It’s no secret that the global supply chain is a little … congested. The whole business world found that out firsthand back in March through the infinitely memeable Suez Canal blockage, but based on this laughably extensive string of status reports, there probably aren’t many companies that were hit harder by the backup than A.P. Moller – Maersk.
The Denmark-based international shipping colossus hangs its hat on its immense network of shipping routes, but the company was forced to scramble when faced with the historically massive blockage. However, just about everything Maersk (OCTUS: AMKBY) has done since then has been to give its customers the agility to navigate those kinds of supply chain hurdles.
Maersk’s recent acquisition of Visible Supply Chain Management wasn’t a particularly flashy one, but it served as one of the final pieces of the puzzle for the global shipper’s new growth strategy: e-commerce. The company has committed to organically growing its land-based offerings by 10% annually in a push to open up new international channels for online shopping.
“Visible’s nine centers are designed around delivery zones in the U.S. to achieve 95% coverage of the U.S. within 48 hours and 75% within 24 hours,” Tom Boyd, media relations manager for Maersk North America, told Modern Shipper. “The Visible acquisition also helps us with last-mile capabilities too as we gain a transportation management system they use for their 200 million parcel deliveries annually.”
Maersk set out on its path toward e-commerce growth two and a half years ago, when it acquired customs broker Vandegrift. A little over a year later, the company gained ownership of warehousing and distribution specialist Performance Team and its network of 46 North American fulfillment centers.
“We realized that with the acquisition of Performance Team we had bridged certain parts of [e-commerce] on the fulfillment parts, but we were missing that delivery piece,” Narin Phol, managing director of Maersk North America, told Modern Shipper.
That’s where Visible comes in. The supply chain management company has its distribution centers located in strategic delivery zones to enable quick delivery to as many consumers as possible, and it partners with major delivery companies like FedEx (NYSE: FDX) and UPS (NYSE: UPS), as well as the U.S. Postal Service.
Visible’s nine fulfillment centers plug several gaps in Maersk’s North American coverage and, combined with the capabilities of Performance Team’s warehouses, can provide delivery to an astounding 95% of the United States within 48 hours. Already, the company has achieved over $1 billion in global revenue from its land-based operations, and it just opened up one of the largest markets in the world to thousands of e-commerce sellers abroad.
As is the case for many others in the space, Maersk’s clients are increasingly demanding greater e-commerce capabilities to match rising order volumes. According to the latest Adobe Digital Economy Index, global e-commerce sales will hit $4.2 trillion by year’s end, more than the market for global commercial banking — and U.S. consumers will account for nearly a quarter of that spending.
“If you look at the financial results of our customers, every quarter, it’s the e-commerce growth, the online shopping, that is the highest growth sector for them,” said Boyd. “Our customers, they have some of the most sophisticated supply chains in the world here in North America. So this is an important investment.”
It’s paying off, too. Earlier this month, Maersk reported record earnings for Q2 2021, growing revenue by almost 60% and marking the 12th consecutive quarter of year-over-year growth. That includes 38% revenue growth in its burgeoning logistics and services segment, which is driving earnings before interest, taxes, depreciation and amortization for the segment that are triple what they were a year ago. The company expects even greater earnings for Q3.
Some might be a little more bearish on Maersk’s prospects due to recent criticism surrounding ocean freight pollution, but the shipper says that it will be adjusting its environmental, social and governance efforts to cover both its ocean- and land-based operations. It’s pledged to decarbonize its fleets of ships and other delivery vessels, and it says that 90 of its 200 largest clients have made similar ESG commitments.
That process might be expensive, but Maersk told Modern Shipper that its acquisition of Visible and its other e-commerce-adjacent moves are about growing its e-commerce business, not saving costs. According to Phol, the company’s short-term goal is to achieve above-market growth in the space.
And in this case, a rising tide really does raise all ships: The growth of Maersk’s e-commerce infrastructure will mean greater access for small and medium-size companies to break into the U.S. marketplace.
“With the global presence that Maersk has on the ocean side, the LCL side, the airfreight side, the customhouse broker side and now adding what Visible can do on the domestic side here,” Phol said, “we’ll be able to connect all the dots to make it very easy for a lot of small to medium-sized enterprises overseas to be able to sell into the U.S. market.”
Source: Freight Waves