CASE STUDY

Maersk Digital Disruption

Many businesses around the world were quick to adopt digital innovation and advanced
technology; however, shipping industry considerably lagged behind. This caused 11 out of 12
big names of shipping to face huge losses due to various factors like economic downfall and
technological backwardness.

The changing landscape of operations and the risk posed by the delay in digital disruption
influenced many big names to adopt leading technologies. One such example is of Maersk,
which is a leading Danish shipping company. The driving force that compelled Maersk to
adopt digital technology is the need of customers for a quick response to market trends. The
need for providing customers with better services through the delivery of accurate real-time
data also influenced the said digital transformation.

Digital Transformation
Remote Container Management System

Remote Container Management System was developed in 2011 to track important data like
temperature, humidity, and location of containers containing commodities like fresh produce
(Li, 2018). An illustration of the RCM system is given below:

Source: (Li, 2018)

This advanced interface allowed Maersk’s clients to track the location of their containers and
the condition of the goods.

Online Customer Service

The Trade Finance setup allowed Maersk to advance its financial procedures through
digitized transactions. This initiative allowed the exporters and importers associated with
Maersk to oversee the flow of cash and goods over digital networks. Digital transactions with
customers also assisted the company to maintain its top market position among its
competitors. The online customer services include online booking of containers, online
documentation, 24/7 customer support, and availability of price quotes (Maersk, 2019).

Maersk has also developed a big data analysis team that oversees operations like operational
efficiency, predictive maintenance, fuel usage and efficiency, and customer targeting
(Maersk, 2019). Further improvements in big-data analysis, like demand forecast, can further
enhance customer relationships.

Internet of Things (IoT)

IoT is a system of different devices that can transfer data over others through internet.
Maersk. The IoT journey of the company started in 2012 after its partnership with a
telecommunication firm, Ericsson. By 2017, Maersk had 300,000 containers with smart
capabilities like real-time location tracking, cloud data transmission, and GPS units (Harvard
Business School, 2017). As a result, the company achieved a huge reduction in carbon
emission and product wastage (food products and expired medical supplies) (Harvard
Business School, 2017).

In 2019, the company collaborated with a French technology firm, Traxens for deployment of
50,000 new IoT devices for its fleets (Verchot, 2019). Not only had these devices allowed the
company and customers to monitor physical conditions of the containers, but they had also
enabled the customers to regulate the temperatures inside the containers remotely. This has
further increases the competitive advantage of Maersk in the industry (Verchot, 2019).

Challenge

Cyber security became a huge challenge for Maersk in 2017. As a result of a virus attack, the
company lost up to 300 million due to a sudden disruption in its operations across many
countries. This incident calls for the need of an efficient security infrastructure that could
secure Maersk’s networks and important data transferred over them.

Solution
Maersk’s partnership with Traxen was a way to combat any further attacks on their networks
from cyber criminals. The new IoT networks use encrypted data that can only be accessed by
authorized users. Since the IoT devices are not permanently connected to the servers, the
networks and devices are hard to intrude (Verchot, 2019).

Key Outcomes
The digital transformation led to an immense increase in the revenue of Maersk. According to
the company’s website, 43% increase in revenue was seen since 2016, which represents an
addition of 12 billion USD. Similarly, a growth of 26% was seen in 2018 as compared to the
previous year (David & Madsen, 2019). Instant access to the online platforms has increased
the daily web traffic to Maersk’s website. Around 800 customers visit the website daily for
processes like container booking (David & Madsen, 2019).

RCM managed to secure a high economic value, since suboptimal shipping conditions result
into considerable loss of such commodities. The system also helped the company to build a
huge floating network in 125 countries and the control over the vessels and shipping process
increased over time. RCM and IoT system also allowed the company to reduce its expenses
and time spent on container inspection (Tracy, 2020). The value of company due to IoT
deployment is expected to increase to up-to 15 trillion USD in the next 20 years (Harvard
Business School, 2017).

Big data analytics and management enabled Maersk to reduce its fuel consumption to 13% in
2014 as compared to the previous two years through an in-depth analysis of vessel speed.
Enhanced targeting of customer through data analysis enabled Maersk to increase its sales
volumes and number of container shipment. An 11% increase was seen in the number of
cargo boxes in 2014, compared to 2012 (Harvard Business School, 2017).

For 2019, Maersk’s main focus was on enhancing its ocean revenue and customer services
through improvements in online services. The resulting financial statistics for both 2018 and
2019 are shown in the following figure:
 Source: (Maersk, 2020)

Despite weaker market conditions in 2019, Maersk, due to its digital transformation and other
initiatives witnessed a slight growth in its revenue and a 14% improvement in EBITDA.

Looking Ahead
Maersk has come a long way from a standalone business to a global leader of integrated
logistics and provider of supply chain solutions. The future brings further opportunities for
Maersk in terms of a digitized ecosystem. Considering the fact that Maersk already owns the
highest market share among its competitors, further investment in digital disruption and
innovation will considerably benefit the company in long-term. Despite its prominent market
position, Maersk still faces challenges from e-commerce giants like Amazon. There is no
direct threat from Amazon, since the company uses third-party logistics for shipment of
goods. However, the advanced data handling capabilities of Amazon can strengthen the
abilities of Maersk’s competitors (Amazon’s partner logistics providers). Therefore, it is
necessary for Maersk to keep on innovating its existing technological and digital
infrastructure. The key conclusion is that digital transformation and innovation will decide
the way shipping industry conducts business. It will also affect how different industrial
players will retain their customers and product portfolios.

References

Li, C. (2018). Maersk – Reinventing the Shipping Industry Using IoT and Blockchain |
Harvard Business School Digital Initiative. Retrieved 13 August 2020, from
https://digital.hbs.edu/industry-4-0/maersk-reinventing-shipping-industry-using-iot-
blockchain/
David, C., & Madsen, J. (2019). Leveraging technology to grow. Retrieved 13 August 2020,
from https://www.maersk.com/news/articles/2019/06/26/leveraging-technology-to-grow

Tracy, P. (2020). Ericsson and Maersk create world's largest floating network. Retrieved 13
August 2020, from https://www.rcrwireless.com/20160727/internet-of-things/ericsson-
maersk-industrial-internet-of-things-tag31-tag99

Harvard Business School. (2017). The Internet of Things and Maersk’s Gains from
Digitization - Technology and Operations Management. Retrieved 13 August 2020, from
https://digital.hbs.edu/platform-rctom/submission/the-internet-of-things-and-maersks-gains-
from-digitization/

Verchot, M. (2019). Shipping Industry Bets Big on IoT in Bid to Save Billions. Retrieved 13
August 2020, from https://spectrum.ieee.org/tech-talk/telecom/internet/shipping-industry-
bets-big-on-iot-in-bid-to-save-billions

Maersk. (2020). A.P. Moller - Maersk shows improved performance and strategic progress.
Retrieved 13 August 2020, from https://www.maersk.com/news/articles/2020/02/20/ap-
moller-maersk-shows-improved-performance-and-strategic-progress

Maersk. (2019). Accelerating our transformation. Retrieved 13 August 2020, from

https://www.maersk.com/news/articles/2019/02/21/year-in-review-2018-ceo-soren-skou-
message-accelerating-our-transformation