New alliance between Maersk and Hapag-Lloyd: a game changer
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Maersk's Gemini tie-up with Hapag-Loyd will be a game-changer if it can make its joint network work as expected, analysts say, as their competition Opponents may follow suit.
At the beginning of this year, Maersk and Hapag-Lloyd announced that they would join hands to launch a cooperation called "Gemini" starting from February 2025. They are committed to providing industry-leading reliability, coverage and coverage through the hub & spoke network. The first-class shipping network with the highest transportation speed, with an on-time rate of over 90%.
In a recent panel discussion with Lars Jensen moderated by Hapag-Lloyd CEO Rolf Habben Jansen, Vespucci Maritime’s Lars Jensen said that fewer and larger key hubs are the way to work together in “Gemini” to build a more efficient network.
Bjørn Vang Jensen, an analyst at management consulting firm Nanooq, said that if it can be proven effective after one or two months of operation, this will be the legendary "win" formula.
Bjørn Vang-Jensen said of the "Gemini" collaboration, "It just takes a month or two to prove yourself that you've really found a winning formula. I agree it can be done."
Focusing on “improving on-time performance”
A key goal of the "Gemini" cooperation is to improve the punctuality rate of the two liner companies to reach the goal of over 90%.
This is an ambitious target compared with the punctuality rates achieved by liner companies in recent years. In 2021 and 2022, the attendance rate will be 35.8% and 52.2% respectively, and in 2023 it will increase to 67.7%.
In fact, Hapag-Lloyd CEO Rolf Habben Jansen said when talking about the "Gemini" cooperation that the two parties are making good progress in preparations and may be on time or even slightly ahead of schedule. He said, "The official start date is February 1, but in reality, the transition from THE Alliance to Gemini will probably take about three months. So it will start a little earlier and hopefully end at the end of the first quarter."
Of course, his slogan still focuses on "improving on-time performance," a reliability that has seriously deteriorated since the epidemic.
Maersk and Hapag-Lloyd will achieve this by building a new network around a limited number of key hubs (15 key ports in total) on their east-west routes. Key hubs have been carefully selected and are controlled by the liner companies themselves. They have high reliability and productivity and will ensure smooth and seamless connections between routes. These hubs will also optimize transportation routes so that goods reach their destinations as efficiently as possible.
The trunk lines will operate alongside dedicated branch lines as part of efforts to increase reliability and better protect the network from interference. At the same time, advanced technologies such as the Internet of Things (IoT), digital twins and artificial intelligence (AI) help ensure that critical hubs continue to become more reliable and efficient.
After a long debate, in fact, industry figures, including Lars Jensen, have largely accepted that it is possible to achieve the goal of improving shift rates through hub-and-spoke networks. But the price of a simpler network is that there will be fewer direct shipping routes and cargo will have to be transferred from large container ships at key ports to smaller feeder ships. However, transshipment is risky and may cause delays. Two analysts noted that many shippers may initially be skeptical of Gemini, but the focus will be on whether customers are willing to pay the same price for "transshipment."
"If you just think about how to design a network to be as efficient and cheap as possible, no matter what you do, you end up coming to the conclusion: you want bigger, fewer nodes and more transit," Lars Jensen said.
He added, “That’s exactly what ‘Gemini does.”
He emphasized that the success of the "Gemini" cooperation depends on the partners' ability to smoothly transship in key ports so that the goods arrive on time.
Lars Jensen said, "If Hapag-Lloyd and Maersk can achieve their goals operationally, I think this will set the tone for other alliances to adapt their networks and take the same actions in the coming years."
Vang Jensen predicts that Hapag-Lloyd and Maersk will initially have difficulty selling the benefits of their future networks to shippers.
“There’s not a shipper in the world who likes transloading,” he elaborated. “You’re going to have an uphill battle. I have a better network. Yes, it involves transloading, but it means higher on-time rates. It’s going to be a tough sell, but you never know until you try it.”
On the other hand, he had no doubt that the shipper could accept the transshipment if the cargo arrived on time.
Bjørn Vang-Jensen said, “Although shippers don’t like transloading, they will absolutely accept it, especially if it means arriving on time.”
He expects that if Hapag-Lloyd and Maersk's "Gemini" network works well, shippers can save time and therefore costs because shipping takes less time than before.
"Inventory costs money," Vang Jensen said. "So if we can confidently shave off three to seven days of inventory, that's a game changer and that easily justifies paying the premium."
