Maersk Line, the world’s biggest container shipper, said last year that punctuality was poised to replace pricing as the industry’s key battleground. Less than 12 months on, delivery delays are worsening.
Only 63.7 percent of boxes were on time in the first 20 weeks, versus 65.9 percent a year earlier, according to INTTRA, a U.S. e-commerce platform which handles 525,000 shipments a week. That means 2012 may fall short of 2011’s 66.5 percent on-time delivery rate and the 68.8 percent level achieved in 2010.
Customers can cut their total shipping costs by as much as 70 percent through prompt deliveries, according to Denmark’s Maersk, which began guaranteed daily departures in October in a push to win market share. While rivals have sought to match the model by pooling ships on key Asia-Europe routes, the global decline in dependability suggests many carriers are putting their desire for a full load ahead of timeliness.
“Every time a carrier is late someone incurs an additional cost,” said Lars Jensen, chief executive officer of Copenhagen-based SeaIntel Maritime Analysis. “For Maersk, reliability is extremely important, as it’s their strategic target. Other lines are more interested in their bottom line.”
Late-arriving goods cost customers money in lost sales and output and could leave shop shelves empty, while early arrivals can result in higher storage costs and require a change in collection procedures and sometimes production plans.
The number of containers arriving one day late or more stood at 60.6 percent in the first 20 weeks, compared with 58.8 percent a year earlier, according to INTTRA, with 34.4 percent unloaded at least a day early, up from 33.4 percent.
“The impact can ripple through the entire supply chain,” said Ivan Latanision, INTTRA’s senior vice president for product management. “On-time is clearly preferable.”
More than 70 vessels operate the Daily Maersk route, which has a fixed transit time between Shanghai and Europe of 34 days.
The service, which stops off at three other Asian ports and calls at three in Europe, features cutoff times for delivery, before which goods are guaranteed to depart that day. That contrasts with the industry’s historical practice of overbooking to guarantee a full load, which often led some containers to be bounced to the next departure leaving as much as a week later.
In the event of a delay to the Maersk service, clients are compensated with a payment of $100 per box for the first three days or $300 beyond that. Reliability has been above 97 percent since its introduction and has “changed the industry standard,” according to Maersk’s first-quarter report, published May 16.
Maersk’s share of the global container market stood at 16.2 as of June 14, up from 14.5 percent in March last year, when measured in terms of the capacity of vessels deployed, according to Paris-based shipping data provider Alphaliner.
The introduction of the Daily Maersk service, which counts Swedish clothing retailer Hennes & Mauritz AB among its clients, has been a factor in that improvement, the company reckons.
“Reliability is a competitive advantage for our customers as much as their brands or the quality of their products,” Rune Soerensen, Maersk’s head of customer needs, said in an e-mail. “Clients will be more attracted to carriers who can deliver it and reward them with market share and price premiums.”
Shares of parent A.P. Moeller-Maersk A/S have advanced 1.1 percent this year, valuing the Copenhagen-based company at 165 billion kroner ($28 billion).
A dozen other shipping lines have sought to counter the initiative by consolidating into three alliances which, together with the Maersk service, account for 85 percent of Asia-Europe box volumes, based on Citigroup Inc. figures.
Still, punctuality can differ wildly within that market, with INTTRA data showing that less than 40 percent of boxes sent from China to Britain arrived on time in the 20 weeks, compared with 80 percent on routes to the U.K. from Japan.
“Reliability is very important,” Hamburg-based Hapag-Lloyd AG, Europe’s fourth-largest container carrier and allied to five other operators including Neptune Orient Lines Ltd.’s APL Ltd., said in response to questions. “We’re monitoring it constantly. But shipping is also a business where unforeseeable things can happen, such as bad weather, and safety always comes first.”
Of the top 20 container shippers, SeaIntel’s Jensen reckons only two, Maersk and Hamburg Sued, have a markedly superior punctuality record, and that the other 18 still manage to attract their share of business.
Peter Sand, an analyst at Danish shipping association BIMCO, which accounts for 65 percent of global tonnage, said that’s because speed and reliability aren’t always at a premium.
“Some carriers make huge efforts to be punctual, others almost don’t care and would rather be late than leave half-full,” he said. “The same goes for clients. Those running a very tight program prefer high reliability, while others with less time-sensitive products may opt for the less-reliable carriers.”