A global economic slowdown has affected many industries around the world. For the logistics industry, the ocean freight sector saw great dynamic shifts at the very foundation of its business in 2016. We witnessed the collapse of a major steamship line, as well as many mergers and alliances that were formed that gave rise to several ocean freight giants with increased combined capacity. These shipping lines concluded that merging was the best way to survive the slump and prepare for stronger competition in the near future. One of the first and most notable formations, was that of China’s COSCO and China Shipping.
LM was invited to speak with and introduce the latest Chinese ocean freight giant through its Thailand operation, COSCO Shipping Lines (Thailand). We spoke with them further about the story of the merger, the new culture, and the company’s readiness to rise and strive against the fast-approaching competition in the ocean freight industry.
A Merger for True Success
As mentioned, the previous year saw several major ocean container lines undergoing integration, merging, and even some acquisitions. The economic slump and the continuous threat of overcapacity are among the top contributors to this dynamic shift in the industry, and an unprecedented number of container lines have followed suit for survival and future competition. While many container lines chose the integration or an acquisition route, COSCO and China Shipping underwent a true merger that fused the two previous competitors into a single solid entity, who will from this point forward, grow together as one. The two state-owned Chinese container lines understood what was needed to succeed in an increasingly tough environment, and in December of 2015 an announcement was made regarding the reconstruction of both of the container lines’ businesses. By early January of 2016, the State Council had approved the decision to merge the two container lines into China COSCO Shipping Corporation Limited.
For Thailand, the new name for the company would be COSCO Shipping Lines (Thailand) (COSCO Shipping), and was firmly established and opened for business in a new Bangkok office in October of last year. COSCO Shipping has been reorganized in accordance to the global reorganization of its corporate mother, which means the two lines are combined in workforce and capacities. In terms of capacities, China COSCO Shipping Corp. (the Corporation) has become the world’s fourth largest container line after the merger, and is aiming to grow even further.
The current capacities of the Corporation include a total of 1,114 vessels, 85.32 million DWT, 1.58 million TEUs and, a general and specialized cargo fleet with 3 million DWT capability. Together with an extensive global network and ownership of 46 container terminals around the world, the Corporation boasts the strength to help drive global trade and economies forward in the years to come. Thailand COSCO Shipping’s workforce, in fashion of a true merger, has combined their corporate talents together and given their employees the freedom to decide what they wanted to do in the face of this reorganization, and many have chosen to remain with the new entity. Amidst the reorganization and combining of workforce, COSCO Shipping has emerged reinvented and reinvigorated in terms of corporate culture, services, and new standards.
Being two formerly competing container lines, the merger wasn’t without its difficulties. Differences in business styles, corporate culture, and standards required them to work worth these differences to become one team. The determination to prevail and prepare for the future of the Corporation has opened and allowed for both principles to exist together and operate under a reinvented culture and business style on a global scale. Although Thailand’s new entity has taken COSCO for its name, the new work culture is a hybrid of both of its mother companies. Together, the merged mother companies created a new corporate DNA that strives for consistent service and strong customer care policies.
COSCO is known throughout the Chinese logistics industry for their corporate culture that is rather strict with its procedures. This strict, yet aggressive style of business is a strong point that helped the company strive amongst the competition. On the other end of the spectrum, China Shipping’s corporate culture was comparatively far more relaxed. Their business style was known to be more flexible and more open for negotiation with its business partners. The strengths of each company have come forward in the merger and these elements work together to help the company reinvent themselves as an active player in the ocean freight industry with an aggressive and proactive style of business dealings. At the same time though, they are flexible enough for open negotiation with agile procedures. One element COSCO is focusing on intensely, is the new customer service experiences. The company’s goal for its customer service is to provide a more personalized customer service experience to each and every client, regardless of the size of their business.
COSCO Shipping has also moved to a new office in October of 2016 to house its larger team. The state-of-the-art office is in the heart of Bangkok on the 25th floor of Chamchuri Square office complex. The new command center currently accommodates about 150 employees and has ample room for future expansion. This new office also plays a pivotal role in their growth plan, by offering young people, who are vital to the development of business, a fitting workplace in terms of both location and environment. In a single workspace, the reinvented container line is then able to nurture and utilize its new team for future growth.
While mergers of this size take both time and space for people to work together to be thoroughly infused, COSCO Shipping is already onto its next move to develop its services and network. As one of world’s major trade hubs, China is a trade destination for businesses everywhere. COSCO Shipping and its Corporation network are already planning the future of facilitating a global trade between mainland China and the world with their next landmark business move.
Emerging with Allied Strength
With the merger completed, COSCO Shipping is able to offer a global service from Thailand’s Laem Chabang Port to destinations all over the world with its now even more extensive service network. To further facilitate global and regional trading lanes, the container line boasts four regular loops to major ports all over China from Laem Chabang Port, as well as inland trucking and transshipment services into the industrial grounds. This gives COSCO Shipping’s clients an advantage in being able to reach out further into the country for trade and business. Not only does this vast network provide great route connections, it also gives COSCO Shipping better negotiating power with terminals and other players in the industry. Thai businesses who trade in mainland China can rest assured that with COSCO Shipping their shipment will be handled by one of the most foremost players in the industry with superior route knowledge and the most coverage in the game. They also offer inland trucking services in Thailand from Laem Chabang Port and Lat Krabang CDC as part of the company’s local integrated logistics service.
With even more capacity set to come online, container lines are deciding to form alliances to gain even more power in bargaining and operational costs savings. For the new China COSCO Shipping Corp., it will be joining the Ocean Alliance alongside CMA CGM, Evergreen, and OOCL under the name Ocean Alliance. The Ocean Alliance is launching in 2017 and will be comprised of 350 vessels with a total capacity of 3.5 million TEUs, and will dominate 35% of Asia-North America trade lanes and 39% of the Asia-Europe trade lanes. The alliance aims to offer 20 weekly sailings between Asia and North America and 11 between Asia to Europe, which is made possible by the large size of the alliance itself. The size of the network and the capacity of the Ocean Alliance will be a large factor in strengthening COSCO Shipping’s performance.
The instability and unpredictability of the ocean freight industry can be unsettling for some businesses, but the merged China COSCO Shipping Corp. has unveiled new policies that have been made under close consideration based on their studies of their clients’ demands when it comes to service. The Nine Service Standards are comprised of a promised measurable, traceable and sustainable improvement of the nine procedures. The nine procedures start with the booking process, equipment release, Bill of Lading release, invoicing, schedule reliability, transshipment, arrival notice, counter service, and issue resolution. Each procedure is improved in time and performance efficiency, and the nine standards are a global promise to all COSCO Shipping clients. The new global service standards, progressively balanced corporate culture, and allied strength and capacities will usher in a new era for China Shipping and COSCO’s new identity. COSCO Shipping is united and ready to serve its client and compete in the global ocean freight industry for years to come.