11 March 2024 (Lloyd's List) - ONE of the common topics of conversation at S&P Global’s TPM conference in Long Beach last week was whether the Gemini Co-operation’s new network design would take off with customers.

On the face of it, there is nothing particularly new about the hub-and-spoke model that Maersk and Hapag-Lloyd have used for their new partnership. Airlines have been using it for decades.

But the transhipment of passengers and even air cargo is a simpler matter than the transhipment of containers, and it is the transhipment that is frightening customers.

Every step in a logistics supply chain provides another possibility for disruption and delay. If a cargo has to be feedered from a satellite port to a hub before being put on a main lane ship for the rest of the voyage, and then potentially feedered again from a destination hub to its final point of delivery, that adds several more pinch points where things could go wrong.

Bad weather or congestion at either of the hubs could cause delays preventing cargo getting on the designated mothership and lose any of the supposed benefits of better reliability.

Maersk and Hapag-Lloyd say that by reducing calls at origin and destination, they can improve schedule reliability from the dismal lows of the past few years to over 90% of ships arriving on time.

But by forcing customers into transhipment, rather than direct port-to-port shipments, the risk of things going wrong moves to the shipper rather than the carrier.

If, and it is a big if, the Gemini partners can pull it off, the model could well be a success and could even encourage other alliances to look at similar implementations.

“The other unique feature is that the network is centred around 14 hubs which are majority owned by one of the partners,” said Hapag-Lloyd vice-president Thomas Mathiesen.

“That means we have operational control of the hub. This is where normally we have the challenge.

“We will have full control of the mainline service, the hubs and as an added element we will have shuttle services. Again, these are fully owned by the Gemini partners.”

Veteran industry analyst and Vespucci Maritime chief executive Lars Jensen says the key will be in the execution, which he thinks Gemini will be able to achieve to a reasonable degree.

“Looking at network efficiency from a cost perspective, the best way to design a global network is one with a few hubs and a lot of feedering,” he said.

“That is exactly what Gemini is doing. From a network efficiency point of perspective it will reduce the cost and the friction.”

But he admits there are still some doubts.

“This works brilliantly if operationally they can execute all the transhipments from shuttles,” Jensen said.

“That has to work. My subjective feeling is that they can do it. I know a lot of people are concerned that transhipment and reliability is an awful mix.”

But he points to the fact that all schedule reliability has been appalling since the onset of the pandemic.

“The ability to get transhipment to work has been abysmal for that reason,” he said.

But this was not the norm.

“Maersk and Hapag-Lloyd want to reach 90% reliability but that is not that ambitious,” Jensen said.

“In 2019, on Asia-northern Europe Maersk’s 2M alliance was offering 85%-95% reliability. On Asia-Mediterranean they have five consecutive months above 98%.”

Given that those figures were achieved doing simple point-to-point shipping, it raises the question of whether or not the new model is necessary from a customer’s point of view, or whether it is just making the network more efficient for the carriers.

The one question that is left open is whether customers will pay the same freight rate for a transhipped cargo as for a direct voyage.

“I’m not quite 100% on board with it to be honest,” said Samantha Hasbrouck, logistics director at Hapag-Lloyd customer Haverty Furniture.

“But that’s where your relationship with your partners, and trust, comes in. One of the things going through the pandemic was finding who we had good partnerships with.”

Yao Zhang, operations vice-president at Singapore-based Castlery, which is a customer of Maersk’s integrated products for its direct-to-customer furniture business, said 90% reliability was an ambitious goal.

“But based on our history with Maersk and their focus on operational excellence, I’m a firm believer that if they commit to that then most likely they will be able to achieve that,” he said.

“Specifically on the hub-and-spoke model, we are lucky that our Malaysian facility is in one of these hubs, so I have no concerns about it.”