Team 8: Ates, Hoang, Mackay, Metz, Prudencio

essel HARING

WHAT IS 2M?

1st 2nd

2 Largest Shipping Companies1

Under-usage of Vessels’ Capacity2

VESSEL SHARING AGREEMENT3

WHY 2M?

Declining Freight Rate1

↑ Vessel Orderbook2

SHANGHAI CONTAINERISED FREIGHT INDEX

• Index Start 2009 (used as Reference Freight Rate)

• Hit “ALL-TIME LOW” in September 2015↑ Vessel Size

3

HOW DID 2M DERIVE?

1

• ↑ Fuel & Other Operating Cost

• ↓ Margins (Market Demand)

• Wasted, Un-used Capacity

• ↓ Freight Rate; ↑ Orderbook

2

• P3: Maersk, Mediterranean, CMA CGM

• Integrated Management

LONDON CENTER

3

• by Chinese Government

• Monopoly Concern (3 world largest shipping lines)

• Integrated MGT in LONDON???

4

• CMA CGM withdrawal

• Maersk & Mediterranean remains

• LONDON CENTER’s New Function

Locating vessels

5

• Opp. & Threats

• 2M Implementation

• 2M Offering

WHAT 2M OFFERS?

Efficient use of Ships’ Capacities1

Additional International Shipping Routes2

A more efficient global shipping/ maritime transportation network

Integrated Communication between Maersk & MSC3

~ 100%

21 routes18

routes

The use ofMEGASHIPS

• Maersk Saving: $350 million (MSC to follow)

Potential Saving $350 million1

• Efficiency: ↓ Cost/container (Vessel Utilization)

↓ CO2 Emission

↑ Port Efficiency (Load 1 ship at once)

↑ Fuel Efficiency (↓ waste)

2M OPPORTUNITIES & THREATS

Opportunities Threats

• 2 largest shipping lines in the world

Economies of Scale2

• ↓ Cost & Freight Rate: Combined Capacity

• ↑ Service Level: More competitive

Competition from other VSAs1

97

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Gov. Regulation, China2

↓ Flexibility to Adjust Strategy3

↓ Freight Rate4

2M SUCCESS & FAILURE FACTORS

Factors of SuccessThe use of Megaships

1

MSC OSCAR- World Largest Megaship: 19,000 TEUS

• Combine all available routes of each company

Services/ Routes Variety2

• More routes > Either Maersk or MSC alone

• Develop new Routes/ Services under 2M

Increase in Customer Accounts3

• No Joint Head Quarter

Government Regulation1

• ↓ Efficiency: Management & Operation

• Inconsistency in service performances

Lack of Standardization2

• Lack of Comm. about Demand Forecasting

• Low Coordination in response to Demand ∆

≠

Factors of Failures

2M IMPLEMENTATION

PROPOSAL &LEGAL PROCEDURES

COMBINEDROUTE & CAP. PLAN

INTEGRATEDINFO CENTER GMC

REVIEW, REVISE& EXPAND

1 2 3 4

• Revise P3 Plan after CMA CGM withdrew

• Involved Authorities: China (MOT), US FMC, European Commission

• Terms on: No of vessels, loops, capacity sharing

• Combine routes to offer customers 21 routes instead of 18 routes

• Develop Schedule, Port calls, etc.

• Allocate shipping capacity on each route

• London Center is used to integrated information on ship locations only.

• Ship loading & other procedures is handled by the ship owners

• Start implement 2M• Test for the optimal

number of ports, routes, ships and capacity

• Gradually increase the system capacity

185 Vessels• Maersk: 110 ships• MSC: 75 ships

Allocation (All routes)• Ports: 212• Maersk: 55%; MSC: 45%

Ships Cap. & Speed:• Avg.: 14,000 TEUS• Speed: 19.8 knots/h

Orderbook:• Maersk: 9 ships/ $1.1 bil→ Avg Cap: 14,800 TEUs

6 MONTHS 6 MONTHS

WITHSTEP 2

10 YEARS

2M IMPLEMENTATIONAllocation of Shipping Capacity (Example)

Asia-North Europe - West/ Eastbound

Loop 2

Loop 1

Loop 3

Loop 4

Loop 5

Loop 6

Asia-Mediterranean Westbound

AE20

AE11

AE12

AE15

AE3

Asia-Mediterranean Eastbound

LOOPS AREBASED ON

• Dif. Depart• Dif. Destination• Dif. No. of Ports

ALLOCATION ISBASED ON

• Competitive Advantage

• Regional Specialty

OTHER ROUTES

• Transatlantic• Transpacific

2M IMPLEMENTATIONThe Overall Routes of 2M

2M INVESTMENT & INITIAL OUTCOMES

Investments Initial Outcomes

• To coordinate Vessel Location only

London Integrated Center1

• Vessels are loaded & serviced by its owner

• Without 2M, still purchase NEW VESSELS

Purchase of New Vessels2

• With 2M, purchase LARGER VESSELS

• Maersk 2015: Order 9 new vessels, $1.1 BILLION

• Low World Fuel Price

Insignificant Changes1

• Only 6 months into VSA

• 2M expanding fleet (185 208)

However, New Investments2

• 2M adding new routes (21 24)

• 2M adding new port calls (212 291)

• Direct Port-to-port pairs (788 1,036)

Cooperation with Japan MOL2

Au

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st 2

01

5

ANTICIPATED SAVINGS: $350 MILLION

THE END