Journal of Commerce ‘Newsmakers’: Kuehne + Nagel’s Michael Aldwell

“Newsmakers” is a periodic Q&A with a key industry player conducted by Journal of Commerce contributor Lori Ann LaRocco.

Michael Aldwell entered the shipping industry 16 years ago in his native New Zealand as a project manager for Kuehne + Nagel’s (K+N’s) local contract logistics business. He now heads ocean logistics for K+N, the world’s largest forwarder.

LaRocco: The logistics world has faced a lot of headwinds recently. We are now looking at the threat of (10%) tariffs being implemented on China. What is the reaction from the logistics side?

Aldwell: So, from the companies that have a high density of manufacturing in China, they are looking for a diversified supply chain strategy. We’re seeing a continuation of the trend that we saw for the last seven, eight years since Trump was first in office, and that is, “Can you help us and support us with this continuation of offshoring?” I think realistically, that’s something that’s going to continue to be omnipresent for the coming four or five years.

LaRocco: What implications do sourcing shifts out of China have on how you serve customers?

Aldwell: Supply chain diversification feeds into the needs of a logistics enterprise because as the supply chain gets more complex and more diversified for an import or an exporter, it’s harder to replicate the network of a global logistics provider by yourself. We see expansion happening in Vietnam and Malaysia. I just came back from Indonesia, and we see substantial growth there. That economy is amazing. You have 280 million people in Indonesia. I think it’s one of the most unappreciated economies in the world.

We are also seeing footwear manufacturing moving to Central America. So, we see the need to be able to service complex international supply chain programs in Central America at a greater density than we have had in the past. I think that trend is beginning to accelerate little by little. We still see trade growth coming positively out of China. The early weeks of pre-Lunar New Year and late fourth-quarter trends were relatively poignant in terms of the build out.

LaRocco: How long does it take for you to pivot to capture that emerging growth?

Aldwell: It depends on the scale. It also depends on what modality you want to take to do that. We have a network existing today in more than 100 countries, so what we’re now seeing is increasing density in existing manufacturing zones more likely to be targeted areas from a tariff perspective. So, you can scale quite quickly. It can take weeks and months instead of years because in most of these places, we have an established footprint.

What’s different is port capacity, terminal capacity, getting equipment into the right places when things are moving around. That takes time, but actually getting ships in the right place is not so hard because you can push steel through water in most places. Getting the logistics enterprises scaled up and running is a challenge, but it’s not something that we’re not used to.

LaRocco: What about India?

Aldwell: What we see at the moment is really strong growth in the Indian marketplace. I think there are two things going on India. One is the growth of India as an outsource manufacturing hub where you see, as one of the beneficiaries of outsourcing from China, the risk from China because of geopolitical events. The second is the scaling in India consumption. It is the world’s largest population. Indian consumers are becoming wealthier. There is a growing middle class in India, and that’s driving consumption for imports, as well as the need to get raw materials for the manufacturing supply chain. So, there’s a lot of investment that needs to go into India’s terminal infrastructure, the rail infrastructure, and we see progress there. We see a lot of [capital expenditures] going into that space.

LaRocco: We know that companies had been frontloading due to the combination of tariffs, the ILA strike, and the threat of another strike [in January]. In your future orders, are you seeing shippers starting to pull back some of that freight that went to the West Coast back to the East Coast?

Aldwell: I think that’s a natural trend and we’re seeing that happen. We’re seeing some of that cargo starting to go back to the East Coast. As shippers go into the new year, they have been pointing to more locations across the US to make sure they are diversifying their supply chain by using the East Coast and Gulf ports.

LaRocco: Maersk and MSC recently came out saying they’re going to continue going around the Cape of Good Hope, which, while it is longer, provides more stability and certainty in the logistical supply chain. Are there things out there that you’re concerned about that would add to volatility and uncertainty?

Aldwell: I think there are a few big events that are going to happen in the future. One is, I think, the assumption that the ocean carriers will quickly go back into the Red Sea. I think that is being dispelled now by the few announcements and I guess there will be probably some more to come. Most likely, it’s going to take some time to build confidence that that route will be safe ... What we are looking at is the insurance markets. You still can’t get insurance to sail through the Bab el-Mandeb Strait. Only when you start to see those markets kind of normalizing, I think you will see traffic going through Bab el-Mandeb Strait, into the Red Sea through the Suez Canal. So far, there’s no indication that that’s easing up at all.

I think if we look further out, if you assume that you get into a normalized world where the Red Sea is open, I think the influx of capacity is concerning to everybody in the industry. What will that do in terms of volatility for markets, and will it drive changes into the way that services are structured? We also have the introduction of Gemini [in February], and that’s really the biggest change in modus operandi that we’ve seen in a very long time for ocean carriers.

LaRocco: We are seeing the push here in the United States for AI. How’s your company going to approach the use and deployment of AI to help your customers?

Aldwell: I think you’re ... going to see a substantial utilization of AI to improve data quality, to get better data in a timely fashion into systems and reports. This will help customers and logistics providers and carriers and all the participants in the industry make better, more informed decisions in a timely effect. They can also use AI to start to build out better predictive models for the future and see what inventory needs are and how planning is going to work. I think the big opportunities are in quality and optimization.

LaRocco: How will it help in the velocity of trade?

Aldwell: I think it’ll help the velocity of inventory that’s not related to core movements. At the end of the day, I think you’re going to have climate regulations, vessel sizes and other things that are regulated. There are port-to-port moves, and then we’ve got terminal productivity. AI will help shippers choose to move inventory to different locations and make better decisions [about] stocking quantities. The smarter the inventory models you can get, you are going to be able to be linear with what you can do. The only challenge then is to end up with disruptions like we’ve had so many of over the last five years. Of course, you need to be able to factor that in as well.

LaRocco: The company acquired a 51% stake in IMC. Walk me through the strategic thinking behind this. How is it going to enhance the company moving forward?

Aldwell: During the pandemic, our industry became front page news because of all the challenges. The biggest challenges that came in the industry were landslide logistics. Terminals got blocked up, ports got blocked up, the rails got blocked up. You couldn’t get boxes moving around the country. We all lived through that and we set out in force to remedy that by making a different kind of commitment to the future for our customers and what infrastructure and ability to execute we wanted to have.

We were looking for a few things. The first one was a company with scale. Second, a company with great DNA. Third, was a company with great technology, and the fourth one was a national network. With IMC, we took a majority shareholding in a business that we really believe in, and that’s going to help our business serve our customers better into the future because we can make much better commitments about what kind of performance we can engage in down the line with that company.

We’re absolutely committed to keeping IMC as an independent brand that runs itself in the marketplace.

LaRocco: Do you think we’ll see more of these asset-based investments in the future in terms of being nimble to serve the needs of the client?

Aldwell: Potentially yes when we think it’s the right thing for our business. I can’t speak to the competition. You saw some of the ocean carriers also go in and start acquiring those kinds of companies in the US and in other parts of the world. We think investing in ... assets or asset-like commitments on the land side with a scalable organization makes sense for us because we can deliver a higher degree of certainty around performance to customers.

LaRocco: Looking at 2025, what has you excited in terms of innovation or opportunities around the world?

Aldwell: AI, of course, has us excited. We’re really interested to see how AI can help us innovate and how it can help us build a more and more customer-centric organization that meets the needs of people. I think the huge amount of investment going into the infrastructure that’s needed to power AI on a worldwide basis is an opportunity for logistics companies.

In terms of a potential recovery in Europe, if we see an end to the war in Eastern Europe, this could create an economic rejuvenation and more confidence in European markets. So those are the things that we’re watching closely.

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