As Damco's first anniversary approaches, we assess a year of sparkling growth for the freight forwarder.
The first year for any new company is almost inevitably one of tentative steps and hedging bets.
Not so for newcomer Damco, which has taken great strides in its first year to become one of the world's top 10 global freight forwarders.
“Driven by the strong demand for iron ore and coal, the global bulk cargo market has advanced at a steady pace, with the Baltic Dry Index (BDI) breaking records. This, supported by the decline in the oil tanker market, means the bulk cargo market will play a role in prosperity within the shipbuilding industry.”
But the merger of A.P. Moller-Maersk's forwarding arm, DSL Star Express, and P&O Nedlloyd's subsidiary Damco Sea & Air, was never going to be an ordinary affair.
At the beginning of the month, the firm announced that it had shipped 621,000 TEUs and airfreighted 62,000 tonnes in 2007, clocking up a turnover of US$2.9 billion.
"Our first anniversary is a really important milestone," comments Ricco Poulsen, UAE branch manager of the international freight forwarder. "We moved within one year to become a top-10 global forwarder in terms of volume.
Locally in the UAE we are still a medium-sized player in the forwarding industry. However, we can boast of being a top-five provider of sea-air services and we have one of four major LCL hubs in the Damco network."
Even though the company would be able to leverage the immense logistics experience of the A.P. Moller-Maersk Group and retain the name and customers of Damco, the merger was not without risks - not least in the rebranding of the company.
"We spent a lot of effort making sure that the impact on our existing customers was minimal," notes Klaus Tindborg, Damco regional director.
"Throughout the process of changing the name from DSL Star Express and integrating the Damco brand and people from the the P&O Nedlloyd organisation, we have luckily seen that our customers have stayed with us.
We have many loyal clients and our customer base is constantly growing," he adds. "I must say the market has been very receptive to the change of the name and brand."
On its website, Damco is said to offer customers a flexible, localised and personalised service, and Tindborg says that this is a culture change from the previous organisation.
"We are now a top-10 freight forwarder worldwide and are thus more than ever a global organisation, but our philosophy is to encourage local empowerment," he remarks.
We make sure that branch managers can make the decisions on the spot so they don't need to go through anybody in the regional or global set up to ask for the authority to do pricing or services. If they feel that this is the right thing to do then they can go ahead and do it.
"In the past it was very much globally and regionally controlled with less flexibility and more approval procedures and guidelines. Now we can look at different options," he adds.
The ability to be flexible may largely derive from the market juggernaut that is the parent company, A.P. Moller-Maersk. Last year, the group made net revenue of over $51 billion.
It means that their freight forwarding subsidiary is able to employ 3900 staff in over 200 Damco offices in more than 100 countries.
Owing to the size of the new company, bosses found that it was simply impractical to carry over the ‘one-
size-fits-all' approach that dominated the DSL Star Express model.
"It was a deliberate decision from our global strategy to say this is what differentiates a good forwarder from an average operator," reveals Tindborg.
"Freight forwarding is very much a matter of having the right service at the right price and at the right time.
"Personal relationships are very important and that's what we are concerned with here - that local branch managers and their teams are able to connect with customers," he adds.
"Moreover there is indeed a need for flexibility in the region owing to difficulties with the infrastructure," agrees Poulsen.
"The region is growing at a staggering rate. The infrastructure cannot keep up with the pace and we have to be on top of what's happening all the time in order to cope with the many changes in subsequent regulation and development. Knowing the impact of the many changes and developments can become your competitive edge in fast-growing locations like the UAE in particular and the Middle East in general."
Aside from the financial strength of the parent organisation, it is also through maintaining the name of the old Damco that the firm has been able to build on special relationships and offer flexible pricing.
"The market was used to dealing with the P&O Nedlloyd Logistics-owned Damco," remarks Tindborg. "This was especially the case for ocean carriers, which would be willing to provide rates where required. We are building on those relationships now."
But it is not just in pricing terms that Damco is able to be flexible. The organisation declares itself as an independent freight forwarder and, in order to underline this, prefers to use a range of subcontractors rather than the carriers owned by sister company Maersk Line.
This marks a change from the previous operations of DSL Star Express and highlights the increasing confidence of the rapidly expanding Damco to strike out on its own.
"We have definitely shifted supplier relationships," says Poulsen. "It is mostly on the carrier side. If you look at the carrier relationships in the Middle East and the UAE in particular we have already shifted from being very A.P. Moller-Maersk-heavy to moving with other carriers.
"And that policy will continue in the future. In the UAE we expect to increase our volumes by 35-40% next year and will grow our cooperation with a number of our global focus carriers at the same time. If we want to offer a personalised service we need to give our customers options. This is something we have already achieved and will expand on going forward."
However, a reliance on subcontractors is not without problems, especially in markets such as the UAE which are "fragmented" between smaller operators, says Tindborg.
"For the majority of our business worldwide we use subcontractors, although we do also have our own trucks and warehouses in certain places where it makes sense," he says.
Although we have no immediate plans to invest in our own lorries or warehouses here in the Middle East, we are constantly evaluating the possibilities of investing in markets such as the one here."
Damco is a basic freight forwarder in the truest sense and concerns itself with the typical freight forwarding products of sea, air and landside services.
It sets itself apart on this point from its sister company, Maersk Logistics, which is more obviously involved in end-to-end supply chain management and contract logistics.
There is little cross-over between the two organisations, although in most geographical divisions the two entities share offices, top management and provide services to the same customers where and when they are required to do so.
The firm aims to build on its meteoric growth last year and is constantly taking on more staff to manage the increased business.
"We have increased our head-count a bit this year because of the growth in volumes and additional requirements from our customers," says Tindborg. "And we are still growing. Of course we are facing some of the same issues as many of our competitors - that is, getting qualified logistics staff in this part of the world is tough. There's a high demand for human resources.
"So far, we have more or less found the people we need but we are constantly in the market for more staff," he adds. "We have fairly aggressive growth plans and will need more employees as we grow. We prefer to take people in a little bit earlier these days so that when we have the business, we also have the manpower to be able to handle it."
And there is certainly more business in the pipeline. Damco has no intention of slowing down, although it says it will not dash ahead with acquisitions and takeovers. Instead, it hopes to ride the high wave of the logistics market in the Middle East.
"I think there's a lot of room for growth in this region without changing our focus or scope," indicates Tindborg. "We're going to be seeing organic growth in the Middle East, at least in the short term. But then again, we are talking about witnessing quite significant growth rates over the next three to five years."