Supply Chain to Soon See a Merger of Cargo Transport and Logistics Ops

The next question in the Shipping & Ports session asked by moderator of the Future of Logistics conference Lars Jensen, was if port and terminal operators had considered investing and participating in landside cargo logistics operations in order to have greater degree of control over throughputs and avoid situations that led to congestions?

Panellists for the session were:

• Shahab Al Jassmi, Commercial Director of Ports and Terminals, DP World

• Kim Larsen, VP of Commercial & Business Development, AD Ports Group

• Lars Jensen, CEO, Vespucci Maritime

Shahab Al Jassmi pointed out that landside operations were indeed a very critical consideration for ports. However, Mr Al Jassmi clarified that it had always been DP World’s policy not to infringe upon or compete with the businesses of its customers.

Nevertheless, Mr Al Jassmi said that they had modified operations at times to “help with the supply chain” without becoming a pure-play logistics service provider.

For example, in the case of certain cold chain and security-sensitive cargoes where DP World had tried to build a connected network across global ports in order to support customers to efficiently and safely deal with these cargoes.

Mr Al Jassmi concluded his reply by saying that DP World had made certain investments in logistics companies across the world. But that was only to provide agility and flexibility in services that would help their customers maintain continuity of their supply chains even in the most difficult circumstances.

Kim Larsen said that ports have to invest individually or have effective partnerships that can solve the problem areas. “The Hope Consortium could not have been established if you didn’t have strong partnerships where everybody delivers into the full supply chain of medications and vaccines… What really matters is that we can come together and form a group that can deliver the value that is required.”

According to Mr Larsen an effective supply chain has to have an efficient logistics system backing the ports. Like DP World, AD Ports Group has also invested significantly in certain logistics operations of the supply chain. However, Mr Larsen felt that these initiatives would have better outcomes if the investments were in the form of JVs and partnerships with money put in by all the partners.

This way all stakeholders would have more “skin in the game” and be vested and dependent on the success of the partnership. Because of what the industry has experienced in the last two years Mr Larsen predicts that the investment landscape is going to change with these partnerships emerging as a dominant trend in the near future.

“We need to get things done. We cannot sit on our hands. We have to play a very active role as Abu Dhabi Ports… that’s the way we can solve issues for our customers here in the UAE,” concluded Mr Larsen.

The Pandemic is Accelerating a Change in the Competitive Landscape of the Supply Chain

Agreeing with Mr Larsen Lars Jensen also foresaw a change in the competitive landscape of the logistics industry. The change was building up gradually up until now but the pandemic has accelerated movement in that direction.

According to Mr Jensen in this “multi-front battle” there are a lot of different service providers fighting over the business of cargo owners. Elaborating further he said that presently freight forwarders controlled a lot of freight of cargo owners for various historical reasons.

But moving forward ocean carriers are trying to gain market share there firstly, by digitalising their booking processes for the more conventional cargo and secondly, by providing end-to-end logistics services directly to shippers.

Furthermore, given how cash rich the carriers are today it is almost inevitable that they will invest some of that cash in acquisitions of freight forwarding and logistics companies.

Another emerging battle area according to Mr Jensen is digital freight forwarding v/s conventional freight forwarding. Although the former provides greater convenience they are less experienced in the physical movement of the cargo and planning for contingencies.

Then, we have port and terminal operators who are trying to expand their wings into end-to-end logistics services.

“This multi-front battle is not going to resolve itself today or tomorrow but it’s going to play out over at least the next 10 years,” said Mr Jensen.

These opposing forces are going to cause a major shakeout in the freight forwarding industry with medium sized and smaller, non-niche freight forwarding companies being the major losers in this battle.

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