8 Wastes: A Maritime Perspective

Empirical Look at 8 Wastes Impacting Your Bottom Line

So, What is Operational Waste Costing You?

Thought Experiment: What is the single greatest source of waste in your maritime operations? What do you estimate the impact of this waste to be on your bottom line? What is being done about it?

Each of the 8 Wastes (from Lean Principles) can become somewhat invisible amidst the frenzy of daily operations. In other cases, maybe you see and feel the waste piling up all around you, or hear about it from others, but assume the impact is marginal relative to other issues and opportunities on your plate. But make no mistake--each of the 8 Wastes, individually and collectively, is costing you real money! In this article, we apply the 8 types of waste to a commercial shipping operation using the example of a container ship. We hope this article is both informative and thought-provoking.

Being the apple of your customers' eyes and having a really healthy bottom line doesn't always require some fancy new product or market expansion. Sometimes it's just about perfecting your core business to a fine art with a relentless attention to detail. The rewards can be just as big.

Thought Experiment: Reflect carefully on each waste as it applies to your own operations. Where do you see it? Hear it? Feel it? Whether you are in ship-building or ship-chandlery, port operations or a software provider to the industry, you will find these wastes in physical and digital form across your business--the digital ones are particularly easy to miss and dismiss. Why not select a different waste each day over the course of the next weeks and identify as many instances of it across your business as possible? Talk to your experts and be mindful of creating safety in the conversation so you get an honest response.

A Quick Refresher on Lean Principles: 8 Types of Waste

In case you are unfamiliar with the 8 types of waste in lean methodology, let's review them quickly before applying them to maritime operations:

1. Transportation: Unnecessary movement of products, materials, or information between locations. This can lead to delays, added costs, and potential damage.
2. Inventory: Holding more materials, products, or information than necessary. Excess inventory ties up capital, takes up space, and may lead to obsolescence or waste if items expire.
3. Motion: Unnecessary movement of people or equipment within a workspace. Examples include excessive walking or reaching, which can lead to fatigue and decreased productivity.
4. Waiting: Idle time when resources (like workers or machines) are waiting for the next process step. This can cause delays in production and disrupt workflow.
5. Overproduction: Producing more than is needed or producing it sooner than required. This leads to excess inventory and potential waste if demand changes.
6. Overprocessing: Adding more steps or using more resources than necessary to complete a task. This can include unnecessary features, excessive paperwork, or duplicating efforts.
7. Defects: Producing items that don’t meet quality standards, requiring rework or disposal. Defects waste resources and can damage customer satisfaction if undetected.
8. Skills (or Underutilized Talent): Not fully utilizing the skills, talents, or knowledge of employees. This happens when workers are given tasks below their skill level or are not involved in problem-solving or improvement processes.

The goal of Lean is to identify and eliminate these types of waste, streamlining operations and focusing on value for the customer. While this article focuses primarily on bottom-line impact, it's important to be aware of how these wastes can have significant impact on your employees, customers, and partners, that may not show up as clearly in the numbers. Mapping the customer journey can be a very helpful exercise for understanding your client experience and seeing where these wastes appear for them. [we will share an article on this later and hyperlink].

A Maritime Example

Let’s look at a container ship operation as it undertakes a typical journey across the Pacific Ocean, carrying goods between Asia and North America. This example will explore how the 8 types of waste manifest onboard a commercial maritime operation, how they impact profitability, and, where possible, some real-world data to show the financial impact. While our lens is primarily that of a shipowner, shipmanager, or charterer, we hope others in the maritime community & supply chain will see relevance to their business.

Setting the Scene: The Journey of the  MV Profit Venture

The MV Profit Venture is a container ship carrying thousands of containers across the Pacific. As part of a large fleet owned by Ship Shape Shipping, the Profit Venture has a tight schedule to maintain. The journey should ideally be smooth, efficient, and cost-effective. But upon a closer examination through Lean principles, Captain Rosa notices areas of waste eroding profitability.

Waste 1 - Transportation: Unnecessary Movement of Containers

On each port call, the Pacific Venture often undergoes multiple container moves to balance the load, usually due to suboptimal stowage planning or last-minute cargo reshuffling. High-priority cargo might need to be accessed more easily, or specific containers may require repositioning to adhere to weight distribution rules. These adjustments require the ship’s cranes and crew to perform additional shifts, sometimes moving the same containers multiple times.

Impact on Profitability:

1. Direct Operational Costs: Each container movement within the vessel is estimated to cost between $50 and $100. For a ship with high cargo volume, these extra moves can add $10,000–$50,000 per voyage, particularly if we consider repositioning empty containers. Across several voyages, this can total hundreds of thousands in additional expenses, diminishing overall profitability.
2. Increased Labor Costs and Crane Usage: Each unnecessary move extends the work time required from both crew and cranes, increasing port labor and operational costs. Repeated shifts also accelerate crane wear and tear, potentially adding to maintenance expenses.
3. Risk of Port Delays: Excessive repositioning can delay departure, leading to late fees or penalties if cargo misses its delivery window, impacting client satisfaction and profitability.

Waste 2 - Inventory: Excess Spare Parts Stored Onboard

The Profit Venture carries an inventory of spare parts for its essential machinery and equipment, including items like engine components, pumps, and filters. While these spares are critical for reliability at sea, an overabundance of rarely-used parts takes up space and ties up precious capital. In many cases, parts remain onboard until they expire or become obsolete, resulting in unnecessary holding costs.

Impact on Profitability:

1. Capital Tied Up in Excess Inventory: Carrying spares that may not be used means that capital is tied up in idle inventory. A typical container ship can hold $50,000–$100,000 worth of spare parts, a percentage of which may be unused for years. Reducing this could free up tens of thousands in working capital annually.
2. Waste Due to Expiration or Obsolescence: Parts with expiry dates or evolving equipment standards can render old inventory useless. Replacing outdated parts results in direct financial losses. Changing shipmanagers can also result in unused spares being disposed of.

Waste 3 - Motion: Excessive Crew Movement Across the Ship

Due to limited automation and inefficient layout of systems, crew members often have to walk long distances within the ship—from the bridge to the engine room, for example—just to perform routine checks, inspections, or obtain tools. This repetitive, extensive motion results in lost time and contributes to crew fatigue.

Impact on Profitability:

1. Labor Cost of Lost Time: Crew members spend significant time moving between locations, reducing time available for productive, value-added tasks. Assuming just 1 hour of 'wasted' daily motion per crew member and an average labor cost of $50 per hour, unnecessary motion could cost up to nearly $1,000 per person per month.
2. Increased Fatigue and Accident Risk: Excessive movement causes fatigue, which is linked to accidents. Maritime industry data suggests fatigue-related incidents can cost $10,000–$30,000 per incident due to injury, downtime, and repairs.
3. Higher Insurance Premiums: Frequent accidents and incidents resulting from fatigue can lead to increased insurance premiums, adding to long-term operational costs.

Waste 4 - Waiting: Delays in Loading, Unloading, and Clearance

At various points in the journey, the Profit Venture encounters delays due to factors such as port congestion, lack of berth availability, and customs clearance. These waiting periods leave the vessel idle, potentially causing schedule disruptions and increasing costs.

Impact on Profitability:

1. Demurrage Costs: Ships incur daily demurrage costs while waiting at port, typically ranging from $20,000 to $50,000 per day. A single day’s delay can leave a material impact on the profitability of a voyage.
2. Missed Schedules: Delays can disrupt the schedule for subsequent port calls, leading to cascading penalties or late fees if cargo doesn’t reach its destination on time. This damages customer relationships and may result in lost business.
3. Increased Fuel Costs: Vessels may need to increase their speed to make up for lost time, consuming extra fuel. “Speeding up” is costly, as fuel expenses rise exponentially with increased speed, potentially adding tens of thousands of dollars to fuel costs per voyage. This is a particularly sensitive point with EU ETS, Fuel EO and the like coming into effect.

Waste 5 - Overproduction: Redundant Reporting and Documentation

To satisfy regulatory requirements and company protocols, the crew on the Profit Venture produces extensive reports daily. Many of these reports contain duplicated data entries for different stakeholders, including regulatory authorities, the shipowner, and local port authorities.

Impact on Profitability:

1. Labor Costs for Redundant Work: It’s estimated that up to 20% of a crew member’s time is spent on documentation, representing a significant opportunity cost. For a ship's crew with a collective monthly payroll of $30,000, redundant reporting accounts for about $6,000 monthly, or $72,000 annually, per vessel. While that payroll may be viewed as a sunk cosk, you could be getting substantially more for your money if that time were used more productively
2. Potential for Errors: Duplicative reporting increases the risk of data entry errors, leading to compliance issues or delays, which can incur fines or penalties.
3. Reduced Focus on Operational Efficiency: Excessive focus on paperwork diverts attention from high-impact activities, such as maintenance and safety checks, potentially increasing operational risks and costs.

Waste 6 - Overprocessing: Excessively Cautious Maintenance

The Profit Venture follows a conservative maintenance schedule, where parts and systems are often checked or replaced sooner than necessary to avoid issues at sea. While preventive maintenance is essential, excessive caution leads to unnecessary costs and part replacements that don’t add immediate value.

Impact on Profitability:

1. Unnecessary Maintenance Costs: Maintenance costs represent about 5–15% of operational expenses for most vessels. Overprocessing can add 5% more to this budget, costing around $100,000 annually on a $2 million maintenance budget.
2. Labor Costs for Redundant Tasks: Routine but unnecessary maintenance checks consume valuable crew time, costing hundreds or thousands in unnecessary labor hours each month.
3. Premature Disposal of Usable Parts: Replacing parts before they’re fully depreciated wastes valuable resources. This cost could be avoided by implementing condition-based maintenance, which monitors equipment health and allows parts to be replaced only when truly needed. Changing shipmanagers can also result in the premature disposal of usable parts.

Waste 7 - Defects: Cargo Damage Due to Incorrect Stowage

During a leg of the Profit Venture voyage, a miscalculation in container stowage led to damaged goods when the vessel hit rough seas. Poor stowage planning is common and can lead to container collapse, damage to cargo, and even safety risks.

Impact on Profitability:

1. Direct Cargo Claims: Cargo claims due to damage are common, with global container insurance claims amounting to about $400 million annually. A single cargo damage claim can cost between $10,000 and $100,000, depending on the extent of the damage.
2. Reputation Damage: Repeated incidents of cargo damage harm relationships with clients, leading to potential loss of business and missed future revenue.
3. Administrative and Legal Costs: Processing claims and handling litigation or insurance paperwork consume administrative resources, adding to operational costs.

Waste 8 - Skills (Underutilized Talent): Inefficient Use of Crew Expertise

Onboard the Profit Venture, skilled engineers and navigators spend a significant portion of their time on repetitive tasks, such as manual logging and routine inspections, which could be automated or delegated to lower-skilled personnel.

Impact on Profitability:

1. Labor Cost of Misallocated Time: Skilled crew members could be focusing on high value-added tasks that improve shipping operations and safety rather than low-skill tasks. Redirecting their time could reduce operational costs by 1–2%, such as by needing fewer crew, by improving overall efficiency, saving around $50,000–$100,000 annually on a typical $5 million voyage budget.
2. Missed Opportunities for Cost-Saving Innovations: Skilled crew members are well-positioned to identify improvements in maintenance, safety, and fuel efficiency, which could save the company tens of thousands annually if they had time to apply these skills.
3. Reduced Crew Satisfaction and Retention Issues: Underutilizing skilled talent can result in lower job satisfaction and higher turnover, increasing costs related to recruiting and training replacements. Indeed, it can disincentivize labour in the first place or attract the wrong sort of labour if the career is known to be menial.

It Adds Up

By identifying these 8 types of waste, shipowners, shipmanagers, and charterers are able to streamline operations and cut costs on the MV Profit Venture and across the entire fleet . By reducing unnecessary container movements, optimizing spare parts inventory, and leveraging crew expertise more effectively, Ship Shape Shipping is able to reduce operational costs and improve overall profitability by hundreds of thousands of dollars per ship annually.

In a high-stakes, high-cost industry like maritime logistics, these Lean principles illustrate how reducing operational waste directly impacts profitability, enhancing competitive advantage in a challenging market. Many of these wastes can be easily applied to other maritime, transportation & logistics, and physical goods businesses.

Thought Experiment: In your own business, which waste is most worthwhile to address?  Which one appears the easiest, low hanging fruit? If you are addressing these wastes to some extent, and you likely are, are you comfortable with the pace of progress? Are you comfortable incurring these costs while you wait?

Now What?

There are some common solutions for each waste, but much will depend on your specific enterprise and processes, training, systems & software you have in place, to name a few. If you're feeling the impact of waste, we can help! There is a good chance it costs less to fix these issues than what it's certain to cost you by living with them.