On the shoulders of a giant
Maersk, a global shipping industry giant, is levelling barriers to international trade for small businesses with a new service called Twill. Piloting in Sri Lanka, the service saw volumes triple during the COVID-19 lockdown
Global shipping and logistics giant A.P. Moller-Maersk (popularly called Maersk) is a $40 billion revenue company which is half of Sri Lanka’s GDP of $84 billion in 2019.
It carries up to 20% of the world’s merchandise trade annually on a fleet of about 600 vessels which includes some of the world’s largest ships.
Over the years, Maersk has consolidated businesses in port operations, air and land transportation, customs clearance, and warehousing to mitigate the impacts from overcapacity and the commoditisation of freight rates. Taking a step further, Maersk is using digital technology to transform into an end-to-end logistics service provider.
A new online service targeting Small and Medium Enterprises (SMEs), Maersk Twill, has had impressive results in Sri Lanka since launching in January 2020, despite the COVID-19 pandemic.
Maersk’s Siddharth Iyer, Country Manager for Sri Lanka & Maldives; Randima Krishnaratne, Country Sales Manager Sri Lanka; and Nanthani Yogeswaran, SME Account Manager discuss how Maersk is disrupting shipping and levelling barriers to international trade for SMEs.
Research suggests that global trade could decline by 20% in the third quarter of this year due to COVID-19, a much steeper fall than the 2008 financial crisis. How has the pandemic impacted Maersk?
Siddharth: The COVID-19 pandemic is unprecedented, but Maersk has stayed resilient through the pandemic. Group revenue declined 6% in the first six months of the year due to trade contractions, but profitability improved by 25%.
This is largely due to ongoing efforts to reimagine the company. A.P. Moller – Maersk was primarily an ocean carrier company and was popularly known as Maersk Line.
Over the last few years, the company has consolidated its ocean carrier business which includes Maersk and Safmarine to mitigate the impacts from overcapacity and the commoditisation of freight rates as a result of the global financial crisis.
Maersk consolidated other businesses in port operations, customs clearance, warehousing, and ground and air transportation, bundled into logistical services. Our goal is to increase our logistics business rapidly in the coming years.
We are transforming from a shipping line to an integrated logistics company, of which Maersk Twill is an important aspect.
We have an online booking platform called Maersk Spot which generates almost 40% of our global freight business. With Maersk Twill, we are reaching out to a vibrant and fast-growing SME sector, and helping them take their business globally.
We are eliminating barriers to trading across borders and even partnered with NDB Bank to help SMEs grow. Sri Lanka’s trade is not significant compared to global volumes, and the small market size limits growth.
However, we are confident of doubling SME export volumes annually with Maersk Twill over the next three years.
Our idea is to give Sri Lanka’s SMEs access to new markets. Today, we cover over 340 ports and have deep relationships with industries across 130 countries.
We can leverage this wide-spread network to provide SMEs matchmaking services and conduct seminars to help them understand and discover new global opportunities.
How can Maersk Twill help SMEs become exporters?
Randima: Sri Lanka has a relatively small market of 22 million people and the businesses have realised that exports are the only viable option for exponential growth in future. However, SMEs have not been able to make inroads into export markets.
While SMEs contribute 52% to Sri Lanka’s GDP, they account for just 20% of the country’s annual export earnings. We researched this and found that while most SMEs don’t have the knowledge to access global markets, they are also intimidated by the complex procedures, documentation, regulations and high costs of trading across borders.
We launched the online freight forwarding platform Maersk Twill targeting SMEs to make exporting as easy and seamless as booking an airline ticket or making a restaurant reservation online. Maersk Twill is an end-to-end logistics supply chain service.
Meaning, once a customer makes a booking on Maersk Twill, we will pick up the goods from the customer’s warehouse, our trucks will deliver the consignment a warehouse for consolidation and then on to the port and loaded on one of our carriers. We will take care of all the paperwork and customers can track every step of the journey until the consignment reaches the buyer’s warehouse.
We also have affordable airfreight options for smaller consignments. In short, we hand hold the SMEs through the complex process of shipping and ensure that their cargo gets exposure of the global market. We have also standardised freight rates.
Usually, freight rates can wildly fluctuate by the minute, but we allow customers to book forward at standard rates which leads to significant savings. We also provide insurance coverage much reliable than conventional policies.
How is the adoption of Maersk Twill in Sri Lanka, especially during the lockdown period?
Nanthani: Maersk piloted Maersk Twill in South Asia at the beginning of the year and Sri Lanka exceeded all expectations.
At first, customers were a bit hesitant because they found freight forwarding and the documentation process complex, and they were not used to doing things digitally. But they quickly took to it once we showed them how easy it was to sign up and navigate on Maersk Twill.
Earlier, businesses rarely bargained for preferential rates because they didn’t understand freight forwarding, but with Maersk Twill they get better rates, better services, and a better experience.
The COVID-19 lockdown in April saw volumes on Maersk Twill triple in Sri Lanka.
The SME customer acceptance of Maersk Twill was phenomenal compared to the rest of the South Asian region.
In regular business, Sri Lanka accounts for 10% of Maersk’s South Asia ocean volumes, but the contribution to Maersk Twill business volumes is around 40% which makes it one of the key focus markets.