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Maersk is no longer just a shipping company

Maersk owns more container ships than anyone on earth, but it would be a mistake to think of the company as just a cargo shipping line. It’s also an airline, a trucking company, a port terminal operator, and a freight forwarder. Maersk has gobbled up a piece of virtually every stage of the global supply chain as part of its ambition to become a one-stop shop for logistics.

Yesterday (Dec. 16), Maersk struck a deal that offers a glimpse at the future of its business—and the future of global shipping. Starting next year, Maersk will effectively run the logistics operations of Unilever, one of the world’s largest consumer goods companies. Maersk announced in a press release that it “will be providing operational management of international ocean and air transport” for Unilever from 2022 to 2026.

Starting next year, Maersk will develop and help run a piece of in-house software, dubbed the “International Control Tower Solution,” to manage Unilever’s supply chains. “It’s a strong indicator that Maersk’s expertise extends well beyond sailing ships,” said Eytan Buchman, CMO at the cargo booking platform Freightos, who has written about Maersks’ acquisitions and expansion. “Combined with their other assets and what they’ve been building towards, it’s not a stretch to assume that this is another rung in the ladder towards full end-to-end global supply chain ownership.”

Deals like this go by the name “fourth-party logistics” (4PL), and they’re becoming increasingly common. Under this model, a client like Unilever outsources the control of some or all of its supply chain to a single logistics giant like Maersk, which may act on its client’s behalf to book cargo space on ships and planes from other third-party freight providers.

These types of deals will become more common as shipping lines expand into new corners of the supply chain, fueled by the multibillion-dollar profits they’ve racked up during the pandemic. It’s not just Maersk; other shipping lines like CMA CGM are also expanding into air freight and freight forwarding, and analysts expect Amazon could launch a rival logistics service in the next year. The net effect may be a global supply chain increasingly controlled by a few big logistics companies.

Maersk’s pivot to end-to-end logistics

Five years ago, the entire shipping industry struggled to make a profit as a fragmented field of relatively small shipping companies competed fiercely with each other to lower prices. Hanjin Shipping, the seventh largest shipping line in the world, declared bankruptcy and folded in 2016. Maersk lost $1.9 billion that year. On Sept. 22, 2016, the company announced a plan to reinvent itself and put itself on firmer financial footing. Maersk would sell its oil business and focus on building out a logistics empire, with an emphasis on expanding into other parts of the supply chain that promised more reliable profits than shipping.

Over the next five years, Maersk went on a spending spree that accelerated during the pandemic, when the shipping line’s profits skyrocketed. It built out its cargo airline, expanded its trucking fleet, bought the freight forwarder Senator International, grew its roster of container ships, and made a bet on e-commerce by buying the last-mile fulfillment firm B2C Europe.

Now, Maersk no longer markets itself as a shipping line. “The company has taken a strategic decision to change course” it wrote in a March press release. It’s now an “end-to-end supply chain and logistics partner”—a more lucrative line of work that allows it to make money by consulting on its clients’ supply chain strategies and selling access to its logistics software in addition to the freight fees it collects from carrying cargo on ships, planes, and trucks.

Other shipping lines and freight forwarders have followed Maersk’s lead in expanding into 4PL services, according to Buchman. These firms argue that by consolidating the whole range of logistics services into one package, they can boost efficiency and lower prices. But if they succeed in consolidating the logistics industry, they’ll leave their clients with fewer choices.

In good times, that may not matter: Clients will enjoy lower prices and the ease of not having to think about their supply chains. But in times of crisis—like the pandemic-fueled chaos we’re living through now—those clients may be scrambling to find any alternative they can as prices rise and cargo space becomes scarce. Companies will have to weigh those tradeoffs as they emerge from the current supply chain crisis and rethink their logistics strategies.

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