Maersk: Going Slow Might Not be Green for Everyone

Over on Spend Matters affiliate blog MetalMiner, Lisa Reisman recently penned a column that attacks some of the green precepts of Maersk's decision to send some cargo at a rate of travel across the seas that can often be beaten by many classes of sailing vessels (or outrun by pirates in a rowboat, for that matter). While Maersk is crying “green” to defend its new practice based on the reduced fuel consumption that steaming at a slow speed brings, in reality Maersk’s customers may be the ones left with less efficient supply chains and larger carbon footprints. But you won’t read this from the NYT and other biased eco-news sources which are lapping up the move without presenting a balanced supply chain perspective. In her argument against Maersk’s move, Lisa suggests that taking 33% longer to ship a container from Germany to China can have serious adverse supply chain implications.

To wit, as a response to longer lead times, companies are “likely to 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. Look further below the surface, and it becomes clear that the move could make even the greenest supply chain convert do a double-take and reconsider that Maersk’s move is nothing more than a cost-cutting initiative creatively re-spun as a green initiative at the customer’s expense. Consider that “every day your material is on the water you add to your financing costs … [and] decrease your throughput and increase WIP.”

I personally can't believe how the mainstream business and news media has missed reporting on the bigger supply chain picture here. At the end of the day, when the entire container ship is unloaded, Maersk's act is really nothing more than a clever means of taking advantage of their excess shipping capacity. With a material portion of its fleet in a mothballed status -- and most likely with new ships on order as well -- Maersk can afford to put more assets into use, which, if it sets a standard of slower shipping, will allow it to conveniently take advantage of idle capacity. After all, labor in the shipping business is relatively cheap. And if customers end up shipping more because of the inventory requirements that longer lead times require, Maersk will end up winning -- at both the environment’s and their customer’s expense.

But think about it in your terms -- as Marsk’s customer. As Lisa remarks, “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?” I’ll leave that for you to decide.

- Jason Busch

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