It might seen odd for a global container transportation and logistics group to relocate its Americas regional headquarters inland from Oakland, California to Phoenix, Arizona. After all, the port of Oakland is noted for being the first major seaport on the west coast to build terminals for containerships. Landlocked Phoenix, on the other hand, is renowned for its sunny weather and south-west desert terrain.

But when Singapore-based Neptune Orient Lines (NOL) made the decision to move its regional Americas headquarters, a seaport location was not a priority.

Inland transport

“We’re relocating a headquarters function that manages people, processes and information,” says John Bowe, NOL’s regional president for the Americas. “That activity isn’t married to a particular geography. And as an integrated transportation company, we don’t just move cargo on the ocean. Inland transport by truck and rail is essential to our customers as well.”

The relocation to Arizona is one of a series of cost-saving measures NOL has announced, and one that Mr Bowe says is necessary to establish an effective long-term cost structure for the group’s Americas headquarters.

Other initiatives include reducing capacity in its major ocean trade lanes, idling vessels and restructuring its logistics business. The company, which had revenues of $8.2bn in 2007, has three principal operating brands: APL, APL Terminals and APL Logistics.

It is well known that, with rising transportation costs, more US manufacturers are looking to source goods closer to home – that is, Mexico, and central and South America. The Americas regional headquarters co-ordinates NOL’s shipping, terminals and logistics activities across these destinations. It also manages everything from marine operations to intermodal transport of containers by rail and truck, which is why Mr Bowe believes Arizona will be a convenient location.

“Phoenix will be a lower-cost base of operations for our company,” he says. “Living costs are also less expensive, which will benefit our employees and be attractive to job candidates. What’s more, we are moving into a business-friendly environment in Arizona.”

Cost-saving measures

The move – which is slated to occur during the second half of 2009 and be completed during the third quarter of the year – is also indicative of NOL’s global strategy to put its cost structure on a more sustainable footing in the face of the current economic downturn. With dramatically diminishing global trade, steamship lines and transportation providers are feeling the pinch.

“In the wake of long-term structural changes in the industry and in the face of a global recession, carriers globally are reassessing cost structures and seeking greater efficiencies,” says Mr Bowe.

“NOL Group has initiated numerous changes to bring its cost structure into alignment. Relocation of our Americas headquarters is one of those measures.”

The company, however, will continue to operate marine terminals on the US west coast in Los Angeles, Seattle and Oakland. “Each location has terminal management staff at the port to directly oversee our marine operations,” says Mr Bowe. APL’s global services also include vessel calls at ports up and down the US East Coast as well as in Central and South America.

COMPANY PROFILE

NEPTUNE ORIENT LINES

Regional headquarters

Singapore

Employees worldwide

11,000

2007 turnover

$8.2bn