Ahoy! Maersk Embraces the Internet of Things

Digitization and the industrial internet of things present lucrative opportunities in the maritime shipping industry. Maersk is leading the way with digital innovations that reduce costs and deliver on evolving customer needs.

What would salty, seafaring old timers say about fully digitizing the barnacle encrusted traditions of maritime shipping? They should say bring it on! Digitization and the industrial internet of things present lucrative opportunities in the maritime shipping industry. Maersk, the world’s largest container shipping company,[1] should continue to be concerned with digitization and the internet of things in order to maintain industry leadership and to enhance their profitability.

The continued evolution of the internet of things will build customer appetite for granular information, customized solutions, supply chain transparency, and outcome based value propositions.[2] The shipping industry, and Maersk, will face continued pressure to evolve ahead of these changing customer appetites.

Leaders at Maersk are paying close attention to digitization. They are seizing the opportunities presented by digitization and the internet of things with both short and medium-term measures.

In 2016, Maersk created the Chief Digital Officer (CDO) role[3] – a short term action with long term impact. In 2017, the CDO spearheaded a major partnership with Microsoft as Maersk’s cloud provider of choice[4] – signaling a dramatically increased need to store and fluidly access the data that will be gathered by thousands or millions of shipborne sensors. In another short-term move, the CDO and the Maersk analytics team employed sensors on ships in order to optimize route and speed as well as affixing tracking sensors to their shipping containers to gain efficiencies loading and unloading at various ports.[5]

These short-term steps are complimented by Maersk’s forward looking, medium-term actions on the digitization front. Moving forward, Maersk will employ predictive maintenance sensors on their ships in order to reduce maintenance costs and improve schedule reliability, by getting ahead of emergent maintenance issues and related delays.[6] In order to attack issues of efficiency, cost, and potential for fraud with regard to the paperwork required at each port of call and customs house, Maersk is working with IBM to develop blockchain solutions that will allow for paperless, transparent, and unforgeable ledgers.[7]

In addition to the steps Maersk is currently taking, I recommend an increased focus on Maersk’s cyber security posture. Increased digital integration and entrance into the internet of things exposes Maersk to significant cyber risks, as evidenced by the NotPetya cyberattack in 2017, which cost the company an estimated $300 million.[8] In order to achieve this enhanced security posture, I recommend that Maersk conduct a thorough after-action-review of the NotPetya cyberattack, share key lessons learned, and establish contracts for best-in-class cybersecurity capability.

As a market leader, Maersk is in a powerful position to shape the future “system of systems”[9] in which maritime shipping companies will digitally operate. The World Economic Forum report on the future of the industrial internet of things recognizes “the emergence of consortia to address the growing need for industry collaboration on common concerns such as security and interoperability.”[10] I recommend Maersk assert itself as the leader of such a consortium. This positioning will enable them to shape synergies, monitor and favorably manipulate barriers to entry, and enhance interoperability in order to deliver on evolving customer appetites for supply chain transparency and outcome driven value.

Maersk is well positioned to maximize the opportunities presented by the evolving internet of things, but should maintain focus and momentum in order to ensure they are not overcome by a nimble newcomer.

Many open questions remain about how Maersk can best move forward. For example: The various capabilities of smart, connected products fall into four rough buckets; monitoring, control, optimization, and autonomy.[11] What are some possible applications for smart devices with autonomy and control functions in the maritime shipping industry?

(797 words)

Sources

[1]Abraham Zhang and Jasmine Siu Lee Lam, “Daily Maersk’s impacts on shipper’s supply chain inventories and implications for the liner shipping industry”. Maritime Policy & Management, (2014), http://hdl.handle.net/10220/18865, accessed November 2017.
[2]Knut Alicke, Daniel Rexhausen, and Andreas Seyfert, “Supply Chain 4.0 in Consumer Goods”, McKinsey and Company Report (April 2017), https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/supply-chain-4-0-in-consumer-goods, accessed November 2017.
[3]Maersk, “Everything will be digitised,” https://www.maersk.com/stories/everything-will-be-digitised, accessed November 2017.
[4]Microsoft, “Maersk goes Big – Digital Transformation”, 26 April 2017, https://news.microsoft.com/2017/04/26/maersk-goes-big-digital-transformation-microsoft, accessed November 2017.
[5]“Profits overboard”, The Economist, 10 September 2016, https://www.economist.com/news/business/21706556-shipping-business-crisis-industry-leader-not-exempt-profits-overboard, accessed November 2017.
[6]Ibid.
[7]Agustina Calatayud, “The Connected Supply Chain; Enhancing Risk Management in a Changing World”, Inter-American Development Bank (Discussion Paper No IDB-DP-508), (March 2017), https://publications.iadb.org/bitstream/handle/11319/8204/The%20Connected-Supply-Chain-Enhancing-Risk-Management-in-a-Changing-World.pdf?sequence=1, accessed November 2017.
[8]Greg Knowler, “Cyber-attack impact hangs over Maersk’s Q3 earnings”, Journal of Commerce, November 6, 2017, https://www.joc.com/maritime-news/container-lines/maersk-line/cyber-attack-impact-hangs-over-maersk%E2%80%99s-q3-earnings_20171106.html, accessed November 2017.
[9]Michael E. Porter and James E. Heppelmann, “How Smart, Connected Products Are Transforming Competition,” Harvard Business Review (November 2014 Issue), https://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition, accessed November 2017.
[10]World Economic Forum, “Industrial Internet of Things: Unleashing the Potential of Connected Products and Services” (2016), http://reports.weforum.org/industrial-internet-of-things/general-findings/2-1-the-state-of-the-market/ , accessed November 2017.
[11]Michael E. Porter and James E. Heppelmann, “How Smart, Connected Products Are Transforming Competition,” Harvard Business Review (November 2014 Issue), https://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition, accessed November 2017.

Image Citation:

Microsoft, “Maersk goes Big – Digital Transformation”, 26 April 2017, https://news.microsoft.com/2017/04/26/maersk-goes-big-digital-transformation-microsoft, accessed November 2017.

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5 thoughts on “Ahoy! Maersk Embraces the Internet of Things

  1. This is an extremely interesting topic. Maersk being the largest shipping company definitely gives them the upper hand and puts them in the driver’s seat to spearhead change. The cyber security risk you’ve spoken off is definitely a huge concern especially as the world depends more on digitization and the increased scale of damage that could be caused. The larger the ship, the larger the target. To overcome this issue through technology could be by using higher levels of encryption, maybe even using a more closed loop system to prevent data leakage over the air. A consideration could also be going back to a more analog way of communicating with the ships and then converting that into digital when communicating with the customers. This way customers receive the information they desire and the information stays safe while within the system

  2. Fascinating look at the biggest player in the shipping market. Thinking about your prompt, I wonder what are the major cost drivers for the shipping industry? We’ve seen recently with the U.S. Navy the damage that can be caused by ship collisions. I don’t know how significant a problem this is for Maersk, but implementing a networked fleet could prevent similar occurrences. I also wonder about some of the key passage points for international shipping, e.g. the Panama Canal, the Suez Canal, and the Straits of Malacca. How could traffic be coordinated in a better manner through the use of digitization? Depending on various characteristics of the boat, spreading information and creating a market around access could increase the efficient flow of products around the globe.

  3. Great synthesis!
    With regards to your question on how Maersk can best move forward and the possible applications for smart devices with autonomy and control functions in the maritime shipping in light of security concerns. I think the most important and powerful control will be recognising that facing the potential of the IoT, things should not be done just because they are possible. In other words the most powerful control, will arguably be simply deciding whether or not to connect things to the internet. The firm should exercise some restraint and arguably limit the connection of safety critical equipment.

  4. It’s great to see a leading company in an industry still be willing to “try” new things (I like that no one will get that joke).

    It seems to me that one application for autonomy devices in shipping would be on speed/route adjustments to optimize for fuel efficiency. Just like autonomous vehicles promise greater fuel savings for cars, constantly monitoring external conditions and then making course adjustments to reduce drag and better position in a current could offer small but scale-able savings for the industry. A system like this could range from making small adjustments to a predetermined route or it could be used to optimize a route as a whole. This may also allow for reducing labor costs for personnel on the “boats” (again, only you and I will get that reference).

  5. Based on the evidence presented in the essay, Maersk is certainly on good path to be among the early beneficiaries of industrial IoT solutions in the shipping industry. Regarding your question on possible applications for control functions, I would argue that effective monitoring is among the key factors that enable control. Maersk is already equipped to collect a vast array of data along its value chain, e.g. through sensors on ships collecting data about route and speed or through tracking sensors providing insights around loading and unloading efficiency. Besides, predictive maintenance sensors will likely add another layer of data in the foreseeable future.

    In order to make effective use of all data collected, Maersk should shift focus on big data analysis in order connect the individual datasets and derive meaningful interpretations that ultimately result in higher control. In case Maersk is able to connect its predictive maintenance application to its operational backbone, the integrated approach is set to increase autonomy of the maintenance process.

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