Global manufacturers are chasing more flexible supply chains

Global growth is slower than expected and uncertainties abound. Yet, there are opportunities out there for Maersk. As companies fine-tune and alter their supply chains, Maersk businesses are at the heart of the changes and winning business.

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All companies are focusing on their supply chains, looking to lower their costs and diversify risk. And, in some cases that means building production facilities closer to consumer markets.

Two years ago, Maersk Line offered no direct service to Mexico from Japan; there was simply too little demand for it. Today, the Japan-Mexico trade is Maersk Line’s single largest volume trade from Japan, accounting for roughly 20% of export volumes.

The reason: Asian carmakers – along with their American and European counterparts – are investing billions in new assembly plants in Mexico. The attraction being a combination of lower cost (land, labour and energy) and proximity to growing consumer markets, in Mexico as well as in the United States and Latin America.

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Graham Slack, Chief Economist for the Maersk Group: “Global growth forecasts are being lowered and uncertainty is the word, so it’s a challenging period we’re in.”

“Global growth forecasts are being lowered and uncertainty is the word, so it’s a challenging period we’re in,” says Graham Slack, Chief Economist for the Maersk Group.

“All companies are focusing on their supply chains, looking to lower their costs and diversify risk, not by leaving China but by expanding elsewhere. And in some cases that means building production closer to consumer markets.”

The shift in Japanese trade to Mexico is an example of the opportunities Maersk businesses have as supply chain alterations occur. In this case, the potential for a lot more business stems from the nearly 2,000 Japanese car part suppliers that have followed the carmakers to Mexico and will need supply chain assistance.

“As logistic partners and service providers across thousands of supply chains, Maersk Line, APM ­Terminals and Damco can play a key role in enabling their customers to cut costs and grow their businesses,” says Slack.

Planes, cranes, automobiles and future champions

Cars are an increasingly important business segment for Maersk Line as carmakers hunt lower costs and greater access to markets. Instead of producing complete cars and sending them on ‘ro-ro’ vessels, manufacturers build car parts in one or more locations and ship them in containers to final assembly points closer to the consumer markets.

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China’s biggest car manufacturer, Geely Automobile Holdings Limited, produces car parts in China but has final assembly plants in places like Russia, Uruguay, Sri Lanka and Belarus.

Made in China assembled in Belarus

Chinese car manufacturer, Geely, and Maersk Line are working together to develop a Chinese automobile name, by shipping car parts for assembly overseas.

China’s biggest car manufacturer, Geely Automobile Holdings Limited, is one example. It produces car parts in China but has final assembly plants in places like Russia, Uruguay, Sri Lanka and Belarus. In 2014, Geely shipped 21,000 40-ft containers with Maersk Line – 40% of its export volume – and expects its use of containers to increase.

Geely’s global operation is so large and spread out that it has given Maersk Line and Damco full control of its entire logistics supply chain.

“It’s a partnership that allows us to respond quickly if there is a sudden increase in the agreed number of containers and also for to ensure on-time-delivery,” says Cathy Yang, a sales representative with Damco in Wuhan, China.