Better, faster and cheaper

Despite news making investments in growth market countries, a quarter of APM Terminals’ port facilities are in Europe and the United States, where growth is slower. Facing new operational challenges such as larger vessels, this means that better performance and better products and services in these markets are more critical than ever.

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In Europe and the United States, where volume growth is expected to be 3% in 2014 compared to the 6-8% growth seen in parts of Africa, Asia and Latin America. Here, the port in Rotterdam.

Peanut farms stretch on as far as the eye can see in certain parts of the southern United States. Brian Harold noticed the giant farms while driving in his car, but didn’t know what the endless rows of green plants were. New to the South and sensing a business opportunity, he started making calls.

“It’s a USD 100 million export business in Alabama and a handful of other states,” says Harold, head of the APM Terminals container terminal in Mobile, Alabama on the Gulf of Mexico. “And I knew that we weren’t seeing any of that cargo in Mobile,” he says.

He requested a meeting with the Alabama Peanut Farmers Association and not only found out how large the industry was, but that he had something simple and valuable to offer them. They were exporting their cargo to Europe, but instead of using his port in Mobile they were trucking the cargo much further to the Atlantic Ocean ports of Charleston, South Carolina and Savannah, Georgia.

“Very simply, I showed them that they could save a pile of money if they trucked their containers to our port in Mobile instead,” he says. “And that was that, peanuts.”

Business is business

Gone are the days when container shipping terminals wait for cargo to arrive and focus only on efficiently moving boxes in and out.

In Europe and the United States, where volume growth is expected to be 3% in 2014 compared to the 6-8% growth seen in parts of Africa, Asia and Latin America, better, faster and cheaper is the name of the game. However, to survive these terminals must also find new business like the peanut farmers or find other ways to save time or money for customers.

“These 15 ports are incredibly important,” says Martin Gaard Christiansen, Chief Commercial Officer for APM Terminals. “They anchor the networks of our shipping line customers, and with more than 300,000 containers per week they are still the markets where most of the world’s cargo moves,” he says.

“But the margins are thinner and the business has become more complicated. We are not going to be saved by volume growth,” he says. “We won’t survive if we don’t have lower costs and provide a better product than our competitors. It’s that simple.”

Performance is critical

One primary example of this effort is the hub partnership programme with Maersk Line, APM Terminals’ largest customer.

In shipping, just like in the airline industry, certain “hub” locations anchor the global networks of shipping lines. For Maersk Line, the three primary hub ports are Algeciras, Spain; Tangiers, Morocco and Rotterdam, the Netherlands.

In these ports, the terminal’s operational performance is critical to Maersk Line and any delays can wreak havoc across the global vessel network and cost millions to clean up. But as a port operator, APM Terminals has its own bottom line to watch as well, meaning the two companies’ priorities often didn’t align.

Focus on performance and productivity

With the hub partnership agreement, that changes. In return for focusing entirely on productivity and performance in Algeciras and Tangiers, Maersk Line pays APM Terminals the operational costs of the two terminals in Algeciras and Tangiers. Operational staff from both companies share office space in the region and management has shared ‘KPIs’ on which their performance is judged. A shared bonus system rewards any performance above target.

We won't survive if we don't have lower costs and provide a better product than our competitors. It's that simple.

MARTIN GAARD CHRISTIANSEN, CHIEF COMMERCIAL OFFICER FOR APM TERMINALS

“With the partnership, APM Terminals knows its revenue and costs are covered and Maersk Line gets the focus we need on operational performance, making sure berths are available and crane productivity is high. It means our network runs much smoother and we save on costs, particularly bunker,” says Keith Svendsen, Vice President in Operations Execution, Maersk Line.

As a direct result of the partnership, Maersk Line saved several million dollars in bunker cost in 2013, and has seen productivity improvements in both ports. In Algeciras in particular, gross crane moves per hour jumped to an average of 31 in 2013 from 27 the year before.

The programme is expected to be implemented in Rotterdam and possibly other locations in the future.

Building a stronger portfolio of ports
Whether it’s working together with customers for mutual benefit or asking terminals such as that of Brian Harold to better understand the needs of importers and exporters, Martin Gaard Christiansen says the entire mature market portfolio needs sharper focus.

Specifically, he says what’s needed is a manufacturing-like mind-set and standardisation of processes and equipment so that performance can improve and also be measured more accurately.

Leading this effort to optimise and standardise in the coming years will be Jeff De Best, who in March 2014 takes over as Chief Operating Officer of APM Terminals, a position that Christiansen was holding in the interim.

“These kinds of changes don’t happen in a year, especially when what we’re aiming for is world-class operations,” says Christiansen. “It takes time and will require us in some cases to invest in the equipment and the processes needed, or if the profitability just isn’t there, consolidate or divest.”