Slow Trip Across Sea Does Not Aid Maersk's Customers' Profits, Regardless of the Environment

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Green, Logistics, Sourcing Strategies

Here was the original title of that article from the New York Times:

Slow Trip Across Sea Aids Profit and Environment

As a quick follow-up to Stuart’s latest post on Maersk purposely slowing down its shipping fleet to create energy cost savings and better “green mindshare among its customer base, I thought I would offer another point of view which sourcing professionals may wish to consider.   From a sourcing manager’s point of view, this move by Maersk makes no sense from a supply chain management standpoint. Sure, haste makes waste, and personally, I have no problem buying fuel efficient vehicles or driving 55 instead of 65, but longer commercial transit times lead to nothing but waste. Is Maersk trying to guilt its customer base with the eco-stewardship argument that in reality turns out to be a direct cost pass-through straight to that customer base? I would argue this move will cost corporations millions of dollars in decreased supply chain efficiency.

Let’s start with the obvious increased costs you the buying organization will bear in the name of Maersk’s energy efficiency plans for you. First, you may lengthen your ocean lead-time by 25%. The NY Times article in the original post cites a 4-week journey from Germany to China (the route normally takes 3 weeks). Now that you have an extra week to account/plan for what will you do? You’ll likely order a bit more and create that bullwhip effect as you and your suppliers try and manage your longer lead times. And we all know that when we add time to order cycles we are less productive with our cash, we add to our inventory and we run the risk of not meeting demand.

But there are subtle losses to you the buying organization as well. Every day your material is on the water you add to your financing costs (thank you Maersk!) You decrease your throughput, you increase your WIP, and you offset those working capital improvements you made last year. Look, I don’t mean to rain on the green parade. If your company chooses to make environmental stewardship a priority, that’s great, so long as the costs have been weighed against the benefits.

A wise client once told me if your customer is not willing to pay more for a particular benefit then it may not represent a big enough benefit. In this case, you may intentionally [or unintentionally] pay a whole lot more but my question to you is this is your customer going to pay you more for that benefit?

–Lisa Reisman

Comments (6)

  1. Ian Falconer says:

    But Lisa, you need to bear in mind the longer game that Maersk is playing with the EU regulators. In bringing down fleet average energy intensity and emissions it is trying to avoid the imposition of strong legislation that will see even more rigid emissions and efficiency targets put in place.
    Energy intensity and emissions will come down one way or another, the question is whether the inevitable can be put off with a little judicial diplomacy until the technology is available to be even faster and more efficient that they are today.
    You want jam today. They want jam tomorrow and the next day too.

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