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.

Cargo Talk - - Contents - HRITVICK SEN

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.

Shub­hendu Das Chief Op­er­at­ing Of­fi­cer, Schenker in­dia, Died­er­ick de Vroet, Se­nior Vice Pres­i­dent - Global Ocean Freight, Schenker AG and reiner A. All­geier: MD, Schenker in­dia

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