STRUGGLES AT MIKE'S INDIA SEAFOOD COMPANY

Mike's was the largest importer of frozen fish into the United States from India. Partnering with Fran Seafood Corporation (Fran) in India, it shipped 5,300 forty-foot-equivalent refrigerated containers per year, with Maersk handling

50 percent of that volume.

Snapshot: July 2020Mike's Fragmented Supply Chain in Both India and the United States .

In India, Mike's partnered with Fran, which had fish farming locations all across the coastal (southern) part of the country. Fran would work with different drayage

companies to bring empty containers from ocean ports to load the frozen

seafood at its facilities and then truck the product back to the ports. All overflow

volume was sent and stored at contracted third-party cold-storage facilities throughout India. An export customs broker would first perform the customs clearance. Ocean carriers would then bring the reefer containers to Mike's from various Indian ports to different US ports (on the west, east, and gulf coasts). This multi-point, multi-party

logistics chain generated inefficiencies and incurred extra costs in India for Mike's.

After the containers arrived in the United States, Mike's would use a customs

broker to complete the customs clearance. Using services from contracted drayage companies, it would then transport seafood containers from the various ports

to its designated cold-storage facilities in cities such as Los Angeles, Oakland, Seattle, Houston, Chicago, Newark, Norfolk, Savannah, Jacksonville, Miami, and New Orleans.

Mike's had a nationwide contract with the largest US cold-storage provider, Ancestry

Cold Storage, although it also worked with smaller cold-storage companies across the country. Mike's had built contracts with different reefer trucking companies and various domestic trucking providers that used sixteen-metre (fifty-three-foot) trucks to logistically

handle the frozen seafood. But again, this multi-vendor, multi-point strategy made

the business operation challenging, inefficient, and difficult to run. Mike's would

Frequently encounter legal issues. For example, it was difficult to determine and assign fault when a container arrived in the United States with deteriorated product quality due to a break in the cold chain at some point along the journey.

Mike's was unable to file a claim for the recovery of lost product

value because of the many different potential sources. Was the trucking company in India to blame? Was it the cold-storage company in India? Had one of the ocean carrier's containers failed on the ocean leg? Had the drayage provider in the United States failed

to refuel the reefer container? Was the cold-storage distribution company in the United States at fault? If two sources decided to blame each other, who would

mediate the case to reveal the truth?

Various parties and different contracts meant dealing with multiple incoterms

for Mike's seafood import business. For example, according to freight-on-board incoterms between Mike's and Fran, for some product, Mike's would be responsible from the port of origin in India through to customs clearance in the

United States, cold storage, and distribution to Mike's customers, as well as

for delivered duties paid between Mike's and its US

customers. In other cases, Mike's US customers would buy product

From Mike's after the product was delivered at the US port, the customer had to manage customs clearance, pick up the container from the port, arrange storage, and oversee distribution. In those cases, Mike's would act as a trader, buying the product from Fran at the port of origin in India, freight on board, and selling it to the US customer as cost insurance and freight in the US destination port. In summary, Mike's

needed help to smoothen its supply chain. Mike's was struggling with

various other issues, including availability of empty containers

and finding space on ocean-going vessels with asset (or container) visibility

during the voyage. According to an October 2021 report, empty

containers were piled up in Australian and New Zealand ports, whereas containers were

Scarce at the Kolkata port in India, forcing exporters to truck their goods up

To 1,000 miles west to Mumbai for better container availability. Some rice exporters in Thailand, Vietnam, and Cambodia were avoiding shipments to North America due to difficulty in securing containers. In 2021, the situation was dire for

most global exporters to the United States for a wide range of reasons. Port

congestion was an issue due to countries reopening after COVID-19

Lockdowns at different intervals. Another issue was an ocean liner vessel

crashing and blocking the Suez Canal for several days. Various other issues

included congestion on inland warehouses, slow-moving railways,

and reduced trucking capacity.

O'DONNELL'S PREDICAMENT

Snapshot: January 2021O'Donnell Returns to the United States

In January 2021, O'Donnell returned to the United States and was soon tasked with helping Mike's, a key Maersk client, resolve various logistics issues. He

was also expected to work with Maersk's sales

representatives to grow the company's market share for end-to-end

cold chain logistics. A new colleague named Alejandra Ospina was hired around that time to implement the new business. Ospina was responsible for setting up clear processes between Maersk and its vendors (e.g., trucking and cold-storage companies), confirming expected service levels, setting up credit for customers, establishing invoicing processes, and facilitating the integration of technology between Maersk and its customers. O'Donnell and Ospina would work together to grow Maersk's cold chain logistics into a mature product that would appeal to its clients.

However, the two colleagues soon faced various challenges managing Maersk's

infrastructure, workforce, and the pricing- structure. In terms of infrastructure, Maersk had access to only two cold-storage facilities in North Americaone in

Houston, the other in Los Angeles. The new cold chain logistics

relationship between Maersk and Mike's was solely dependent on using these two facilities. Regarding workforce, management of cold chain logistics was not

assigned to anyone on Maersk's procurement team. None of the team

Members had experience sourcing temperature-controlled warehousing (i.e., cold storage) and trucking services. This was a bottleneck in the goal of growing

Maersk's third-party vendor base, which limited the potential for business growth and market share. Operationally, Maersk had one customer service representative responsible for all cold chain logistics clients, but the company did not have a system in place to support third-party cold storage and distribution

of product. Operations relied mainly on email and telephone for

communication, and on Microsoft Excel to record the information. As O'Donnell and Ospina increased the company's client base, customer experience became an issue, so the two colleagues developed strong operational processes.

Maersk's pricing structure, which was a large part of the value proposition between Maersk and its clients, was based on an all-in rate per container. Maersk's

Clients found the all-in rate convenient because it provided clear visibility on cost of

Goods sold per order. However, complications arose because the vendor

provided costs in transactional line items (e.g., handling per pallet, trucking per container, storage per pallet weight, stamping by the US Department of Agriculture, labelling, and inspections per case). Maersk's clients would issue one all-in invoice for the container, but the pricing model was calculated based on many

assumptions that made it difficult for Maersk's accounts payable to match up with

its accounts receivable. For example, if a container arrived with higher-than-expected pallets, cases, or weight, Maersk's costs would exceed its sell rate.

Despite all of these challenges, O'Donnell was tasked with growing profits for

the cold chain logistics product by over 300 per cent.

O'DONNELL'S GROWTH STRATEGY

Snapshot: August 2021

Eight months into the year, O'Donnell was determined to expand Maersk's

market base. He focused his energies on building new business relationships. By

August 2021, he had found new drayage and cold- storage partners in four additional cities to cover the breadth of his market in the middle of the country

And across the southeastern seaboard of the United States, including Chicago, Jacksonville, Norfolk, and Savannah. Maersk had planned to invest in new cold storage in Miami, so O'Donnell worked with Mike's to move some of its business to that southern port city. Mike's had never shipped to Miami before, but in hopes of

Developing a partnership and supporting Maersk, Mike's convinced several of its customers to accept cargo in Miami so that it could be directed toward Maersk's eventual investment in that city. In some cases, based on the incoterms,

Mike's was required to deliver cargo from Maersk's third-party cold-storage facility

to the customer's designated cold-storage facility. Mike's would tap Maersk's network

to arrange these temperature-controlled domestic truck deliveries, using sixteen-metre (fifty-three-foot) trucks, at no extra cost. Knowing this, and to avoid the extra cost of transferring product from one cold- storage facility to another, Mike's customers began to follow Mike's example and became Maersk clients. This helped O'Donnell and his team increase the company's client base.

By this time, the Maersk customer service team dedicated to cold chain logistics had grown to six people. Things were looking favorable for O'Donnell. A

strong operational process was in place. The next step was to work on a software solution to support the team. The cold-storage market was heating up. Third-party

cold-storage providers were increasing in numbers, and cold-storage facilities had started restricting the volume they could accept from Maersk. Mike's customers who had followed him (Mike's) to the new cold-storage facilities had begun to create problems for Maersk. Those who had joined Maersk were included in the company's business planning; however, some clients had gone directly to the third-party

cold-storage facility. When Mike's sold products to a customer, ownership of the cargo would transfer to the customer's name, but the physical pallets of product

would not move. The third-party cold-storage provider considered this part of Maersk's pallet space allocation, even though Maersk had no

direct relationship with that particular customer. This process

limited the amount of additional space Maersk could sell to its other direct clients.

O'Donnell's understanding of the US cold chain logistics market matured throughout the year, which provided him a better view of market pricing and dynamics. Based on this

understanding, he determined the true value that Maersk was offering Mike's, which influenced Maersk's pricing. Along with new customer experience And growth,

Additional upselling opportunities arose between Mike's and Maersk. As

well, the prospect of creating a cold-storage program in India, where Mike's product originated, became more feasible. Additionally, Mike's wanted to understand how it could have more visibility in and control over its end-to- end supply chain, right

down to the purchase-order level. This want was consistent with Maersk's cold

chain management product offering. When a Maersk client expressed a

desired outcome, Maersk would make it its responsibility to help the client achieve that outcome. For example, shippers and consignees (or importers) might tell ocean lines and logistics companies what they wanted, but when problems arose, they

would have to refer to their customers for instruction.

However, Maersk's cold chain management system allowed a client to simply ask Maersk to deliver product to a cold-storage facility in Chicago, for example,

and Maersk would decide how to get the product there. Maersk would determine the mode and the cost within a previously agreed upon framework. If an

issue arose during the transport, Maersk would resolve it on behalf of the customer.

Snapshot: February 2022Negotiation

Maersk's relationship with Mike's continued to grow in 2022. Mike's awarded Maersk with a drayage and cold-storage business in Oakland, California. Unfortunately, however, Maersk's Miami cold storage investment did not go as planned, straining the relationship between the two partners, especially after Mike's had proactively

moved product to Miami to support Maersk's investment in that city. To help

and support Mike's demands, Maersk signed contracts for fixed pallet positions at different cold- storage facilities in the Florida region, as well as nationally. This led to increased competition against Ancestry Cold Storage, which began to compete aggressively on pricing in its efforts to slow Maersk's increasing market share.

The US cold-storage market was running increasingly over capacity, and demand for space was exceeding the available supply of space. In addition, labour issues across the United States logistics market led to massive cost increases from all of Maersk's vendors. In February 2020, Maersk and Mike's began working on a March 2022 contract renewal. The pricing structure for their previous contract had been transactional. Mike's would only pay for containers that had been sent to Maersk's cold-storage facilities. For the 2022 contract, O'Donnell needed to change that structure to include fixed space pricing. This would mean that Mike's would pay for a specific amount of

space in the cold-storage facilities regardless of whether or not it was used. This was the only way to secure space in third-party cold storages for Mike's shipments.

O'Donnell had to pass on cost increases as much as possible, while still maintaining a profit margin for his company. Toward this goal, Maersk was able to leverage to Mike's its ocean equipment and vessel space allocation commitment.

With continuing global supply chain issues and cold-storage capacity limitations in the United States, how could O'Donnell grow market share and business relationships for Maersk? How could he strategically

sustain his company's growth? What could he do to retain existing clients, attract new clients, and grow the company's customer base?