A year after Maersk announced that it will be ending its alliance with MSC in 2025, earlier this year Maersk announced that it will go into a new alliance called Gemini with Hapag-Lloyd.
This year, I attended the TPM conference, where I listened to details during the presentations where the new alliance is aiming for 90% schedule reliability. This is compared to the industry average of less than 60%. The push for 90% is quite ambitious.
The model that Gemini will be using is called the “hub and spoke” model which is used widely in different industries.
The “hub and spoke” model uses a central location as a hub with a number of spokes leading out from that hub, as can be seen in the below chart. It is a proven method, especially used by airlines, as they have main hubs that they use to connect to different areas where it increases efficiency.
The main criticism for the model is that by using main hubs for distribution, it increases the chance of a bottleneck if something extraordinary happens in that hub. In the end, a chain is as strong as its weakest link. We are living in an interdependent world where it’s impossible to control any part of a system since systems rely on outside entities and vulnerabilities.
We saw that clearly last week where a system failure of CrowdStrike affected over 8 million machines that use Windows software and some companies like Delta are still recovering even though more than two weeks have passed since the incident. The problem with Delta was that they could not use their system to move the crew to the desired locations so flights kept cancelling and they had to do everything manually for a while. This happened again back in 2016 where Delta had a computer outage that cancelled thousands of flights ended up costing the airline over $150 million without counting the damage done to the brand.
What are the specifics of the Gemini alliance and how will it work?
Gemini will cover seven trade lanes and the whole network will only have 12 key hubs where 10 of them are owned by the alliance. This is a good thing since once you own the terminal, you have more control over its operations and decrease your risks. However, it does not mean 100% control over everything.
One example that happened this summer is in Singapore which is a major transhipment hub and one of the main hubs that Gemini will use next year. Due to the rerouting of the vessels due to Houthi attacks on ships in the Suez Canal, the global shipping network is disrupted significantly with bottlenecks happening in Asia and Europe.
Since vessels arrive less per predetermined schedules and arrive at the same time, a large volume of containers arrive at the same time causing the port to lose efficiency in handling. Singapore’s volume went up by 22% in the first six months of the year and I believe when the third quarter numbers are announced we will see more increase in the numbers.
I believe Gemini is quite lucky that they averted this by not starting the service this year but as the Covid pandemic thought us, our systems are vulnerable be the source is a simple computer glitch or a worldwide epidemic and when the next crisis hits this kind of model will probably be the one that might be affected the most.
