Maersk tries changing no-show/overbooking behavior

Maersk tries changing no-show/overbooking behavior       Maersk Line will begin implementing a global system to charge shippers whose cargo no-shows in the third quarter of the year.
      Under the plan, Maersk would conversely compensate shippers whose cargo has been held back due to overbooking by the carrier. The penalties are $100 per dry container and $500 per reefer container if the booking is not canceled seven days prior to sailing.
      In an interview with American Shipper Tuesday, John Nielsen, Maersk Line's senior director for charge management, network and product, said the program is not designed to be a revenue-earner for the line.
      “We're calling this loading protection, because we wanted to signal that this was not another fee we slammed on customers,' he said. 'The idea is to offer a two-way street, a quid pro quo with customers. We compensate them if we mess up their plans.'
      The issue, Nielsen said, is severe, with a global average of 20 percent no-shows, or downfalls as they're more often called in the industry. On some trades, downfall rates reach as high as 35 to 40 percent.
      He said that when Maersk presents data about the downfall rate levels to some shippers, particularly cargo owners in Europe and the United States, they're shocked at what is happening.
      'The intent is not to punish, it's to change behavior,' Nielsen said. 'It seems to be a standard practice in the industry for there to be downfalls. On the other side of the coin, if we ask for compensation for customers, it's only fair that we compensate customers if their cargo is held.'
      Maersk has run a number of trial runs of no-show fees in various trades in recent years. Some have been successful and others not. For instance, a $10 westbound transpacific no-show fee for cargo moving through the Pacific Northwest wasn't very successful, likely because the fee was too low to induce change.
      But a program instituted by Maersk's local office in the Ukraine has helped bring downfall rates from 40 percent to 4 percent in two years, Nielsen said. Maersk has been charging a pure $500 no-show fee for South American banana reefer shipments due to the scarcity of equipment and the loss of business Maersk suffered when shipments didn't show up.
      'Based on these results, we decided to go global,' Nielsen said.
      The program will be rolled out trade-by-trade from the third quarter, with Maersk concentrating initially on trades where downfall rates are high and demand is strong (to minimize the effect of customers leaving to use other carriers).
      'There's always that concern (that customers will leave),” Nielsen said. “That concern grows in a weak market and is reduced in a strong market. So we're initially looking at trades where the market is relatively strong and downfall rates are high. We don't want to turn customers away. Of course we don't. But we'd like to get to a place where the customer can see the benefit to their bottom line.'
      Nielsen said there's no pattern to suggest that downfall rates are higher in any geographical regions, or in any particular countries, nor are downfall rates higher on long-haul or short-haul trades.
      'There's normally some kind of reason for shippers who have high downfalls,' he said. 'We're looking at global booking data every day and looking for reasons for the downfalls. We go to a shipper with large downfalls, and discuss it with them and say this surely must be a problem internally for you as well.'
      The program is designed to be flexible, so that consistent customers of Maersk who make infrequent mistakes aren't punished for the odd slip-up.
      The seven-day window was established because that's the minimum the line needs to rebook the canceled slot, bearing in mind what's reasonable for shippers as well. Maersk arrived at the $100 fee per dry container via trial and error.
      'We wanted a fee that is not punitive but one that is noticeable,' Nielsen said. 'It's a fee you would like to avoid. Again, it's about trying to change behavior. Everybody agrees there is a massive problem. If this is a problem, let's do something about it. But we will step forward slowly and carefully.' ' Eric Johnson