Maersk: On-time focus could boost revenue 17%
Maersk Line is apparently serious about ramping up its schedule reliability.
The Danish carrier earlier this year boldly declared it would aim for 95 percent on-time arrivals, allowing its customers to reduce their buffer inventories and streamlining its own network.
In an article in its in-house magazine, Maersk Post, the carrier said it has begun to quantify the impact better schedule reliability could have on its own bottom line.
'For Maersk Line, achieving a 95 percent level of 'on time reliability' would not only mean net annual savings of up to approximately $250 million, but also additional market share and volume,' the article said. 'At present, many customers use several carrier lines to spread out their transport risks. But a survey of 30 of Maersk Line's largest customers found that if Maersk Line could deliver their cargo on time with 95 percent consistency, the additional volumes they would consider shipping with Maersk Line would be equivalent to a 17 percent boost in revenue.'
Of course, the move is aimed at helping Maersk's customers also improve their own bottom lines.
'For international companies, supply chain delays can be the difference between profit and loss,' the article said. 'One Maersk Line customer said that of its $1 billion transport budget (air, land and sea), a whopping $75 million is reserved purely for contingency planning. Maersk Line's research found that incremental gains in reliability do little for customers, but a dramatic increase in reliability would have a powerful impact on their costs per container.'
The man heading the division with Maersk tasked with improving on-time performance said the company has admittedly taken on a huge challenge.
'It's a huge undertaking and a high bar we've set, but it has to be if we're really going to set ourselves apart from the competitors,' Maersk's Mogens Larsen said in the article. 'The benefits to our customers and us of 95 percent reliability are truly profound.'
To quantify the benefits further, the article said Maersk's research team found that a 95 percent on-time delivery rate would mean $150 in cost savings per container to one customer that ships high-value cars from Asia to the United States.
To improve performance, Maersk will introduce a bottleneck prediction software tool this month on its Asia/Europe services. Customers with urgent shipping needs will soon be able to pay to 'upgrade' their cargo to priority loading, with a priority product upgrade system available in late 2010.
Finally, Maersk plans to improve its vessel schedule planning and network design, with changes in 11 terminals on services between Asia and Europe to be implemented between June and November.
Elsewhere in the in-house magazine, Maersk Line Chief Executive Eivind Kolding said the company was 'out of the storm.'
'We have seen a turnaround in our profitability compared to our peer group during the last two years,' Kolding said. 'Yes, we have been helped by the market in posting a positive first-quarter result, but the numbers prove that our streamlining efforts have worked — we have caught up with and are now ahead of most of our peers in terms of profitability.'
Kolding said he expects Maersk, the biggest container line by capacity and volume, to widen the gap between its rivals in coming years.
'We are a leader in the container-shipping industry, but we want to widen the gap still further — with the solid base that we have established, we have the opportunity to become the industry's undisputed leader,' he said. 'Now we are putting more focus than ever before on our customers. The core drivers will be ease of business, unmatched reliability and best environmental performance.
'It's not just about doing what we do today a little bit better tomorrow; we will change the game, to truly set Maersk Line apart from the competition.'
Kolding said Maersk has looked for inspiration outside its industry.
'For example, we want booking a container with Maersk Line to be as easy as ordering a book online,' he said. 'But we also realize that we cannot serve our customers solely on an online platform, which is why we have taken inspiration, for example, from the customer service industry's approach to exception management, i.e., the proactive handling of unexpected situations. We want our customers to feel trust, cared for and pleased when they do business with Maersk Line.'
To achieve that trust with customers, Kolding emphasized a need to standardize customers' global interactions with Maersk.
'We must deliver this customer experience in a standardized way,' he said. 'We have already achieved a lot in simplifying our organization and continuously improving our service delivery to customers, and have developed many local best practices; but greater efficiency has to be an ongoing effort. Optimization means having global standardization, and I see no reason why we cannot take a proven local best practice and execute it right across the organization.'