Maersk North America Market Update (February 2023)

Ocean Update

We have reached the tail-end of the Chinese New Year slowdown period wherein the majority of the proactive network optimizations from weeks 4-6 are effectively behind us. Volumes are increasing week-over-week, which coincide with the resumption of manufacturing and warehouse operations in China.

Recent service and structural updates to improve the overall performance of the ocean network on both transpacific and transatlantic services have begun to deliver results. SeaIntel Data reflects the positive impacts of our service adjustments to reduce transit times and improve reliability. Reliability is a measure of the percentage of vessels that deliver their cargo within 72 hours of the scheduled “Delivery Promise” arrival time.

In the Pacific, Maersk reliability performance rose 15 percentage points from November to December, scoring a 53%, which is 3% higher than the average of non-Maersk vessels in the same month. Maersk reliability on the Gulf Coast rose to 50% in December, nearly double its October performance. Meanwhile, at 40% reliability, Maersk’s east coast December measures outperformed the industry average, but lagged the west coast figures. Maersk continues to optimize its network in a manner that maintains sufficient coverage to addresses customer needs while improving performance. We continually strive to communicate the latest developments with customers as soon as possible. Be sure to read our “Weekly Reader” email to stay up to date and check schedules on Maersk.com.

Tender Season Considerations

As Tender Season is nearly upon us, your account teams stand ready to explore your business objectives to determine the best opportunities to partner with you on your supply chain. Given the ever-changing nature of economic conditions and market forces, we recommend the following key considerations:

• Think ahead as to what may be happening in the next six months in your industry. Plan for what you believe your warehouse(s) inventories will look like come July or August.
• Consider that the market may change significantly. The economic outlook remains uncertain and economists are divided as to whether there will be an upturn or a downturn by year end.
• Identify contract options that enable flexibility and resiliency for your business to be prepared for multiple economic scenarios.

Maersk’s “AMEX Southbound” to South Africa from the U.S. East Coast is experiencing vessel bunching and wait times up to seven days due to periods of high winds in Cape Town and Durban.

West Coast Highlights:

• Vancouver: The terminal’s line up, yard, rail, and gate all remain impacted. Vessel wait times are expected to average 14 days. Inbound rail is currently running greater than terminal capacity. Average departed rail dwell is nine days and yard utilization is at 97%.
• Los Angeles and Long Beach: Maersk will be shifting its TP8 call from Long Beach Total Terminals International to Los Angeles APM Terminal Pier 400 with the first vessel estimated to arrive on April 3rd. The TP8 serves Ningbo, Shanghai, Qingdao and Busan to Long Beach. The change has no impact on transit times but will result in greater operational efficiencies.

East Coast Highlights:

• Savannah: The terminal has discontinued its night gate as of February 20th due to a decline in volumes and reduced utilization of the gate. Savannah remains among our top dwelling import and export cargo dwell locations.
• Houston: The terminal plans to discontinue the Saturday gate as of the end of April due to decline in utilization.

Landside Updates - Warehousing & Distribution

Census Bureau reporting that January retail sales up 3% from December and 6.4% year-over-year.

Without a crystal ball, how should a supply chain planner proceed? The answer? Slowly.

The great majority of our North American customers wrestle each day with two persistent supply chain realities: 1.) market demand can change rapidly; and 2.) Supply chains tend to extend over several months, particularly when crossing an ocean is involved. To offset the impact of these standing truths, our most savvy customers employ a strategy of pushing inventory allocation decisions downstream. The allocation could be either which distribution center to store goods in or what sales channel to apportion stock to. This approach leverages decision postponement to gain greater clarity over current market trends before committing to specific supply chain tactics that may impact supply chain costs, inventory levels, speed to market, and customer experience.

Here are three considerations for an allocation postponement strategy:

1. Allocate Upon Arrival – make allocation decisions regarding storage destinations or sales channels when your goods have landed in North America, as opposed to when your goods are still in Asia. Given that transit times can run a range of 35-68 days or more, making decisions at the conclusion of ocean transit will give you better market condition visibility closer to the point of sale.
2. Leverage Transloading Options – As your goods make the move from an ocean container to truck or rail conveyances, use the opportunity to route goods to the most geographically/operationally advantageous distribution center (DC) for current market conditions. If you only have one DC, consider whether gaining access to multiple DCs could improve your supply chain resilience.
3. Maintain Unified Inventories – rather than splitting out your inventory upstream overseas into separate allocations such as e-commerce, retail, or wholesale, keep the goods in a single co-mingled inventory at the warehouse level to respond to omnichannel demands when customer activity pulls it forward. This builds flexibility and reduces the potential for stranding goods in allocations that may not have attained forecasted sales. Co-mingled warehousing of key SKUs also enables efficient, consolidated parcel shipments for e-commerce orders and a better customer experience.

Longer term, your supply chain agility will benefit from warehouse strategy reviews that include an analysis of SKU rationalization within your distribution network while also taking a hard look at clearing long-held inventories taking up valuable space in your warehouse network.

Check out our Warehousing and Distribution pages on Maersk.com to learn how you can build more agility into your supply chain in the face of economic uncertainty.

Landside Updates - Transportation

• Off-terminal container overflow yards are closing or have closed.
• The need for “dedicated” chassis fleets has waned as traditional “pool” chassis fleets can once again meet demand.
• Use of overflow trailer storage has dropped significantly.

Now that the “smoke has cleared,” our customers have begun to re-evaluate their transportation and logistics arrangements. Addressing costs is a major concern, as well as the ability to simplify the number of vendors and partners relied upon to reach business objectives. In the height of the supply chain crunch, organizations had to connect to high numbers of disparate providers to meet their needs. Today, the easing of congestion has opened the way to reducing the number of vendors once more to simplify business operations.

The question on the minds our customers is how to plan better for the inevitable next wave of supply chain activity – whether that is three months from now or in the year ahead. Some economists see the current strength of wage and salary growth as indicator of potential economic growth in the near term. For its part, Maersk has seen a 63% year-to-date drop in longstanding dwelling cargo, which could indicate that warehouse space is opening up. Decreasing inventories could be a precursor of inbound flows from retailers needing to bolster inventories. The catch is, even a 10-15% increase in cargo flows could quickly impact the fluidity of the overall transport and logistics networks. When it does, the rising tide will have everyone scrambling for capacity at the same time. Best to be prepared.

The opportunity to plan ahead is always welcome, as is the ability to plan “bigger.” Lately, we have begun to see customers submit proactive “Requests for Information” that explore a more wholistic approach. Customers are looking for what’s possible in terms of available future capacity with the upsides inherent in cross-border nearshoring, automation, and increased visibility. Supply chain integration has also been top of mind in terms of securing capabilities to transport, warehouse, and deliver goods, all within a robust contractual framework with built in flexibility that cares for the ebbs and flows of commerce. RFIs can serve as a foundational framework for implementing a stronger supply chain solution before the next wave arrives.

As you look forward, stay close to the partners who have a demonstrated a track record of support and are aligned to your vision of a better supply chain. For more information on what’s possible, contact info@performanceteam.net or visit our Truckload Transportation pages on Maersk.com.

Topics, Trends & Insights

And many emerging markets are vulnerable, having entered this environment with high debt levels and key dependencies on energy and food imports. In this uncertain context, the global ocean container market growth is expected to be in the range of -2.5% to +0.5% in 2023.

In addition, market-based trade policies are being challenged more forcefully than at any time in the past 60 years. Going forward, geopolitical relationships are set to remain tense, and some supply chains will be shaped more by political choice than by economics, and by the increasing impact of climate change. The totality of uncertainty facing customers’ supply chains and logistics providers is significant and greater than any single risk factor would indicate by itself. The report shared a compelling illustration of the “polycrisis framework” and the drivers influencing the industry landscape.

The report went on to address other fundamental drivers of the logistics landscape that are also changing. Technology is creating new demands and opportunities, channel shifts are accelerating, and the quest for resilience and ESG compliance are becoming paramount. As part of the response, supply chains are starting to be rewired through nearshoring and diversification of sourcing, and customers seek closer collaboration and long-term relationships to reduce undue complexity and shared responsibility for operating their supply chains.

Access the Annual Report on Maersk Investor Center.

To power these vessels, we signed memorandums of understanding with nine green fuel producers around the world. We also took steps to move away from fossil fuels to electric energy in our terminals and logistics networks, including the order of 400+ heavy-duty electric vehicles in North America.

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