Reporting its second quarter earnings last week, A.P. Moller-Maersk said it is planning to boost the size of the company’s IT staff and that “Technology is core to both our vision to become the global integrator of container logistics and a key enabler to enhance our operating performance.”
The company said its technology strategy focuses on three areas:
- “Digitizing customer transactions, enabling Maersk.com to become our key transaction platform for all products and services.”
- Improving operations and increasing utilization of ships, containers and terminals with digitization and automating “core processes” in the company.
- Creating new revenue streams from digital products such as the electronic shipping platform TradeLens.
Carolina Dybeck Happe, the company’s chief financial officer, said in a call with investment analysts that the company has in total around 6,000 people working in information technology, about half of whom are contractors. The company is looking at increasing the share working directly for Maersk “in the more strategic areas, and the important areas, and then keep a healthy balance of contractors for the rest,” she said.
Adam Banks, Maersk’s chief technology and information officer (CTO), told the Danish newspaper Borsen in July that the company was hiring 26 new employees a week and that in a year and a half it planned to have 4,500-5,000 IT employees. He said two-and-a-half years ago the company had an 800-person IT staff.
This year the company introduced “Maersk Spot,” a product that offers shippers carriage of their cargo at a fixed price as well as guaranteed equipment and space in exchange for a penalty if they don’t show up with promised cargo.
Chief Executive Officer Soren Skou said the Maersk Spot was an “important step in the digital journey of the company.”
Maersk said it is now offering the Maersk Spot product on all trade lanes except in and out of the U.S., and at the end of the second quarter it was moving the equivalent of about 8,000 40-foot containers, or 8 percent of spot volumes, using Maersk Spot.
Silvia Ding, global head of ocean products at Maersk, said in June that it was “not uncommon to see overbookings to the tune of 30 percent, and often this leads to rolling of the customers’ cargoes since there is overbooking to compensate for the high downfall.”
Ding continued, “This creates a lot of uncertainty for our customers,” and Maersk Spot will allow “customers to move their cargo in a much simpler and more reliable way.”
A Maersk spokesman said the company is planning to launch Maersk Spot in the U.S. in the fourth quarter and is preparing an offering compliant with Federal Maritime Commission regulations.
Maersk said it has “achieved improved fuel efficiency for our vessels through technology,” allowing it to prevent an increase in bunker costs even while moving more cargo. Though the average price for bunker fuel in the second quarter of 2019 was $436 per tonne, 8.5 percent more than in the second quarter of 2018, the company was able to keep fuel costs at $1.2 billion for the quarter by reducing bunker fuel consumption by 7.5 percent “mainly due to efficiency initiatives, the more efficient newbuild vessels delivered in the past year as well as from a stable network in the second quarter that also impacted schedule reliability positively.”
Fuel costs for shipping companies are expected to increase dramatically next year when IMO 2020 – the International Maritime Organization agreement that will require ships not equipped with scrubbers to use low sulfur fuel – goes into effect on January 1, 2020.
Skou said Maersk has been “very successful in terms of getting fuel adjustment clauses into all contracts. We are right now at 90 percent coverage on that and on the fuel supply side we are testing some scrubber technology. We are making supply contracts for low sulfur fuel and we believe generally and we are reducing fuel consumption very importantly to mitigate the extra costs, so we believe we are well-prepared at this point in time.”
Maersk noted that automation is also helping it improve service delivery and that since the first quarter of 2018 it has improved service reliability from 70.4 percent to 85.5 percent in the second quarter of 2019, citing figures from the consulting company SeaIntelligence, though it noted these figures exclude Hamburg Süd, which Maersk acquired in 2017. Alan Murphy, CEO of SeaIntelligence, explains the metric Maersk cited is his company’s “global measure of vessel schedule reliability, where ‘on-time’ is defined as actual vessel arrival within +/- 1 calendar day of scheduled arrival. We measure the schedule reliability of Maersk and Hamburg Süd separately, as they offer a different set of services.”
Speaking about TradeLens, a “blockchain-enabled” digital shipping platform jointly developed by A.P. Møller-Maersk and IBM, Skou said Maersk is “building towards TradeLens becoming a business in its own right as if you will, an internet of trade.”
In addition to Maersk, carriers such MSC, CMA CGM, Hapag-Lloyd and Zim are joining TradeLens, as well as terminals and logistics companies.
“It was a very important step to get commitments from some of the largest carriers in the world to join the platform because without the data from the carriers, the platform will not be interesting for the customer,” said Skou.
“The rest of this year we’ll do the work to actually get these carriers on board,” he said. “We will have around 60 percent of global capacity on the network then on the platform. At the same time building the platform with the landside participants – container terminals, container truckers, railroads and so on, so that we get as much of a network covering as many participants as possible.”
Skou said, “The concept for TradeLens is that the shippers will be the customers of TradeLens. So the revenue model will be that shippers will be paying for access to all the data on the shipments. Today we have today around eight customers, all of them big name companies.”
He said these “pilot customers are interested in the new platform because they think it can help to manage their supply chain, improve visibility, make it more efficient and so on.”
Computer security remains a continuing challenge for Maersk, which in June 2017 was hit by what CTO Adam Banks described as “the world’s most expensive cyberattack.” In its 2017 annual report the company said the attack caused by the NotPetya malware resulted in it suffering “losses in the order of $250-$300 million covering, among other things, loss of revenue, IT restoration costs and extraordinary costs related to operations.”
Banks says that “if you look at the defensive side of cybersecurity, perimeter security is no longer sufficient. With the state actors that we see at play today, we have to assume they are inside. So we need the perimeter, but equally we need to be vigilant inside that perimeter looking for odd behaviors and reacting to those.” He said there is a need for companies to focus on “cyber-hygiene” because the rise in nation-state cyber-crime means many more companies are likely to be impacted.