Maersk Case
Instructions: 1. The mix of reliability, ease of doing business with, and sustainability can pose a significant challenge to Maersk going forward especially when the company also needs to be profitable. Where are there the inherent tradeoffs here realizing that optimality may be an elusive objective?
2. When one is in the shipping business, vessels and customers are only a part of the mix. Ports play a major role in determining whether a container line will be successful or not. If you were the executive director of the (fictional) Port of New Livonia and wanted to attract Maersk’s service, what would you need to consider. Think of those that might already be in place as well as those that you will need to make capital investments for. (Take a look online for the scale of the C/S Regina Maersk)
3. What are the potential game changers that could affect the container shipping industry in the next five years? Is it a case where Maersk may positioning itself for the current environment only to be left at a disadvantage in the future? (One way to go about this would be to perform a SWAT analysis)
Solution.
Maersk Line Case: Shipping Containers
Question One.
Maersk company is one of the largest shipping container enterprise in the world (Lam, 2011). Recently is has tabled their plans to maximize reliability and sustainability to deliver the best services to its customers. For such schemes to be implemented, they have to experience some inherent trade-offs that can make their goal of maximizing profit unachievable. This extract will review operational and technical changes that can make a slippery goal of maximizing profits.
First, Maersk Company has to adhere fully to their reliability goal of delivering their services on time. The CEO must fully admit to his plans of paying customers around $300 for any late delivery, depending on the number of days delayed (Greve, Hansen, & Schaumburg-Müller, 2007). Such costs are deadly when it comes to computing the profit in ledger books. The definitive goal of any business is to make a profit, with such large compensation allocated to costumers is evident that Maersk Line containers will not achieve profitability (Bendeković, Naletina, & Šunjić, 2015). It is also apparent that with the difficulties experienced at the sea, either environmental and physical. Maersk Line experiences such threats at the see and will lead to late delivery of products.
Additionally, with their aim to achieve sustainability programs like Carbon monoxide reduction they have to incur costs of redesigning their shipping vessels with sustainable materials. According to the Maersk Line Case Study, they have to design their networks, vessels, products and in due course the entire operating model. Maersk has to experience such a tradeoff that will consequently affect the profits they make yearly. For example, the current plan to build the most efficient biggest ship in the world(Triple-E) (Zou, et al., 2013). It will take them years to realize the profit to cover the cost incurred in making the vessels start operating on its redesigned routes. Therefore, for Maersk Line to achieve sustainability they have to undergo this cost. Lastly, the technical changes put in place, using a new fuel, new vessels and technological improvement will slow their goal of making maximum profits.
Question Two
Maersk Line as a global shipping company is an arm of A.P Moller-Maersk Group. Therefore, Maersk serves customers who have the ambitious port authority or a terminal operator. As a director at Port of New Livonia, there are basic requirements that are put in place to attract Maersk Line Company. First, Maersk has two levels of decisions; choice of port level and the selection of terminal level. Additionally, apart from nautical and locations, Maersk require differentiated products that are a superior performance in relations of productivity. Also, the ports must ensure a smooth connection for feeder or barge operators, as well as rail and road links into to the hinterland. Also, Maersk is attracted to unmatched reliability and flexibility on the side of their customers.
Since Port of New Livonia has met the basic requirements. The port has to improve on its services through innovation and supply chain co-operation. Furthermore, since Maersk believes that the ports must encourage ultimate competition such as towage and terminal handling, Port of New Livonia must drastically focus on such parameters to make sure that the cost levels remain competitive. Also, the port must have the current state-of-art equipment. Many shipping Companies find it inefficient when ports have inadequate cranes; this is one of the disqualifiers of being selected by Maersk Company.
Additionally, Maersk has very high standards when it comes to issues to deal with sustainability. Therefore, Port of New Livonia must improve on its safety, security and environmental standards. Even though Maersk Line Company has no specific requirements, they are mostly attracted to ports that are environmentally friendly so as to achieve their goal of making their services sustainable. As a director at Port of New Livonia, it is advisable that the port must increase the workforce and update their machines such as cranes to be able to attract Maersk Line Company.
Question Three
Recently, Maersk has introduced a game changer in the container shipping industry by introducing the brand new smart containers. The introduction of the remote container management system(RCM) that is responsible for monitoring each and every shipment under Maersk across the world. This game changer is efficient as it has eliminated cases where clients lie that the consignment was not delivered, and it has solved many security issues aboard. The system has also eased the process of container inspections, and therefore Maersk can fully achieve reliability.
On the verge to solve its environmental crisis in the next five years, Maersk has to incur additional costs to make their services sustainable. Currently, the threats that face Maersk Line company concerning the environment is oil spills in the at the sea land. Therefore, Maersk can come up with durable and efficient containers that minimize the oil spillage at the water bodies. Another significant game changer that can drastically inflict losses in the shipping company is the growing rates of terrorism and piracy. First, countries where terrorism is imminent and predictable largely affect the shipping business. For example, clients request a delivery that takes seven days to deliver, during the shipping period, an outbreak of terrorism strikes a nation. Therefore, it will lead to tensed delivery of products. Otherwise, a nation with frequent terrorist outrage is prone to piracy cases, case in point, Somalia ports are highly insecure.
Conclusively, Maersk and the container shipping business
must be ready to face any game changers in that can either post a risk or an
advantage to their profitability. The most common game changer that shipping
companies fear is bans posed at the ports
and economic degradation. Bans at the ports that
initially allowed container shipping, largely affect the container shipping
businesses through a narrow outreach of potential customer. Lastly,
economic degradation is inevitable, and
companies must be ready to put intensive plans to focus on handling an economic go-down.
References
Bendeković, J., Naletina, D., & Šunjić, Z. (2015). Cost Control Policy in Maersk Line. h International Scientific Conference on Economic and Social Development–Building Resilient Society, XI, pp. 1-20.
Greve, M., Hansen, M. W., & Schaumburg-Müller, H. (2007). Container shipping and economic development: a case study of AP Moller-Maersk in South East Asia. Copenhagen Business School Press DK.
Lam, J. S. (2011). Patterns of Maritime Supply Chains: Slot Capacity Analysis. Journal of Transport Geography, 19(2), 366-374.
Notteboom, T. E., & Vernimmen, B. (2009). The Effect of High fuel Costs on Liner Service Configuration in Container Shipping. Journal of Transport Geography, 17(5), 325-337.
Zou, G., Kinnunen, A., Tammi, K., Tervo, A. K., Kovanen, P., & Elg, D. M. (2013). Modeling Ship Energy Flow with Multi-Domain Simulation. CIMAC World Congress on Combustion Engines. XXVII, pp. 1-30. International Council on Combustion Engines.