Daily Maersk’s impacts on shipper’s supply chain inventories and implications for the liner shipping industry

Abstract

The liner shipping industry has long been characterized by a weekly sailing frequency and schedule unreliability. This research is motivated by the launch of the revolutionary “Daily Maersk” service in late 2011, which introduced daily departures and “absolute reliability” in the Asia–North Europe trade lane. This article analyzes Daily Maersk’s impacts on a shipper’s supply chain inventories and profound implications for the liner shipping industry as a game changer. The quantitative analyses show that the impact of more frequent sailings is most significant on a shipper’s cycle stock, while improving schedule reliability substantially reduces safety stock and pipeline stock. Daily Maersk is most valuable for products that have high value density, high inventory holding cost ratio, low demand variability, and high service level (SL) requirement. These findings imply that the trend of liner alliance/merger/acquisition is likely to continue or even accelerate as shipping lines consolidate fleet capacity to offer more frequent sailings. Rival carriers may step up their involvement in terminal operations to improve schedule reliability. They also need to rethink about their SL targets and clearly define their preferred customer segments.

Acknowledgments

The authors would like to thank the industry professionals who provided help on the data. They appreciate constructive comments offered by the editor Prof. Kelvin Li, associate editor Prof. Wesley Wilson, and two anonymous reviewers. Their comments have greatly helped improve the article. This research was partially funded by Singapore MOE AcRF NTU Ref: RF20/10.

The authors wish to stress that this article is the result of an independent research project. The research project has not received any funding support from the industry, and the presented analyses are not influenced by any shipping lines.