For multinational companies dealing in baby food products, one market remains the cream of the crop: China. According to research firm Euromonitor, the Chinese baby food market stood at 128 billion yuan (USD 18 billion) in China in 2018. This figure was forecast to increase to 160 billion yuan (USD 23 billion) over the next five years, much of it driven by international brands.
Buoyed by the 2015 withdrawal of the one-child policy in China and the rising spending prowess of its middle-class population, the need for nutritious and safe baby food had been increasing. Any company looking to edge out rivals had to be quick and efficient to satisfy the interests of its Chinese consumers all the way.
Our customer is a leading producer of powdered milk for infants and babies. Based in Western Europe, the company mainly exports their milk powder products to large markets in China, Hong Kong and to some Middle Eastern countries.
The customer was enduring several challenges in reaching its markets in China. Their goal was to meet growing demand. The company required a faster go-to-market schedule while also tracking their freight. The customer’s challenges included:
Delays to eastbound vessels
The customer’s vessels were facing lengthy delays, occasionally stretching an initial 30-day transit to around 50 days.
An increase in rolled cargo
Seasonality of westbound sailings led to pressure on the availability of space and an increase in rolled cargo in eastbound sailings.
High costs of air freight
Although air freight was a faster means to reach China, it was not sustainable in the long-term. The customer was moving bulk orders of sizable weight, which led to higher air freight costs.
The aim was to provide a speedy alternative to ocean freight, along with a cost-effective solution to air freight. Maersk’s in-house team of supply chain experts in Europe and China proposed an intermodal solution, primarily driven by rail.
- The rail link offered the customer a shorter and more reliable lead time on their goods; halving the transit time from ocean freight.
- There was a less than 10% difference in door-to-door costs between ocean and rail, with faster speed to market.
- Moreover, rail was also considerably cheaper than air freight.
Maersk’s Warehousing & Distribution, trucking and digital platform services were integrated to enhance the rail solution.
The five-pronged approach
Our tailored solutions streamlined the logistics process in five detailed steps to ensure reliable factory-to-shop delivery:
- Our fleet of bonded trucks carried cargo from the customer’s manufacturing hub to our warehouse in Belgium.
- The goods were then safely sorted at the warehouse before being loaded into rail containers.
- The containers were dropped at the railhead and securely loaded onto a train in Germany under the constant supervision of our intermodal teams.
- Upon arrival in China, the goods were custom cleared before being sorted at the warehouse in line with the customer’s distribution requirements.
- The sorted batches were loaded onto bonded trucks and delivered to the final hubs.
Active GPS trackers were installed in containers along the entire route. This allowed Maersk to: offer the customer detailed insights on the location of their containers, guarantee timely deliveries and ensure the safety, security and desired temperature of their cargo.
Following its implementation, the intermodal solution provided a series of wins for the customer:
- Speed-to-market improved considerably due to shorter transit times – from 30 days to 16 days. Since the rail option reduced costs, it also helped the customer’s overall margins.
- With around 95% reliability of on-time deliveries, the customer could bank on Maersk to meet demands on-schedule.
- Availability was no longer an issue for the customer. Maersk’s rail operations and tie-ups with global rail operators ensured cargo space was always accessible.
- Shipments were no longer rolled, with the customer’s cargo shipped in the same batch.
- Shipping via rail also led to fewer handovers, safeguarding the health of food products during transit.
- The active GPS tracking resulted in greater security and visibility for the customer throughout the journey.
- The warehousing option also provided the customer with the flexibility to divert shipments to different markets, depending on demand.
- Rail freight is a more environmentally friendly transport option than air or ocean freight.