The Knowledge Hub of IMD
Share
FacebookFacebook icon TwitterTwitter icon LinkedInLinkedIn icon Email
Shipping is the lifeblood of the global economy and an essential part of all major supply chains, with around 90% of goods transported by sea

Leadership

MSC is investing in shipping and logistics networks to help ease supply chain crunch, says CEO

Published 13 October 2021 in Leadership • 6 min read

Soren ToftCEO of the world’s second-largest container carrier, says the resurgence of global trade amid the pandemic has highlighted the need to reinforce cargo transport systems and infrastructure. 

Even after a quarter of a century in the industry, Soren Toft (EMBA 2009) could not have predicted what a turbulent first year he would face when he agreed to take the helm of the privately held Swiss shipping company MSC. 

Pandemic-induced border restrictions, lack of access to vaccines for seafarers and shortages in labour and equipment are among the factors creating logjams outside ports and delays to deliveries. The strain on global supply chains is particularly acute due to the huge swings and surges in demand from companies seeking to move goods around the world. Imports to the United States were up 33% in the first half of 2021 compared with 2020, according to a report by Jungle Scout. 

While the COVID-19 crisis has played a major role in the disruption, Toft said it has also laid bare some systemic issues plaguing the industry, such as high freight capacity utilization rates of around 90-95% that meant there was little slack available to cope with the huge jump in demand. 

“When you throw a pebble in the pond, the pebble may not be that big, but you see a ripple throughout the network,” said Toft, a Dane, who joined MSC last December., The Geneva-based company, which was founded in 1970 by Gianluigi Aponte, handles about 23 million TEUs (twenty-foot container equivalent units) annually and is present in over 150 countries 

“We have done everything in our power: as many ships as possible have been deployed all over the world and we are investing billions of dollars in the network to ensure we provide vessel capacity, containers and landside services to keep the merry-go-round of world trade turning.” 

Toft says he expects demand might cool next year, especially if the US Federal Reserve starts raising interest rates. But he hopes that one lasting impact of the pandemic is that customers will understand that in order to move goods affordably and reliably to the point of sale they may need to pay a little more for service than they have done historically. 

“If we would get a slightly higher price than in the past, we could also offer a better and more stable service. I would hope that the big learning is that squeezing the last $100 out of the transport price is not leading to stable and sustainable solutions,” he said, while recognizing that today’s rates [as of October 2021] are very elevated on the back of the systemic supply chain crunch 

While he concedes that higher shipping prices might mean that some companies and consumers might wish to source certain commodities and goods more locally, he notes that shipping volumes have not fallen despite freight rates hitting multi-year highs during the pandemic. 

Soren Toft, CEO of MSC

Suez Canal blockage left MSC “unfazed” 

Given the bottlenecks shipping companies have to battle daily, Toft said he was relatively unfazed when the Ever Given megaship got jammed and halted traffic in the Suez Canal for almost a week in March 2021. 

“Compared with the daily challenges that we see in quite a lot of the ports around the world, with waiting times of four, five, six, seven days, every day every week, the Suez Canal incident served to signal to the rest of the world what can impact supply chains and the essential role of container shipping in keeping global trade moving,” he said. 

“Every day we have an operational matter to manage somewhere. The Suez Canal blockage gets a lot of attention, but we always have issues to solve and recently port delays are excessive.” 

Another challenge facing the shipping industry, which accounts for up to 3% of global CO2 emissions, is how to reduce its impact on climate change. 

Although Toft said he prefers action over targets, MSC is among other shipping companies in committing to reach net zero CO2 emissions by 2050. To achieve this goal, he said there needs to be a global market-based measure and a price on carbon that reduces the gap between zero-carbon fuels and regular fossil fuels. MSC also wants to work with strategic partners such as energy providers and recently entered a partnership with Shell to develop zero-emission marine fuels at scale. 

Nonetheless, Toft cautions that it may take until the end of the decade before zero-carbon marine fuels are available for container carriers to use at scale. 

Every day we have an operational matter to manage somewhere. The Suez Canal blockage gets a lot of attention, but we always have issues to solve and recently port delays are excessive. 
- Soren Toft

Take charge of your own career 

Despite the challenges, surging freight prices have delivered record profits for shipping companies this year and Toft has begun the CEO role at MSC at a time when the industry has a chance to make up for some of the leaner years of the past decades. MSC survived the 2008-09 shipping market crisis without any programme of layoffs or transformational M&A while the rest of the industry entered into a period of M&A consolidation to survive. Remaining a family-owned, independently managed private company is a part of the DNA of the company he has joined 

When asked about his recent career move, he concluded that it was the right time to make a change if he were to experience more than one company and gain new perspectives and insights. 

“I wanted to make sure that I was in charge of my own career and life and there wouldn’t be a point in time where other people would be deciding,” he said, adding that the MSC role had been a “unique opportunity” to take on a CEO position at a top company in the sector. 

“It excited me to join a company that was growing a lot and was interested in getting me on board and expressed a need to get a CEO to run and develop the company for the next many years.” 

Toft spent a good year speaking with the Aponte family owners to understand their vision and values and test out the chemistry before deciding to make the jump.  “I also knew it would not be an abrupt change of the guard because the family is still very engaged. I got a sense that we would be a great match working together.” 

Among the advantages of working for a privately-run firm are having a long-term perspective to make strategic investments, as well as working for an owner who is passionate about the business, he said. 

Toft, who completed an EMBA at IMD in 2009, said the program taught him to dig into his drive, reflect on his strengths and weaknesses and define his leadership identity – a task he still works on daily. 

In his first few months at MSC, he spent time listening and trying to gauge how the company works rather than coming in and “being an elephant in a glass house.” 

“Now it’s about applying my own experiences but trying to get the best of both worlds. MSC has a great culture, and you have to safeguard that. You really have to work with the culture and gradually adjust and improve where needed,” he said. 

About

Soren Toft

CEO, MSC

Soren Toft is CEO of MSC Mediterranean Shipping Company where he oversees the company’s global cargo businesses, including all ocean liner and logistics businesses. Before joining MSC, he was Chief Operating Officer and a Member of the Executive Board at Maersk and held various leadership positions in Europe and Asia. He holds an executive MBA from IMD (International Institute for Management Development).

Related

Learn Brain Circuits

Join us for daily exercises focusing on issues from team building to developing an actionable sustainability plan to personal development. Go on. They only take five minutes.
 
Read more 

Explore Leadership

What makes a great leader? Do you need charisma? How do you inspire your team? Our experts offer actionable insights through first-person narratives, behind-the-scenes interviews and The Help Desk.
 
Read more

Join Membership

Log in here to join the conversation with the I by IMD community. Your subscription grants you access to the quarterly magazine plus daily articles, videos, podcasts and learning exercises.
 
Sign up

Welcome to I by IMD

Install
×

You have 4 of 5 articles left to read.