Daily Maersk: Application of Lean Approaches
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Arjit Saran
GSEP14GLM27
Daily Maersk:Application of Lean Approaches

Daily Maersk: Application of Lean Approaches
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Abstract –
The shipping industry is often associated with weekly sailing frequency and low service
levels in terms of On Time Delivery of goods. This report tends to highlight how Maersk Line
(a shipping company) applied Lean principles to its entire value chain to completely
transform the way ships operate. Maersk Line introduced the Daily Maersk initiative in late
2011 which necessitated daily shipping schedules in the Far East-Europe route. This not
only reduced Muda along the value chain but also brought cost savings and created value
for the customers.
Keywords: Daily Maersk, Muda, Kaizen, Kaikaku, Lean, Ship, Port, Lean Enterprise
Background –
A.P. Moller Maersk group is a Danish business conglomerate founded by Arnold Peter
Moller and his father Peter Maersk Moller in 1904. The group has interests in various
activities which include shipping, oil and gas, retail and port terminal operations, of which
shipping is its main business. The Group also has a 20% stake in the largest Danish bank
Danske Bank A/S. The group employs approximately 89,000 employees and has offices in
more than 130 countries around the globe. The Group comprises of five core subsidiary
companies – Maersk Line (it’s shipping line), Maersk Oil, Maersk Drilling, APM Shipping
Services which includes DAMCO (its logistics arm), Svitzer (it’s tug services), Maersk
Tankers and Maersk Supply Service and APM Terminals (its port terminal arm). The Group
collectively owns and operates more than 600 Maersk Line ships, 430 owned and operated
Svitzer tug boats, 70 Supply Service vessels and 23 offshore drilling rigs. It also operates 64
port terminals under APM Terminals worldwide. The Group collectively posted a healthy
revenue of $ 47 billion in 2014 and has been ranked 172 in the Fortune 500 ranking.
Maersk Line –
Maersk Line is the world’s largest containership company with over 17% of the world
shipping fleet making approximately 70,000 port calls annually with a total capacity of more
than 2.6 million TEU’s. Maersk Line has a relatively young fleet with an average fleet life of 8
years compared to the industry average of 12 years.
Maersk Line’s key customers are Walmart, Nike and Tesco which account for 25% by
volume of its business and are tied by long term contracts. Another 15% of Maersk Line’s
business is from the independent freight forwarders. Maersk also provides tailor made door
to door transportation service in conjunction with inter-modal transport and an elaborate
feeder ship connections to smaller ports which cannot be accessed by large container ships.
The clients of Maersk range from small and large individual companies, freight forwarders,
Non Vessel Operating Cargo Carriers (NVOCC) to Ship Brokers.
Daily Maersk –
Maersk Line is the world leader in the container shipping industry, and is considered a
shining beacon of light in terms of its handling of its supply chain processes. Maersk has
always emphasized on improving and streamlining its operations and achieving greater cost
efficiencies in its operation. It has achieved all this by focusing on innovations across all
aspects of its supply chain and by achieving economies of scale in its operations.

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Figure 1: Global Schedule Reliability 2013
Maersk was the first to realize that industry-wide only 50% of all deliveries reached the
customer on time and exactly as promised. There were various delays and overheads
involved in transportation at all stages of the delivery process. At the same time, the
companies were having excess shipping capacity which was spread across the world and
was hence, not getting used optimally leading to wastage and increased costs. To this end,
Maersk introduced the ‘Daily Maersk’, which guarantees customers of on time delivery and
reliability and would compensate customers for any shortfall in delivery time.
Maersk Line had an industry best On Time Delivery of 80% which it wished to improve
further by applying Lean principles in its daily operations. Daily Maersk program was
designed to reduce Muda in the transportation business and establish Reliability of service
thus increasing its customer value. Before the launch of Daily Maersk, ships worldwide used
to operate on a bi-weekly or weekly schedule. Daily Maersk sought a “Kaikaku” approach by
providing daily ship service from 4 major ports in the Far East (Ningbo, Shanghai, Yantian
and Tanjung Pelepas) to three major ports in Europe (Felixstowe, Bremerhaven and
Rotterdam). Maersk would provide a fixed transportation time between the ports and would
offer to deliver within the stipulated time. Maersk also sought to compensate to mitigate the
risks of its customer by providing monetary compensation for any late deliveries. The Daily
Maersk initiative, which came into force on November 19, 2011, required meticulous
planning and implementation across the value chain and involved Value Stream Mapping to
identify and cut wastes within the chain, in order to create value for the customer.

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Figure 2: Daily Maersk Route
Daily Maersk provided the advantage of increased flexibility for the customers in terms of
daily shipments as opposed to the earlier weekly or bi weekly shipping schedules. This was
a considerable improvement and a breakthrough service applauded by the entire shipping
community. The other major advantage was for the customers who could now deliver directly
to the ship and did not need to hold extra safety stocks at the port or their warehouses. This
brought about significant cost savings for the customers who were now able to pass on
those profits to the end consumers. Although it did require a close co-ordination between the
customers and Maersk, in terms of information sharing, it did lead to elimination of “Muda”.
The third advantage of Daily Maersk was the impeccable reliability with a 95% service level
being offered by Daily Maersk. This led to smoother planning of the future shipments as they
only needed to know the transportation time without worrying about the transit delays or the
docking or undocking delays at the ports. Needless to say, this service became highly
popular amongst various businesses and Maersk attracted many new customers.
Limitations of Daily Maersk –
Although, it’s been more than three years since this service was put in place and thus far
has resulted in significant cost savings, there are certain limitations to the Daily Maersk
service. Firstly, the service is valuable only for products which have a high inventory holding
cost associated with them as this would eliminate the need for holding the products at either
end of the ports. Secondly, this service would be beneficial in shipping of the products which
have a smoother and fixed demand over a longer period of time without any significant
fluctuations. Thirdly, since this service requires a closely knit network of customers, freight
agents and the shipper, close co-ordination amongst all is crucial for the success of the
service. A delay on the part of any party can delay the entire process which can lead to
complications in how the parties deal with such situations. Fourthly, it requires ships to be on
schedule and in good running condition all the time, thus necessitating the need for good
maintenance of ship and its technical equipment. This service fails to recognize that ships
can break down any time due to technical failures of various sorts. These failures can be as
miniscule yet significant as safety equipment not functional to as humongous as the main
engine shut down. However, it has been noticed that often the problem is very small yet
logistically significant such as less than minimum fuel bunker on board, or a Port Inspection
Control failure. The solutions to the above problems are not easy and require considerable
thought process. The need for continuous improvement and a Lean Enterprise cannot be
over emphasized in such a situation. Contingency plans need to be formed depending on

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the criticality of the situation and back up ships need to be re-routed to perform delivery of
the required products. Also buffer times should be included in the transportation times which
amongst other things depend on the weather forecasts as they are the single most
determinant in late arrivals, especially in the Bay of Biscay and South China Sea.
Importance of Schedule Reliability –
The shipping industry is often associated with weekly sailing frequency and low service
levels in terms of On Time Delivery of goods. Considering that approximately 95% of world
trade is transported by ships, this poses a legible inadequacy in terms of how the world trade
functions. With an industry average of 32-54% delays in schedules in container shipping,
such low reliability makes it extremely difficult for firms to implement Just In Time production
or distribution. Also manufacturers have to hold up extra safety stocks in their warehouses at
either ends to cope with the unreliable schedules. According to a study, “Transit Time” is the
second biggest Service Quality Requirement by customers, only after “Cheap Transportation
Prices”. Before the launch of Daily Maersk, ships worldwide used to operate on a bi-weekly
or weekly schedule.
There are various reasons for this schedule unreliability of container shipping industry. While
some of these issues are within the control of shipping companies, some are beyond their
purview. (Nottleboom & Rodrigue, 2008) found in their research that the main cause for such
unreliable schedules is the delay at ports and their low service levels. This is even more
aggravated when delays in the first port are carried forward to the second port. Typically if a
ship reaches its second port late due to delays in the first port, it often has to wait even
longer as preference is given to the ship which was on time. This causes a Bull-Whip effect
and delays the entire schedule.
Figure 3: Sources of Schedule unreliability on the East Asia -Europe route 2004 (Nottleboom & Rodrigue, 2008)
A method to overcome this is by “dynamic scheduling” wherein the port schedules the
berthing of ships on a dynamic basis and gives preference to ships which have a larger
amount of cargo waiting at the port terminal ready to be shipped. This is a generic shift from
the present day single focus scheduling without considering the costs involved. It should be
considered that five thousand containers of a large container ship being held back at the port
would cost more losses to the suppliers and distributors than a few hundred of a small

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feeder ship. This would also require exclusive Service Level Agreements between the port
authorities and the shippers concerned.
Value Stream Mapping –
Figure 4: Value Stream Map - current state
The figure 4 illustrates the various stages of cargo movement from supplier to the end
consumer. The above simplified Value Stream Map highlights that the actual transit time for
cargo by ship is just a small portion of the entire process where there are various wastes in
the form of TIMWOOD (transport, inventory, motion, waiting, overproduction, over-
processing, defect) occurring at various stages.
Containers must arrive at the port terminal for customs clearance at least a day in advance
of the terminal cut off time. The terminal cut off time is set for at least 2 days in advance of
the ship’s scheduled arrival. Often in large ports due to various external reasons the
containers are required to be at the port gate for customs clearance and inspections 3 days
in advance. This is just to factor in the possibilities of open box inspections if any one
container is found faulty or breaking laws. This leads to a total lead time at the export end to
an excess of 5 days thus being classified as a “Transport and Motion” Muda. The vessel
loading time at the berth can be estimated to be 12-18 hours for a 10,000 TEU ship with
around 5 gantries working simultaneously. However, practically this time is extended to more
than a day due to port clearances of ship and the time taken for the ship to come alongside
the berth. In various parts of the world, ports do not operate after evening hours which
further adds to the delays thus increasing the total time of ship’s stay at berth to be more
than 2 days. This can be classified as a “Waiting” Muda. A similar 10,000 TEU vessel may
take upto 3-4 days to be fully loaded at an Indian port and upto 4-5 days at an African port.
While this can be achieved within 18 hours by an efficient port like Singapore, Hong Kong or
Rotterdam.
Similarly, once the container reaches the destination port, the container often spends close
to 2-3 days at the terminal for customs clearing and inspection. This is called as “Port Dwell”
of the container and can be classified as a “Waiting” Muda. Then the container is transported
to either the transport dock or onto a train dock from where it is then transported to its
location. This entire process involves a total “Throughput Time” from the time it leaves the
seller to the time it reaches the end buyer of 35 days in a Far East – Europe route.

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Lean Initiatives at Maersk Line –
Daily Maersk has sought to reduce many of these wastes so that the goods flow at the pull
of the customer from downstream thus reducing wastes and closely linking the various
activities. The various initiatives undertaken by Maersk Line to execute Daily Maersk have
been listed below –
a. Focus on Reliability - Understanding the needs of the customer who wanted shorter
transit times for the cargo was a significant breakthrough for Maersk. Thus Daily
Maersk introduced the concept of only Total Transportation Time between a specific
set of ports. This is a higher level of “Customer Success” as well as the service
provider can not only understand the needs of the customer but those of its
customer’s customers as well. Daily Maersk quoted of a specific transportation time
with the assurance of reimbursing their customers for delays caused during shipping.
b. Fleet capacity reorganization – Maersk has conducted re-orientation of its entire
fleet of ships with large mega container ships doing inter-continental routes and
smaller ships acting as feeder ships for intra-continental routes and acting as back up
ships for large ships. Maersk has the largest fleet of ships and the largest volume
base of cargo and hence this presented a significant opportunity for Maersk Line to
maximize their profits while improving their operations. Using a complex matrix of
routes and a system of back up ships for cargo which could not be loaded, Maersk
has optimized its capacity to the limits.
c. Daily Transport – By providing daily transport of goods Maersk has been able to
reduce the dependency on weekly schedules in pre- Daily Maersk days. Earlier if a
container misses its schedule it would typically have to wait another one week at the
port for the next shipping schedule. This would not only increase the delays of
shipment but also the costs incurred for the “Port Dwell” for the manufacturer. It
would also increase the costs for the port terminal as it cannot fully utilize its
container yard capacity thus leading to opportunity costs. The daily transport
provides increased flexibility for the manufacturers with nil “Port Dwell” thus reducing
their costs and shipment delays significantly.
d. Backward Integration – Maersk group has done backward Integration by
developing their own port facilities (APM Terminals) which have been awarded for
their improved efficiencies. APM Terminals use the latest state of the art technology
to improve their operations. The gantries at their terminals can pick up two containers
together thus almost reducing the loading/discharging time by half by conducting one
move for every two containers. The APM Terminal at Rotterdam uses robotic
gantries which are remotely controlled and fully automated to read the container
number and pick it up and drop it at its desired location without much human
intervention. The APM Terminal at Pipavav, India uses laser guided gantries to
correctly locate the position of the gantry over the container, thus improving its
operations efficiency. Maersk also introduced the “Dual Truck Cycle” at the Gateway
Terminals of India wherein the trucks carry containers while coming in and going out
of port instead of going empty one way, thus reducing costs and improving
operations. Maersk Group owns more than 64 port terminals worldwide and runs an
equal 60 as Joint Ventures.

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e. Training and development - Providing training to gantry operators at APM
Terminals to ensure they do the right thing in the right way thus reducing the time
wasted in locating the gantry over the container and not being able to pick it up
correctly. Maersk has invested heavily in one of the most advanced simulator training
for Gantry Operators as it understands that an efficient cargo operation can reduce
its turn-around time significantly. Maersk group has a subsidiary Maersk Training
which provides continuous training to its shipping personnel worldwide either by way
of online graded sessions and/or quarterly seminars held at various locations
worldwide. Maersk places significant emphasis on training of its personnel as it
realises that the human resource is its biggest capital as these trained personnel are
then well equipped to handle their multi-million dollar assets.
f. Fuel Bunker Planning - Maersk ships bunker fuel mostly at Rotterdam where
Maersk has a massive Heavy Fuel Oil and Diesel Oil storage capacity to factor in the
turbulent oil prices. This removes a variety of variabilities for bunkering of Maersk
ships as they can now plan their fuel requirements based on just one port, instead of
relying on local fuel bunker facilities which not only increase their costs but also time
wastage.
g. Communications - Improved communications with port facilities by electronic data
transfer of the ship’s details along with the port requirements for documentation has
led to significant cost reductions and better planning at Maersk. This reduces the
time wasted for documentation purposes. Also if the ship requires some port services
like Garbage Disposal, Oil Sludge disposal, Crew Change, etc. then the same are
communicated more than a day in advance of the ship’s arrival. Hence as soon as
the ship berths, all the services are rendered simultaneously without wasting any
time.
h. Turn-Around Time Reduction at Port – Maersk has been able to reduce turn-
around times at ports by entering into exclusive agreements with port facilities and
developing communication systems with the port facilities. This leads to elimination of
“waiting muda” when the ship berths at the port. Hence, as soon as a Maersk ship
comes alongside, the containers are ready to be loaded or discharged with the
gantries positioned in the exact locations. Earlier, the gantry operators were not sure
of the vessel location along the berth and hence would have to wait for the ship to
berth and then accordingly move their gantries to the “bay” of the container.
However, now with improved communications, the port facilities are now fully aware
of the exact locations of the containers on the ship to be loaded or discharged. The
ship’s position along the berth is also pre-notified so that the ship berths at the exact
same location as specified. Thus even before the gangway of the ship lowers, the
gantries start moving the containers thus totally eliminating the waiting time.
i. Lean Enterprise concept - Maersk Line realises that success can only be achieved
if they function as a “Lean Enterprise” in close conjunction with various parties
upstream and downstream to eliminate wastes. Maersk realises that its various
partners along the value chain are a web of opportunities which if tapped can lead to
significant cost savings for all. It thus entered into long term agreements with various
channel partners like the port facilities, its customers, the port service providers and
the like. Maersk Line’s biggest customers by volume are Walmart and Tesco who
rely heavily on the operational efficiencies of Maersk Line to maintain their
profitability and market shares. Tesco and Walmart follow the principles of

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“continuous replenishment” so that they do not go out of stocks at any point of the
day. While this ensures that they are able to service their customers better at any
point of the day, it also requires much more efficient scheduling and planning. In
order for the “continuous replenishment” to succeed, Tesco would require small but
regular shipments of its goods without any delays. Daily Maersk helps Tesco achieve
the same with absolute reliability, thus fulfilling the requirements of Lean
Consumption.
j. 2M Collaboration - Recently, Maersk entered into a vessel sharing agreement with
its primary competitor MSC encompassing a total of 193 vessels over the Asia-
Europe route with a combined capacity of 2.1 million 20 feet containers. The
agreement seeks to optimise the operations of both companies by utilizing lesser but
larger ships thus resulting in lower per container costs for the customer thus
increasing the cost competency of both these carriers. The first ship under 2M
Collaboration entered service on 9th January, 2015. Historical cargo flows and GDP
forecasts were taken into consideration while mapping the ship routes thus reducing
the delays and the expedite costs for customers.
k. Weather Planning Tools - Maersk Line has also implemented internet connectivity
across its entire fleet of ships which leads to better planning of vessel arrivals and
departures and positioning. The internet compatible softwares like BOPS (Bunker
Optimization and Planning Software) and VES (Vessel Efficiency System) interface
with the ship’s radar, GPS and internet to provide accurate weather forecasts for
entire ship’s route and the fuel needed to travel the route. This helps in planning for
unforeseen situations in advance like storms and cyclones, thus reducing the
inherent risks of sea transportation to the minimum. The VES also helps the ship’s
captain to benchmark his vessel’s performance with that of the sister vessels and the
entire fleet. Thus targets are fixed for vessel fuel optimization along with greater
service level and on time arrivals at ports.
l. Customer Service - For Maersk, its customers are of prime importance and
providing unhindered service to them is of highest priority. In order to be able to
maintain the same along with the introduction of Daily Maersk, they have reduced
their inherent complexities of making shipping orders for the customers. With only
two contact points and a few clicks on their website, customers can now book their
shipments on the Maersk website which has been made more user-friendly so as not
to waste the customer’s time. This saving of customer’s time is crucial from the “Lean
Consumption” perspective as it helps save significant time and efforts for Maersk
Line as well. This time can then be utilised to carter to and acquire new customers.
With the new added features, customers can not only track the status of the cargo
during shipment but also its exact location at sea using the satellite network of
Maersk.
Conclusion –
In its attempt to continue to be the market leader in shipping industry, Maersk Line
overhauled its entire operations in order to cut costs and improve customer service by
introducing the Daily Maersk service. Since the last three years, Maersk Line has been able
to remain highly profitable due to the Daily Maersk. However, this service requires a “Kaizen”
approach and small continuous improvements need to be made continuously in order to the

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changing customer needs. Many shipping companies are now replicating the daily schedules
concept in their operations thus making it an industry standard. While this is definitely useful
for the customers who now have a variety of shippers providing the same service, it is a
strain on the profitability of Maersk as they cannot charge a premium for their service.
However it should be noted that that the G6 alliance of MSC and CMA-CGM serving the
Asia-North Europe ports has a smaller frequency of 4-5 calls a week compared to Daily
Maersk’s 7 calls a week at the same port. Also the G6 alliance ships cover various ports in
Asia but the same port in Europe, thus reducing their actual port calls in Asian ports to less
than 4 a week. However, still it cannot be disregarded that such services are becoming a
norm. Hence continually improving their operations with technological improvements
interfaced with greater customer understanding is their need of the hour.
In this VUCA world, it’s important to be able to understand the market dynamics well in
advance especially when one has a costly and humongous carrying capacity. Capacity
Management is a crucial criteria for Daily Maersk while addressing the various limitations
being imposed on itself. There is a continuing quest for reliability even within the intermodal
transport of cargo which has not yet been covered with Daily Maersk as it seeks to
prioritize only the sea transport. However, with the large network of Maersk trains criss-
crossing the European territory, this definitely seems to be the next big opportunity to make
its operations lean. Maersk can develop transport hubs for joint capacity building either
with its distributors or in alliance with other shippers. Such alliances would not only help it
serve its customers extra-ordinary needs but also open up new opportunities for expansion.
This draws from the concept of Lean Enterprise wherein the firm works in close collaboration
with its distributors to serve the customers.
There would always be variabilities and time pressures on Daily Maersk and it is only with
careful planning and flawless execution can the same be achieved. As good it may sound on
paper, it might not be the same managing it which is a continuous challenge for Maersk Line.
The recent Chinese economy slowdown has resulted in critical management decisions
aiming at managing capacity with the improved expectations of maintaining the service
levels.
References
Nottleboom, T.,&Rodrigue,J.-P.(2008).Containerisation,box logisticsandglobal supplychains:the
integrationof portsandlinershippingnetworks. MaritimeEconomicsand Logistics,152-174.