With global companies going for e-commerce in a pandemic hit world, the shipping industry is suddenly finding favor with an upsurge of investments. One such case is CMA CGM which has received logistical solution support requests from heavyweights like Amazon and Walmart, reports the Wall Street Journal.
The Future of Shipping Lies in E-commerce
The head of CMA CGM SA says the future of the world’s fourth-largest container line will increasingly be built on e-commerce.
The head of the container line says big clients like Amazon and Walmart want end-to-end logistics solutions from shipping companies
The company, which now gets most of its revenue from shipping, in the future will likely see a 50-50 mix of shipping and inland logistics, he said.
More Logistics In Operation
The French shipping company is bringing the logistics business it acquired last year more deeply into its operations as the carrier takes on bigger trade volumes aimed at online consumers.
“Clients like Amazon and Walmart are looking for one entity for all their shipment needs,” CMA CGM Chairman and Chief Executive Rodolphe Saadé said in an interview.
The company has swapped out the management of Ceva Logistics AG, the big logistics operator it acquired last year, and moved its headquarters from Switzerland to CMA CGM’s base in Marseilles. Mr. Saadé said the moves are aimed at turning the loss-making Ceva profitable while embedding its inland distribution specialties into the shipping line’s own port-to-port operations.
Distribution Pattern Change
CMA CGM is seeing signs of changing distribution patterns in the recent container import surge that hit U.S. shores in the third quarter, Mr. Saadé said.
“Amazon and Walmart are increasing significantly their volumes coming out of Asia to the U.S. People don’t go to the malls with the pandemic, but they buy on the internet,” he said. “These clients are increasingly asking for warehousing and last-mile services.”
Shipping executives and brokers estimate that up to a quarter of all container volume heading into the U.S. from across the Pacific in recent months has been destined for e-commerce distribution centers and that demand continues to grow. CMA CGM is one of the biggest operators on trans-Pacific container lanes.
The company’s logistics investments are part of a broader move in the maritime sector.
Shipping Realigning To Counter E-commerce Boom
Major shipping lines increasingly are aligning their international operations to meet the demands of big online retail customers, in a sign of the growing impact of e-commerce on global supply chains. Industry executives say those retail customers want tighter schedules for delivery of their goods and greater visibility into the flow of shipments to their final destination.
Companies including A.P. Moller-Maersk A/S are investing in warehousing, customs clearance and truck capacity to cater to the growing demand
The Danish company’s Maersk Line operation, the container-market leader, said earlier this month that it will consolidate its supply-chain services by having its logistics division absorb Damco, a separate arm of the group that provides air and ocean freight forwarding.
CMA CGM is betting on Ceva to fulfill that part of the supply chain.
The shipping line spent $1.65 billion last year to buy the third-party logistics operator. The loss-making company is a top-10 global freight forwarder in terms of revenue, but lags behind fellow European firms DHL Global Forwarding and DHL Supply Chain, Kuehne + Nagel International AG and Schenker AG.
Mr. Saadé said he expects Ceva, which lost $1 million in the second quarter, to show a profit next year. The CMA CGM group, which includes the main shipping arm with a fleet of 500 ships, made a profit of $136 million in the quarter, after a $109 million loss last year.
“This year our profit is coming from shipping,” Mr. Saadé said. “Tomorrow, most probably it will be divided between shipping and inland logistics, maybe half and half, over the next five years.”
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Source: The Wall Street Journal