A.P. Moller - Maersk reports strong improvements in earnings in Q2

A.P. Moller ? Maersk delivers a 17% increase in earnings before interest, tax, depreciation and amortization (EBITDA) to USD 1.4 bn in Q2 compared to the same quarter last year. Revenue grew slightly to USD 9.6bn, which is on par with last year, and the underlying profit increased to USD 134m from USD 15m in Q2 2018.

“Q2 was a quarter of solid progress. EBITDA was up 17% and cash flow improved 86% year on year, driven by continued recovery in Ocean,” says Søren Skou, CEO of A.P. Moller ? Maersk.

On the back of the increases in volume and freight rates, Ocean EBITDA in Q2 increased 25% to USD 1.1bn. The Ocean business continued to recover with enhanced unit cost, utilization and reliability and revenue grew 2.9% to USD 7.2bn compared to Q2 2018.

Revenue in Terminals & Towage grew 13% to USD 957m compared to Q2 last year. In gateway terminals, volume in Q2 grew by 8.5% compared to last year, leading to higher utilization. EBITDA increased by 11%, partly offset by one-off items.

In Logistics & Services EBITDA grew to USD 61m in Q2 compared to USD 52m in the same quarter last year. Revenue was at USD 1.5bn, positively impacted by increased revenue in supply chain management, but offset by declining revenue from sea and air freight forwarding.

In Q2, A.P. Moller - Maersk distributed USD 615m in cash to shareholders through an ordinary dividend of USD 469m and USD 146m related to the first phase of the share buy-back programme announced in May 2019 of DKK 10bn (around USD 1.5bn) over a period of up to 15 months.

Progressing well on transformation

During the first half of 2019, A. P. Moller ? Maersk formed one sales organisation. Its focus is now on giving customers an integrated experience and offering them even more products, thus improving the financial results across the business and accelerating the transformation.

“The transformation progressed further with an improved cash return on invested capital of 6.9% and synergies of USD 1bn realised earlier than expected. Growth in revenue and gross profit in Logistics & Services still need to improve as we continue to build capabilities within logistics and services,” Skou elaborates.

The latest example of a digital innovation to improve customer experience is Maersk Spot, which simplifies the buying process and offers increased visibility and reliability by enabling customers to search and get competitive rates online, while ensuring cargo gets on board the selected vessel. TradeLens, the blockchain platform developed together with IBM, also progressed with several new commitments from carriers and port authorities during the quarter.

Guidance for 2019

While EBITDA for the first half year improved by USD 500m to USD 2.6bn, A.P. Moller - Maersk reiterates it’s full-year guidance for 2019 of an EBITDA of around USD 5.0bn including effects from IFRS 16.

“We reaffirm our guidance for 2019, while the macro environment continues to be subject to considerable uncertainties,” says Skou.

The guidance continues to be subject to considerable uncertainties due to the weaker macroeconomic conditions and other external factors impacting container freight rates, bunker prices and foreign exchange rates.

UPS Invests In Autonomous Trucking Company, Tests Self-Driving Tractor Trailers

UPS Ventures takes minority stake in TuSimple, completing transaction on August 13, and complementing ongoing purchased transportation services
UPS, TuSimple studying potential network efficiency benefits of future autonomous systems
Law requires driver in vehicle at all times
TuSimple believes its technology can reduce the costs of shipping goods via tractor trailer by 30%

UPS (NYSE:UPS) said its venture capital arm, UPS Ventures, has made a minority investment in autonomous driving company TuSimple. Together, both companies are testing self-driving tractor trailers on a route in Arizona to determine whether the vehicles can improve service and efficiency in the UPS® network. This is an extension of the ongoing commercial relationship between UPS and TuSimple in which UPS has purchased transportation services from TuSimple.

The work with autonomous driving company TuSimple began with the goal of helping UPS better understand the requirements for Level 4 Autonomous trucking in its network. L4 Autonomous means the vehicle’s onboard computer is in complete control at all times, eliminating manual intervention. Currently, however, laws regulating L4 Autonomous driving require a driver in the vehicle at all times to take over operation if needed.

Throughout the ongoing tests, UPS has been providing truckloads of goods for TuSimple to carry on a North American Freight Forwarding route between Phoenix and Tucson, Arizona. The company initiated self-driving service in May, 2019, with a driver and engineer in the vehicle. TuSimple and UPS monitor distance and time the trucks travel autonomously, safety data and transport time.

“UPS is committed to developing and deploying technologies that enable us to operate our global logistics network more efficiently,” said Chief Strategy and Transformation Officer, Scott Price. “While fully autonomous, driverless vehicles still have development and regulatory work ahead, we are excited by the advances in braking and other technologies that companies like TuSimple are mastering. All of these technologies offer significant safety and other benefits that will be realized long before the full vision of autonomous vehicles is brought to fruition ? and UPS will be there, as a leader implementing these new technologies in our fleet.”

Founded in 2015, TuSimple’s mission is to bring the first self-driving truck to market, to increase safety, decrease transportation costs and reduce carbon emissions. TuSimple develops technology that will allow shipping companies to operate self-driving class 8 tractor-trailers ? those that exceed 33,000 pounds and typically have three or more axles.

UPS contracts with third-party trucking companies during its peak shipping season. TuSimple believes it could cut average purchased transportation costs by 30%.

“We are honored by UPS’s strategic investment and their vote of confidence in TuSimple, this proves their commitment to staying at the forefront of innovation,” says TuSimple’s Founder, President & CTO, Xiaodi Hou. “TuSimple is confident that it can accelerate bringing the first self-driving truck to market to increase road safety.”

UPS’s tests with TuSimple are part of an advanced technology evaluation for vehicles in the UPS Global Smart Logistics Network. UPS is investing in Internet of Things (IoT) technology, Artificial Intelligence (AI) and advanced analytics to increase fuel efficiency and improve customer service to ensure that UPS remains the shipper of choice.

One way UPS explores new technologies is via its internal venture capital group UPS Ventures, which was established in 1997 as the UPS Strategic Enterprise Fund (SEF). In 2018, the SEF refined its objective and took the new name UPS Ventures. The group now seeks specific capabilities that UPS can integrate into its network immediately. UPS Ventures takes a minority stake in technology startups and actively partners with these companies to achieve technology goals for the UPS Smart Logistics Network.

“The UPS Ventures mission is to build collaborative relationships with early-stage companies that provide capabilities and insights that accelerate technological advancements within our network,” said UPS Ventures Managing Partner, Todd Lewis,. “UPS Ventures collaborates with startups to explore new technologies and tailor them to help meet our specific needs.”

Generational shift in fashion logistics: stepping up to the challenge

We’re about to experience a generational shift. The sooner the fashion and logistics industries become fully digitally enabled, the better for speed to market, which will continue to be the top priority. Mattias Praetorius, global head of the Consumer, Retail and Fashion industry vertical at Panalpina, looks at what generational and behavioral changes among consumers mean for fashion logistics.

In my previous blog post, I spoke of 10 developments that have shaped the fashion industry and logistics in the past two decades. The generational shift taking place today means more change can be expected. In just a few years from now.

Millennials will reach 40 soon. They already make more apparel purchases than other generations, while Baby Boomers spend the most per transaction and Gen X spends the most annually. What will happen to the logistics of fashion as Boomers retire and the digitally-native Gen Z gains more spending power?

Both the fashion and the logistics industries are evidently from another generation. Both have digital-first aspirations.

The sooner they become fully digitally enabled, the better for speed to market, which will continue to be the fashion industry’s top priority. Why? Two words: transparency and optimization.

Window shopping 4.0

In the world of fashion, stores are still the main link between brands and consumers. But today’s physical shopping experience is very different from the in-store experience of the past.

Today’s consumers compare products on-the-go with the brands’ own e-commerce platforms or those of multi-brand retailers. They look for price differences and discounts, and are susceptible to recommendations on social media before and while they visit the stores. They want model availability and delivery options, and appreciate perks such as the ability to pay with their phones.

It isn’t surprising then to see big names closing stores after having failed to adapt. Digitally-native vertical brands on the other hand have taken note and are investing in real estate right where consumers want physical stores, with a digital touch.

Interestingly, although e-commerce is on the rise, no digitally-native brand has been able to enter the elite of fashion… Yet. About 97 percent of profits are earned by just 20 companies, most of them in the luxury segment and the top 20 group of companies has remained stable over time.

Let’s not forget though that Amazon is ramping up its fashion business. It has learned how to sell other brands’ clothes and is now selling its own to generate higher gross margins. It also has Prime Wardrobe and Echo Look, as well as enormous amounts of data ? a competitive advantage that fashion retailers and brands simply can’t match. Plus, money to spend on attractive industry players, like it did when it acquired Zappos. More importantly for its fashion business, Amazon is no longer seen as an “uncool” brand.

To fully bridge the gap between the go-to-market ambitions of fashion brands and the issues facing today’s supply chain, the digital-first aspirations of both the fashion and the logistics industries must come true. Quick.

Delivery must be steered by demand and, simultaneously, inventory needs to be optimal. Transparency needs to be truly end-to-end linking all supply chain stakeholder ERPs (Enterprise Resource Planning). We simply need to get there.

In my next blog post, I’ll speak of the trends I see shaping up and what it’ll take to make it in the world of fashion logistics in the next few years.

Panalpina’s Healthcare Logistics Center in Germany obtains GDP certification

Panalpina’s newly opened Healthcare Logistics Center in Weiterstadt near Frankfurt/Main has obtained Good Distribution Practice (GDP) certification and is ready to assist healthcare customers with the handling, transport and storage of their temperature-sensitive medicinal products. Frankfurt is Panalpina’s third logistics facility in Germany’s Rhein-Main region, alongside Moerfelden and Neu-Isenburg.

The new facility is close to Frankfurt/Main international airport, but more crucially, also very well-connected to major highways and Germany’s federal road infrastructure. This allows customers to shorten lead times for intra-European and global shipments coming through this region. Typical healthcare shipments could go from Frankfurt to Sydney by air freight, or from Frankfurt via Antwerp to the USA by ocean freight.

The facility has successfully passed an audit by the world’s leading inspection, verification, testing and certification company SGS, and is now certified according to EU Good Distribution Practice (GDP). It is equipped for hub services for multimodal transport, including last-mile delivery, and linked to Panalpina’s global network that offers temperature-controlled Air and Ocean Freight solutions. In Ocean Freight, Panalpina uses reefer containers for both Less than Container Load (LCL) and Full Container Load (FCL). Several healthcare customers have confirmed that they wish to use the Frankfurt/Main facility for diverse activities including passive packaging preparation, cargo consolidation and long-term storage.

Some 4,500 m? of temperature-controlled warehouse space of the Frankfurt/Main facility are dedicated to healthcare customers; another 4,600 m? are for multi-purpose use, while an additional 620 m? are office space. Of the healthcare-dedicated part, 3,500 m? cover temperatures from 15°C to 25°C, with three dedicated truck docks, and 1,000 m? cover temperatures from 2°C to 8°C, with two dedicated truck docks. The warehouse has more than 6,000 pallet locations, an X-ray machine in the temperature-controlled area, and is able to handle dangerous goods.

These capabilities allow Panalpina’s healthcare customers to make their supply chains much more flexible. Volker Werner, Panalpina’s district manager, Central Germany, explains: “The facility is not only set up for multimodal transport; we have fully equipped it to meet all possible requirements of our pharma customers. Besides thermos-cover handling, re-icing and gel-pack handling, we can also take care of the temperature-controlled last-mile delivery, with 24-hour monitoring of the cargo.”

“Since the new center is so close to Frankfurt airport as well as major European ports, it is a gateway to the world for healthcare products,” says Stephen Kay, regional manager for Panalpina’s Healthcare industry vertical. “In combination with Panalpina’s other European centers of excellence, we have a highly flexible set-up, where we can move products to every continent by air or ocean freight and using either active or passive cooling. Based on the customers’ requirements, we can also choose between commercial carriers or the Panalpina Charter Network with its main hub in nearby Luxembourg.”

The Panalpina Healthcare Logistics Center Frankfurt/Main obtained GDP certification on August 6, 2019. This brings the logistics provider’s global network of GDP-certified locations to 38.

Panalpina logotype 10 developments that have shaped the fashion industry and logistics in the past two decades

Panalpina has been closely involved in the evolution of the fashion industry for decades. Time to pause and take a look back over the last twenty years to highlight some of the major changes that have taken place, not just for nostalgia’s sake but to see what the trends are for the future. This is the first part of a three-part blog post series with Mattias Praetorius, global head of the Consumer, Retail and Fashion industry vertical at Panalpina.

I recently came across an article about our former customer La Redoute, which was published in 1999 in Panalpina’s customer magazine connect. It made me pause ? and think; think about what has changed in fashion retail and logistics since the turn of the millennium. The rise of the internet and e-commerce have led to profound changes in consumers’ expectations in terms of choice, cost and speed of delivery, leading to new pressures for the fashion retailers and the logistics industry.

Here are ten developments that stand out in my view:

Ordering ? does anyone remember the catalog? In the past, many companies relied on a printed mail order catalog that was issued on a regular basis, usually once or twice a year, with a fixed number of items that could be ordered. Today, ordering, to a great extent, has moved online and the type and number of items is constantly changing. In fact, multiple channels have evolved for easily buying clothes, shoes and accessories from anywhere and at any time: physical stores, web shops--and, yes, even the catalog is still around. Customers increasingly want a seamless integration between these different channels for what we call the omnichannel experience. While this brings more freedom and greater choice to consumers, it adds complexity and demands more flexibility from fashion retailers and their logistics providers.
Fashion seasons ? two does not cut it anymore: In the past, there were two main fashion seasons: spring/summer and fall/winter, and orders and deliveries were based around this schedule. Several companies?Inditex brand Zara, for example? for some time now, have been offering new clothing choices several times per season, which again increases the pressure on logistics.
Delivery ? the expectancy of immediacy: Twenty years ago, when consumers placed an order via a catalog, they expected to wait days or weeks for delivery. Today, consumers expect the goods they see online to be delivered immediately. Panalpina’s global head of Logistics and Manufacturing, Mike Wilson, calls this phenomenon the “expectancy of immediacy.”
Warehouses ? made for moving, not storing products: One of the things that struck me about the old La Redoute article was a photo (see above) that showed garments on hangers in a massive five-story warehouse rack. In the past, most companies kept a large amount of stock over longer periods of time in their warehouses to ensure that their items were available when the order came. Today, thanks to different manufacturing and supply chain set-ups, electronic communications and warehouse management software, inventory moves much more quickly and efficiently. It’s all about moving products fast, not storing them. You will have a hard time finding a warehouse that stocks clothes and accessories from floor to ceiling over several months.
Inventory ? management “on the go”: In the past, companies managed their inventory from fixed locations ? directly from the warehouses. It is now possible to manage inventory “on the go” from any location using a smartphone or other handheld device.
Sourcing and manufacturing ? closer to consumer markets: At the turn of the millennium, sourcing from countries such as China, Taiwan, Vietnam and Bangladesh was already developed. Since then, sourcing and manufacturing has expanded to many more countries and has become more diversified; for example, Chinese suppliers who used to produce most of their goods in China have become global companies with presence in many Asian and African countries. With the increased “need for speed,” sourcing and manufacturing, in many cases, have moved closer to the consumer markets; this has been enabled by technologies such as 3D printing and distributed manufacturing where production is carried out near the end user.
Air freight ? part of the mix: Panalpina and companies such as La Redoute were some of the forerunners in 1999 in using air freight as a competitive advantage and strategic transport method. Air freight has now become an essential part of the business model and transportation mix for companies such as Inditex, GAP and H&M, allowing them to provide multiple seasons, unique fashions and quick delivery when the market demands it.
Brand awareness ? desires fueled by social media: Fashion consumers have, of course, always been interested in status, but today brand awareness is heightened by the immediacy of the internet and; new trends and desirable products are communicated quickly over social media, and consumers define their identity through specific brands. And while companies in the past usually promoted their own brand, large e-commerce players such as Zalando and Amazon offer multiple brands on their online platforms.
Fashion hierarchy ? competing on cost, uniqueness or status: The fashion industry has become more segmented due to the increased number of brands and luxury items. Today, brands such as Primark and Dollar Tree compete on cost, fast fashion companies compete on clothing uniqueness and luxury companies compete on status.
Sustainability ? because it matters: Concern for sustainable supply chains, from sourcing to disposal, was not an important topic in 1999. However, fast fashion and luxury fashion brands now pay attention to sustainability because it increasingly matters for their customers.
Those were my top 10. Do you agree? Did I miss anything? Let me know in the comments!

In part two and three of this series, I will be looking into what the generational shift in the consumer base means for fashion logistics and what it will take to succeed in the future. Stay tuned!

Marken Acquires Japanese Logistics Company

Marken announced the acquisition of PCX International Co. Ltd based in Japan. PCX operates from their Tokyo headquarters to coordinate the delivery of over 3,000 clinical trial shipments per month. This acquisition strengthens Marken's existing supply chain footprint in Japan which will add capacity for domestic and international clinical shipments.

PCX was founded in 2008 as a specialist courier serving the Japanese clinical trials industry. It has since established a reputation for high quality service with strong local provider and airline relationships. PCX manages over 200 highly trained drivers covering the nation and currently provides collection and delivery services for Marken's existing company in Japan. The combination of PCX and Marken Japan KK will allow further operational flexibility, cost savings and process optimization.

Wes Wheeler, Marken's Chief Executive Officer, commented, "The acquisition of PCX provides Marken with direct control of 200 specialist drivers and other partners in Japan. The addition of this new network satisfies our need for a greater physical presence locally in Japan and provides a platform for more expansive services to the local clinical client base. We look forward to welcoming the PCX team to the Marken family and meeting with our clients to discuss their clinical supply chain needs."

About Marken

Marken is a wholly owned subsidiary of UPS. Marken is the only patient-centric supply chain organization 100% dedicated to the pharmaceutical and life sciences industries. Marken maintains the leading position for Direct to Patient and Home Health care services, biological sample shipments and offers a state-of-the-art GMP-compliant depot network and logistic hubs in 51 locations worldwide for clinical trial material storage and distribution. Marken's more than 1000 staff members manage 70,000 drug and biological shipments every month at all temperature ranges in more than 150 countries. Additional services such as biological kit production, ancillary material sourcing, storage and distribution, shipment lane verification and qualifications, as well as GDP, regulatory and compliance consultancy add to Marken's unique position in the pharma and logistics industry.

Five reasons why Anchorage is coming in from the cold as an e-commerce hub

Amazon’s recently-launched daily cargo flights to Anchorage have put the spotlight on this Alaskan air hub. No stranger to Alaskan skies, international freight forwarding and logistics company Panalpina often uses Anchorage for technical stops of its scheduled charter flights. This blog post uncovers Anchorage’s hidden advantages as an air freight and e-commerce hub.

End of June, Amazon Air, the domestic in-house carrier of e-commerce giant Amazon, launched daily cargo flights to and from Anchorage, Alaska. Business Insider commented that given this latest development, Amazon Air is quietly expanding towards Asia’s doorstep.

Panalpina, and its Charter Network in particular, is very familiar with Anchorage airport, often using it for technical stops for its many scheduled charter flights between Asia and North America. Ted Stevens Anchorage International Airport is already one of the world’s most important air freight hubs. A further boost could come from a unique mix of geographical and regulatory factors, investments and growing trade that is spurred by e-commerce and perishables.

Here are five reasons why the idea of Anchorage as a major e-commerce hub is not that far-fetched.

1. At the end of world, yet in the very middle

Situated at the top of the world and near equidistance between Europe, Asia, and North America, the Ted Stevens Anchorage International Airport is less than ten hours by air to 95 percent of major global markets.It is one of the busiest cargo hubs at a volume of roughly 2.8 million tons of freight per year. Anchorage currently ranks as the fifth largest cargo airport in the world (behind Hong Kong, Memphis, Shanghai and Incheon, Korea) and the second largest in the USA (behind Memphis). It handles more than 500 landings of wide-body cargo freighters each week. The Anchorage Economic Development Corporation estimates that the airport creates 10 percent of jobs in the city

2. The technical stop

Anchorage serves as the main link between cities in Asia and North America. About 80 percent of all cargo flights operating across the Pacific, including Panalpina’s transpacific scheduled charter flights, make a “technical stop” at Anchorage to refuel, change crews and, in some cases, to transfer cargo.

3. Maximizing payload-to-fuel ratio

These technical stops can bring considerable benefits. By making a fuel stop in Anchorage, airplanes are able to carry significantly more revenue-generating cargo and less fuel than they would have needed for a non-stop flight. Cargo carriers can thus maximize their payload-to-fuel ratio and operate more efficiently and profitably.

4. Cargo transfers

Anchorage enjoys great flexibility under liberalized cargo transfer rights granted by the U.S. Department of Transportation. It is privileged as one of the few airports in the world where foreign cargo can be transferred from one aircraft to another without being subject to customs and other trade regulations. This would be illegal at most airports, called “cabotage”. At Ted Stevens Anchorage International Airport however, cargo carriers can use the time on the ground spent refueling to also transfer cargo between their planes and those of other carriers.

These transfer rights include transfers from wide-body freighter aircraft to one or more smaller aircraft flying to potentially multiple destinations from Anchorage. This is particularly interesting, considering that most of the cargo headed to the Lower 48 (the contiguous continental states area of the USA, excluding Alaska and Hawaii) via Anchorage is destined for other major cargo hubs such as Chicago, New York City or Los Angeles.

Not many companies have jumped at this opportunity though, mostly because they are unaware or skeptical that they are actually allowed to carry out such cargo transfers. Anchorage airport authorities are now planning to construct a Quick Cargo Center warehouse facility that would further facilitate transfers. It would allow companies to temporarily store cargo in a secure, temperature-controlled environment in close proximity to aircraft parking positions before moving goods onto connecting flights without having to clear customs.

5. Infrastructure investments to match booming trade, especially in e-commerce

The airport is investing USD 85 million this year to support expansion. Scheduled construction projects include the North-South runway and a new airline gate.

Trade growth is an important driver. Alongside the traditional mainstay cargo going from Asian manufacturing centers to North America, e-commerce shipments and produce going from Latin America to Asia have increased. Furthermore, trade officials are keen to boost Anchorage’s ability to process Alaskan goods in order to meet the growing appetite for live king crab and salmon in the emerging markets.

It certainly looks like Advantage Anchorage for now ? as air hubs around the world race for prime business in the e-commerce game and beyond.