Management has at times struggled with the role of “logistics operations” within the umbrella of containership related activities. However, the stand-alone logistics division is coming of age for steamship lines and more often there is a bottom line to prove it. By George LauriatIn the (publicly traded) annual reports of ocean carriers with their very small type and exceedingly large numbers, logistics rarely is an independent line item. Logistics certainly is part of the overall consolidated accounting of container revenue and a contributor to profit and loss statement but rarely does the accounting match the financial reporting. That is changing. Logistics is rapidly becoming a stand-alone profit center that competes on the same playing ground as other grass roots 3PLs. Part of the problem for ocean carriers (and nearly everybody else) is defining just what is a ‘logistics company’: One man’s logistics company is another man’s drayage, warehousing, NVO or IT division. Another issue, particularly in the North America is the difficulty in establishing what is the primary mission of the ‘logistics arm’. The North American box trade is notoriously imbalanced with far more inbounds from Asia than full outbound containers. As a result re-positioning containers for quick return to full container load activity is a major activity for ocean carriers. So is the primary goal for the logistics division’s to turn around and re-position ocean containers or independently compete both for domestic and international freight to create the most profitable bottom line possible? In reality, the answer is both and the push and pull is one of the inherent difficulties that any ocean carrier has with managing their own logistics divisions. Nevertheless, logistics can be a strong contributor to the ocean carriers’ profitability. For this reason, the independent logistics arm is feature that is likely to grow. Take the example of NYK, one of the elite Japanese carriers. In March NYK announced that effective October of this year, the carrier would consolidate its two Japanese logistics subsidiaries JIT Corp and NYK Logistics Japan under the banner of NYK Logistics Japan. JIT was an NVO and NYK Logistics a third party provider. Logistics represents a large industrial segment for NYK. For FY 2006 Liner shipping accounted ¥574 billion and logistics ¥482.7 billion. More importantly, while the liner side lost. ¥9.7 billion, logistics posted a ¥17 billion profit. NYK expects that the logistics will contribute 23% (compared to 25% for container and 27% for bulk) to next fiscal year’s revenues. In the company’s “New Horizon” plan one of the key strategic goals is to “evolve into a logistic integrator.” According to NYK the company is “in the process of integrating the marketing systems…with the objective of promoting our [NYK] SEA-LIP (Sea-earth-Air Logistics Integrator Program) logistics integration strategy.” MOL, another Japanese shipping conglomerate, also is moving to upgrade their logistic segment of the business. The company opened in Shanghai a wholly owned subsidiary MOL Consolidation Service Ltd. The carrier also tied up with California Cartage Company to “offer a more consistent service from departing places to final destination.” The services are part of industry wide endeavor to support “buying logistics” systems used by major US and European retailers and apparel companies, which buy direct from China and other Asian countries. The importance of the logistics arm is reflected in the bottom line. In FY 2006, containership revenues were ¥571 billion, while logistics chipped in with ¥57 billion. The difference was that liner shipping lost ¥2.9 billion while the logistics arm turned a ¥1.4 billion profit. Integrating the logistics services has become a common theme among ocean carriers. China COSCO Holdings, the listed flagship of the Beijing based COSCO Group, in 2006 acquired a 51% stake in COSCO Logistics. The logistics arm contributed Rmb 10,112,143,000 in revenue and returned Rmb 204,000,000. The goal