger, and also the relationship between DB Schenker and Hapag-Llyod, merged with CSAV will increase overall opportunities.
Q: Air-freight is slowly converting into oceanfreight. What is your observation?
Well, I think it would be fair to say that the trend is customers are trying to reduce the costs of products. The decision of whether or not to shift from air freight to ocean freight depends on the product, or goods, type and its life-cycle. So, if you talk about perishables, or trendy high tech goods, the first production cycle tends to be air-freighted, but once you have stock at the point-of-sale, then you can make sure that you do your supply chaining also via ocean freight to reduce costs.
Q: So, how is DB Schenker aiming to improve its supply chain through ocean freight products?
Besides focussing on optimising and improving our IT capabilities and functionalities, we are also focussing on developing our capability into supply- chain solutions. We are adding a different layer where we look at helping customers optimising their supply chain. It is actually looking from a customer’s perspective, ‘how much money is tied up in my supply chain and how through logistic solutions can I reduce my costs within my supply chain?’ So it’s again understanding our customer better, and then helping him to reduce his cost. You could call it a ‘supply chain consultant’, but delivered by a freight forwarder who knows the transactional side of your business. The difference between a consultant and us is that we provide the solution and then we also implement it. The consultant usually only provides the solution, and then walks away.
Q: From the Indian perspective, what products can we see from DB Schenker, from 2014-2015?
Well, we have our traditional products in terms of FCL end-toend; we will further develop and invest in our IT capabilities when I refer to feasibility, exception-reporting dashboards and the third is the part around the solution-offering or the supply-chain consulting offerings. We want to make logistics simple.
Q: What are your reasons for the price volatility that we’re seeing right now?
The main reason for the price volatility that we specifically see on Asia to Europe is the over-capacity situation. The fact is we have more capacity in the market than the demand. It drives pricing behaviour of certain carriers that lead to this volatility and its difficult to predict whether the GRIs that are announced will be accepted in the market, partially-accepted or not accepted and the fact that recently we’ve seen more and more GRIs come out and it’s very difficult to predict whether the market actually takes the GRI. For us the challenge is to deal with all the quotations we do towards our worldwide 700,000 customers. Imagine having to update these quotations on a regular basis. This is a tremendous burden from an administration perspective for us, but unfortunately not something that we can directly influence.