Doing things differently
Published on 14 September 2017
The problem: 8,000 forty-foot containers full of car parts travelling from Vancouver to Michigan every year, and returning empty.
The solution was a creative one – and by using the Transport & Logistics structure to bring in Damco Distribution Services (DDSI), Maersk reduced the complexity involved and created savings for one of its biggest customers, General Motors.
“There just isn’t much cargo going back to Asia from Michigan, so we needed to include in our ocean freight prices the cost of getting those empty containers back to where we needed them,” says Neil McGuire, Senior Key Client Manager for Maersk.
Joint business plan
Maersk has been the recipient of GM’s Global Supplier of the Year award for four years and that strong relationship enabled McGuire to work with his counterparts at GM on a joint business plan to address the issue. And, after nearly 12 months of planning, the result was an end-to-end package with Maersk handling the ocean transport and DDSI taking over the inland logistics once the car parts arrived in Vancouver, Canada.
The mechanics of the agreed arrangement are simple: Once in Vancouver, instead of sending the 40-ft ocean containers inland across the United States to have them sent back again empty, all of them would remain in Vancouver. Using its nearby facility, DDSI would take the car parts out of the 40 footers and “transload” them into 53-foot containers owned by Canadian railroad operator, CN Rail, to be sent by rail to Michigan.
“Maersk and Damco Distribution Services Inc. (DDSI) have done this before, but on a very limited scale. Transloading is a perfect fit for Maersk where they can’t go or be competitive but have good volume. DDSI can put the package together and make it economical for everyone,” says Nick Taro, President of Damco Distribution Services Inc.
“A key value of this solution is the fact Maersk used its sister company to form a fully integrated approach under a single umbrella, where strong trusted relationships and ownership of process both within GM and Maersk are well established,” says Maersk’s McGuire. “It’s a single contract between Maersk and GM, with Damco Distribution Services as supplier and party to the process and operational decisions.”
The transloading solution served everyone’s purposes: General Motors saved a bundle of money by reducing its costs on inland transportation and equipment handling costs since the car parts in the 8,000 forty-foot containers fit neatly into only 6,000 of the larger 53-footers – essentially saving the inland cost of every 1 out of 4 containers for GM.
For Maersk, receiving an award only presented to 1% of General Motor’s global pool of suppliers is a feat and honour in itself. By applying constant innovation and care to a partnership that has grown closer over the years, this new joint planning process not only introduced GM both to DDDS, but also to how Maersk Transport & Logistics can provide a package of services that others cannot.
“Maersk and DDSI have done this before, but on a very limited scale,” says Nick Taro, President of Damco Distribution Services Inc. (DDSI), who worked closely with McGuire on the GM deal.
“Transloading is a perfect fit for Maersk where they can’t go or be competitive but have good volume. DDSI can put the package together and make it economical for everyone.”
Besides transloading, the DDSI arm of Damco provides services like cross-docking and warehousing as well as the operational management of warehouses on behalf of some of the world’s biggest e-commerce companies and is enjoying revenue growth of 15% year over year as more companies seek out more than the ocean carriers can provide.
“The bigger importers are seeing that, depending on where their factory, warehouse or store is located, their menu of shipment options is getting limited," says Taro. "With transloading and crossdocking we can create cost advantages and routing advantages the customers are often not aware of."
For Edgar Pezzo, Executive Director of Global Logistics for General Motors, the value of the collaboration is clear. “Over the last 4 years, GM Logistics has been challenging the way we do business and our Global Logistics Operations was the first to start with this transformation,” says Pezzo. “We have trusted Maersk with their initiatives and proposals to achieve this vision. The transloading initiative was a result of Maersk’s response to a challenge to improve the way we do business. This is a great proof of how strategic partnership creates a roadmap for innovation that leads to a resilient supply chain.”
Fast and efficient: The simple math of transloading. Car parts in 40ft containers sail from China and Korea to Vancouver, BC. There, they are transloaded into 53ft containers at Damcos facility and CN trains take them the 4,500 km to Michigan GM plants. The 40fts stay in the port for quick return.