Maersk’s COVID-19 ‘tool kit’ for 2021: higher agility and contingency plans

The one good thing about 2020 is that it prepared everyone for 2021. In this new year that is just beginning we know that despite the existence of vaccines that will eventually restore ‘normalcy’, we still have a rough 12 months ahead, with quarantines, lockdowns, shutdowns, and continuing social distancing for the foreseeable future. Yet, we are prepared. We know what to expect and we also know that our expectations are subject to sudden changes, as the virus takes new forms.

MundoMaritimo talked in exclusive with Head of Operations for the Americas Maersk, Lars Oestergaard Nielsen, who shared with us how the logistics giant has prepared for the challenges we know 2021 will bring and the surprises we might find along the way relating to vessels, containers, demand, crew changes, and vaccination. “Irrespective of location throughout the world and brand [Hamburg Sud, Sealand, Maersk and other brands the integrated logistics operator has added to their extensive services and products portfolio] we, as a company, established priorities which played a key role in our value-based leadership during the pandemic: protect our colleagues, help our customers and help societies. It’s all about making sure we are all safe and healthy. At the end of the day, we all want the same things. We have also learned to appreciate the need for agility: you need to gauge what’s going on around you and always know that you don’t know what the day will bring. Values and priorities give you the directions to navigate these uncertain times,” says the Maersk VP.

All hands on deck!

Or to be more specific, all ships and boxes at sea. Maersk has displayed their complete vessel capacity on all trade lanes, but there’s still a noticeable shortage of capacity -or at least that’s how it is being perceived. “We don’t per se have fewer boxes, what we have is an issue with the strong influx of demand. At the beginning of the pandemic, there was a shortage of demand and there was no investment in equipment, but later in the year going into Q3 and Q4 we saw a super-strong influx of volume and this has caused the delay of boxes because of the high volume. The equipment that is there is being used for a longer time and if you multiply that by a higher volume you get less boxes available. Equipment is tied up in longer transits caused by stronger demand for consumer behavior,” explains Nielsen. So, how is Maersk sorting out this problem? “We have hired as many containers as we possibly can, taking on leased containers and even making investments to buy more boxes, with deliveries starting in Q2,” adds the executive.

One strategy to make boxes ready for cargo is to consider their emptying out and reloading within the berthing time in port. “Allocating empty boxes on-board has become an important part of our berthing time planning and an important part of that is communicating with customers so that they get the empty containers back to port on time for us to load them,” says the Head of Operations for the Americas.

All boxes, no matter their primary purpose, are being considered. “We are using reefer containers as regular boxes. Traditionally, a reefer container leaves port in South America destined to Asia or Europe, but these locations don’t export refrigerated goods, so the boxes are not sent back as soon as they are emptied. So, we have implemented their use as a ‘normal’ box but considering that the interior dimensions of a refrigerated container are smaller due to insulation, elevated floors, and the cooling unit at the back. This use is a collaboration with customers,” he adds. 

The paradox of a decade of overcapacity

Asia drives demand, and right now there’s less capacity to move cargo out of there to the rest of the world. “There has been an increase in vessel chartering driven by the historical strong demand of Q4 2020 (consumer goods instead of services,) and because of the pandemic and the unforeseen demand the ability for shipping lines to sail as planned has never been worse. Schedule reliability, ability to depart and arrive as planned (margin of 1 day) is down by 50%, this means that only half of global sailings have been delivered on schedule. Some vessels are waiting outside the ports, so we had to add more vessels to meet the weekly service. We don’t have overcapacity right now! We don’t have enough,” says Nielsen, adding that “shipyards have slowed down because no one was ordering new ships. We could be looking to a supply-demand balance completely shifting, looking very different in ‘21 and ‘22. This situation is aggravated by the fact that non-ocean businesses also having a hard time finding trucks for intermodal, especially in North America, where warehouses are full, and it is very difficult to find trucks. The entire supply chain system is clogged up.”

Chinese New Year, a traditional driver for Q1 results is projected to have a lesser impact in 2021 as demand is strong all over the world. “Early predictions are that the strong volume of Q4 2020 will continue into Q1 2021. Should things change, we have the ability to move things around. Have people changed their behavior because of COVID? Will people go back to the same consumer patterns pre-COVID? If volume performance were to make a shift it would come out of Asia. If you look at Latam exports, COVID had a very little impact, because of the nature of the cargo (food and primary products). That pattern should continue in 2021 and should see a lesser impact on exports,” says the expert executive.

Lost at sea

No matter how unstable or unpredictable trade has been in the last year, it has been the crews that have had it worse, having to stay on board for longer periods, stuck waiting for a flight out home. “We have managed to get almost everyone changed by now, but we still have some changes pending from last year. We have had to become more agile in the planning aspect of this because it’s pretty hard to have certainty on flights and there’s also the issue of the constant re-evaluations of government restrictions. We need to make a plan B and C. We basically rented whole hotels, making a ‘crew hub’ so we can assist with testing and quarantining and that is part of the agility we have had to adapt. It’s about being agile, flexible. Understanding what governments are doing and also understanding flight availability. We are in dialogue with IMO and governments around getting seafarers recognized as key workers so there’s an understanding that it’s not always feasible to do the quarantines. Shipping and logistics to be considered as key workers. The same happens with vaccines. At Maersk we follow the national approaches and therefore if the seafarer is at home they should be vaccinated by their government, so that’s why we are trying to get that recognition of essential workers. In the meantime, we are in an internal dialogue if we can access vaccines outside of government programs. Governments are prioritizing their own programs, but we are seeing if we can secure vaccines in a private base to administer to our seafarers,” he says.

Maersk’s annual report will come out on February 10, 2021 and will include more detailed information on operations during 2020 and projections for 2021 considering the issues covered in this interview and other topics of relevance and interest regarding the integrated logistics operation.

By MundoMaritimo