Maersk Line - The Stalwarts Of Shipping Industry

Executive Summary

The maritime industry, just as other areas of human endeavors, has responded appropriately to evolve ways to ensure that river crafts and other modern equipment are developed to meet the present needs of shipping practitioners. It has also put measures in place to tackle some of the main challenges hindering the sustainable development and growth of the maritime industry. Shipping is not a local business. It is a business that transcends national boundaries with set rules and regulations respected worldwide. Indeed, the global maritime watchdog, the International Maritime Organization (IMO), has guidelines and conventions that guide the building of ships, their operations, carriage of goods, repairs, seafarers ‘welfare, navigation in coastal and international waters. Every commodity and type of goods can be loaded and carried in ‘the box’, as the container is often referred to. As a result, modern container shipping has changed the way we transport goods around the world and has played a key role in globalization.

Maersk Line operates in a competitive global industry that demands innovation to create the agile technology infrastructure we need to be a leader amongst peers. Maersk encourage open conversation with customers in order to understand and address their current and future needs and working towards maintaining industry leadership through innovation that brings customers value. Customers can expect reliable, efficient and consistent product and service solutions, providing the strongest foundation to deliver on their promises. ‘Your promise. Delivered.’ is Maersk Line’s acknowledgement and appreciation of the importance of keeping these promises and of the part we have to play in helping to deliver them. The company plays an important strategic role in Denmark’s AP Moller-Maersk Group: restoring profitability and maintaining its industry leadership position central to its strategy.

The Maersk Group

A.P. Moller – Maersk Group is a conglomerate based in Copenhagen in Denmark that was established in 1904. It is considered as the largest container ship operator and supply vessel operator in the world. The company has held that distinction since 1996. It operates 600 vessels with 3.8 million TEU. It also owns the ship Emma Maersk, considered as the largest container ship in the world. The company has a presence in 135 countries around the world. In 2009, Maersk Line vessels made around 35,000 port calls - equivalent to approximately four port calls per hour or one call every 15 minutes. World trade would not be the same without the modern container, invented in 1956. Today, Maersk Line ships around 14% of the world container trade.

The Need For IT Strategy

Mr. Skou (CEO) and his new leadership team faced the dual challenge of improving financial results in the short term while simultaneously breaking the cycle of volatility and delivering more sustainable shareholder value over the medium to long term. They quickly recognized that the best performers in the container-shipping industry created shareholder value throughout the cycles experienced by the sector. Maersk Line therefore had to identify and address the root causes of its own volatile performance. It was already handling all the cargo it can manage. But when Maersk determined that the volume of most of the goods it was shipping had not grown to full capacity, the company decided information technology outsourcing (ITO) would be a crucial part of rectifying the situation.

Implementation of Strategy

In an effort to support further business growth and increase organizational flexibility, Maersk decided to consolidate all of its data centers and server rooms operating worldwide onto a single outsourced platform. HP was already hosting some of Maersk’s IT environment, and in March 2011 Maersk initially approached HP about expanding the scope of the relationship.

The first phase, “Back to Black”, was all about short-term financial results. Its specific aim was to restore profitability within one year, which meant engineering a swing in performance representing more than $1bn. Mr. Skou’s team quickly identified a number of measures to cut costs and increase revenues. This was the easiest stage, probably because Maersk Line executives worked in a volatile industry and were used to addressing immediate performance issues.

The second stage, “Finish the Foundation”, involved the leadership team taking greater control of the mass of internal organizational initiatives that different parts of Maersk Line had launched to address the company’s declining performance. Mr. Skou’s goal overall was to break down silos to make planning and operating systems more integrated and coherent as part of a general effort to create a strong organizational foundation for long-term success. This phase involved hard choices about how much the leadership team should intervene in shaping a new organization, including how the business should be structured and which projects should be shelved. Ultimately, more than 40 per cent of projects were halted.

The final phase, “Sustainable Profitable Growth”, was concerned with specific actions to make Maersk Line the best-performing container-shipping company, and not just the largest. Mr. Skou and his team reflected on current and potential changes in their industry, and on what type of company they wanted to build. They identified clear “must-win battles”, the priority areas on which the leadership team would focus to address long-term underperformance.

Defining these priorities was the most difficult part of the strategy. It forced the team to consider not only how to reshape their individual areas of responsibility but also how the decisions would collectively help advance the business.

The USP of IT Strategy

Operating in 100 countries and transporting goods around the globe, at first glance it would appear Danish shipping company Maersk Line is already handling all the cargo it can manage. But when Maersk determined that the volume of most of the goods it was shipping had not grown to full capacity, the company decided information technology outsourcing (ITO) would be a crucial part of rectifying the situation.. HP was already hosting some of Maersk’s IT environment, and in March 2011 Maersk initially approached HP about expanding the scope of the relationship.

Maersk ran through a global setup. The solution took responsibility to 38,000 end users. The service desk was the first line, with significant consolidation. For the data centers, they reduced cost by making them more agile. Maersk sought a flexible solution catering to all their needs, including managed print services around the world, ease of business, on-time delivery, and affordable cost. After a planning period that lasted from March to October 2011, HP and Maersk signed a five-year agreement in November 2011 and immediately put the project into development, with delivery date.

Outcomes Of  IT Strategy

That modernity and science have changed the face of shipping worldwide are understatements. In many ways, science, especially information and communications technology (ICT), has impacted immensely on the maritime industry.  This is due to the fact that ICT has gone a long way in dictating the pace of development in the shipping world. This explains why river crafts have changed in shape and sizes over the years. The change is not limited to the river crafts and other equipment used in the maritime sector of the economy. Navigation has also been affected by ICT, as most river crafts are now operated in digital format rather in analogue. Moreover, the way and manner port facilities are built nowadays differs significantly from what was obtainable in the past.

1. Better coordination: Information exchange allows a better coordination between ships which is needed no matter for what purpose the ship is sailing. It is due to importance of coordination in marine industry that even more efforts are being made at developing an information exchange system that will allow greater coordination. Such a system would include features like Virtual Regional Maritime Traffic center, the Maritime Safety and Security Information System, the Long Range Identification and tracking and the Regional Co-operation Agreement on combating piracy and armed robbery. Such a system allows coordination in every situation from planning a transit through a narrow region to warding off a piracy attack.

2. Greater safety of ships: An effective information exchange system allows better coordination between the ships, hence greater safety of ships. In case of maritime accidents, this efficient system will allow rapid information exchange which will help reaching the ship in trouble sooner. Especially in case of maritime accidents like grounding of a ship or a pirate attack where it becomes difficult for a ship to communicate on its own, an information exchange system can be very helpful.

3. Improved trade: A better information exchange system would improve the scope of trade globally. The shared information here could include cargo information about ships leaving from various ports, connecting ships scheduling etc. which will mean ships can communicate better and trade can improve.

4. Sharing information and experiences: Through maritime information exchange, there is not only exchange of knowledge but also of valuable experience. This will allow mariners to learn from each other’s experience, getting precious details about expeditions other mariners have been on like handling various maritime accidents, running into unexpected situations etc. and add more to their knowledge. Allowing a proper threshold for such information exchange in maritime industry can open up gates for better learning experiences for mariners.

5. Better trade options: An information exchange system can be a single international organization that will regulate information and make it available to one and all, making important piece of knowledge known while keeping the other sensitive bits in safety. The main idea behind such a system is the scope of better trade options. An internationally maintained organization will be the centre point of flux of all the information and will make trading smoother. That way, ships can communicate directly, sharing their information through a single body. This can open up a lot of trading options which sometimes may not be recognized due to lack of information.

6.Discuss problems and views about current issues: Information exchange events organized all over the world are the perfect opportunity for seafarers and shipping from all over the world to discuss their problems. At a recent maritime information exchange vessel operator’s meeting, everything from marine environment to maritime accidents to specific and future threats to marine industry was discussed. This constructive flow of information surely helps all shipping companies present in terms of their future planning and present management.

Sustainable Competitive Advantage

Trade liberalization and information technology are continually advancing, national borders are increasingly disappearing and barriers to global trade are falling. As a result, global manufacturing and marketing are becoming increasingly organized. To cope with this operational environment, global firms have been searching for new production and logistics architectures as a way of gaining the advantages that come with standardized global production.In developing a global operation strategy, however, a number of issues arise which may require careful consideration.

First, since world markets are not homogeneous, there is still the need for local variation in many product categories. The growth of global brands and the growing convergence of customer preferences would enable standardized products to be marketed in similar fashion around the world. However, the reality of global operations is that there are significant local differences in customer preferences and product requirements. As such, though certain brands and preferences may be global, individual products may require varying levels of customization in order to meet specific country needs.

Second, as there is a high level of uncertainty involved in coordinating a global operations strategy, the complexity of managing global supply chains may result in higher costs. With the trend towards globalization gaining speed, the complexity of the logistics task is increasing exponentially, influenced by such factors as the increasing range of products, shorter product life cycles, marketplace growth and the number of supply chains.

What can Maersk Do?

The Shipping industry is steadily approaching a period of vast change. At a time when environmental concerns and energy prices remain high, savings on fuel can make a significant improvement to margins. Instant, accurate information on fuel consumption and routes can mean the difference between winning a customer and letting them go to a competitor. Meanwhile, increasing levels of automation and onshore vessel control are presenting opportunities to further reduce operational expenditure.

Big data has the potential to underpin these cost savings and become the bedrock of future competitive advantage for shipping companies. The question remains, what are the true costs involved in setting it up and running the required systems? And what payoff can ship owners expect to gain from it over what time-frame? Big Data & Performance Management in Shipping 2015 will investigate the industry’s experiences of utilizing the data that the shipping industry has at hand including on board systems, satellite, AIS and weather information. It will also explore the possibilities for the future such as whether we will be able to access data on activity in ports and, if so, what can we do with it?

For Maersk to tap into SMAC, Big Data & Performance Management:

1.      Find out what other ship owners are looking to get out of their data and new systems

2.     Gain a clearer picture of the business case for using big data for performance improvement

3.     Learn how on board, AIS, weather and satellite data can be analysed to reduce fuel consumption

4.     See what major shipping companies are doing with predictive maintenance and what payoff they’re seeing from it

5.     Analysis of the future potential for data use for performance optimization