Digital shipping will mean harnessing communications, technology and data
With a speaker on every conference platform telling us shipping is ripe for technological disruption, the industry is arguably facing its biggest challenge since the invention of the shipping container.
In some ways history is repeating itself. When he first proposed the concept, Malcom Mclean was met with resistance from all quarters but he demonstrated that a simple idea could revolutionise an industry and in the process drive a boom in global trade.
But McLean’s story also contains a warning; that innovation is not a one-off event but a continuous state and that one success does not constitute a trend. Wrong-footed by an era of cheap oil and increasing service speeds, his next venture went bust and later bets on rising oil prices consumed his considerable fortune.
McLean would have needed extraordinary foresight to have got the market right every time, but many of the same issues cloud the ability of today’s shipping leaders to see the future of their business with great clarity.
The key to doing so is not gut feel but data; arguably the element with as much potential to impact an industry as fuel prices or economic growth had in previous decades. But if data is the shipping container of the 21st century, then another major difference between today and the 1950s is another revolution we have come to take for granted: communications.
Mobile, global and able to cross borders at increasing speed, today’s owners can take advantage of proliferating services, higher throughput and lower costs. So transformational is the technology that its limitations now are to some extent, the applications we can devise for it.
So given the need and opportunity for change in shipping, how do owners separate fact from fiction when it comes to the big tech trends: platforms, AI, 3-D printing and the need for new business models. At the same time, what strategies should shipowners, operators and managers adopt to realise the short term benefits onboard and ashore?
In order to benefit from digitalisation, ship owners and operators will need to create sustained value from digitalisation and just adopt what might be seen as a traditional ‘cost management’ approach. But this is far easier to assert in theory than to deliver in practice.
This analysis is not simply a ‘nice to have’ strategy that can be laid across an existing shipping model with the hope that it fits. There are firm reasons to believe that the cyclical model of shipping is itself incapable of competing in the new digital economy.
Certainly some old certainties have been swept away. There is now no limit on shipyard capacity, theoretical or otherwise. The world’s major trading nations include one no international shipping fleet of its own and another which wants to control its own supply chains.
The pressing need to develop better value proposition has some early adopters, companies who have tried to define how value can be constructed from digitalisation and to build a strategy – and not just a set of tactics – around it.
One very traditional shipowner, Torvald Klaveness, decided to try and understand everything its competitors were doing as well as its own assets and share the results with customers. The visibility brought by data and communications enabled it to create a platform that provided full visibility to the most opaque of markets and improve its competitive edge.
Trends to Watch
The biggest tech trends are also probably of most interest in the long term. 3D printing will increasingly find its way into vessel componentry, repairs and spare parts but the milestones to date have been about proof of concept rather than business case. Neither quick nor cheap at present, we will see a continued trickle down of the technology until it is both.
Likewise Artificial Intelligence is a concept whose impact can be interpreted in many different ways. Industrial users are already taking advantage of learning algorithms, automated reporting systems and more risk-based, predictive operations. In the shipping industry, applications that use AI to analyse behaviours in the logistic chain, risk scenarios and enable better planning and contingency measures are planned or already in operation.
Augmented Reality is likely to have an impact on the industry sooner as it combines the practical benefit of better communications with the need to provide support to remote workers who can benefit directly from the input of specialists in tackling complex technical challenges.
What can be said for certain is that shipping is joined the era of the platform. Those already established include the many vessel tracking services, DNV’s Veracity and other class society initiatives as well as the numerous Blockchain partnerships.
Blockchain in particular is one of the most exciting initiatives to have come from the programmer/hacker community, providing a means of securing digital information flow in an industry that is still awash with paper shipping documents. If Blockchain has challenges they are on the one hand its association with crypto-currencies and on the other that the computing power it requires will keep it securely on dry land for the foreseeable future.
Paths to Follow
In terms of how to move forward, the first observation for any CEO or fleet manager is that a digital strategy driven by communications demands security. Just as it is not enough to presume that it won’t happen to you, it is foolish to believe that cyber security is another example of IT hype that can be ignored.
Accepting the assertion that there are two types of companies; the hacked and those that don’t yet know it, means that a digital data strategy must put cyber at its heart and that this starts at C-level and travels all the way to the seafarer.
The number of service providers falling over themselves to offer security audits, certification and applications demonstrates the need to choose wisely but the fact remains, data demands security; it is an enabler on your strategy, not a constraint.
The example of Klaveness in cracking open its fleet operations could certainly be termed Big Data and there are a number of projects that claim this title. As a result, it can be a daunting prospect to try and establish which data a company needs to collect, manage and act on – and why.
For the most part owners and operators have traditionally been focussed on the low hanging fruit – fuel consumption and vessel performance. This reflects both the relative prices prior to 2008 and the fact that without the ability to reduce crew numbers, fuel is the biggest ticket.
Fleet owners and operators now need to think much more broadly about their performance. A decade of low fuel prices will come to an end in 2020 when the global sulfur cap is in effect and carriers will need to understand where value can be gained and savings made.
In addition, the regulatory burden that owners work under is set to become increasingly electronic and data driven. Reporting will increase once the agenda is set for shipping’s strategy on carbon emissions and other environmental regulations.
Not all data is big
The future confluence of regulatory reporting and performance data is something many software vendors have already noticed and are capitalising upon. But the issue of gathering and working successfully with big data is one that continues to pose practical challenges. Classification Society ABS noted some years ago that the data it could collect on vessel performance was more than enough to overwhelm the recipient.
This is in part because managers like to see information presented in uniform ways and also because there is a clear need to focus on the outliers and exceptions.
This enables the owners to concentrate on the issues that need most attention rather than wade through lakes of data in the hope of catching something. The next logical stage of this evolution is condition-based monitoring of hull and machinery, a concept already employed by OEMs and now being extended to the whole ship.
This ‘digital twin’ concept could radically alter the process of ship management and operations, with data streaming to dashboards that enable a more holistic analysis of the vessel’s condition.
But not all data needs to be big to be effective. In 2015 Maersk launched a monitoring programme to track each of its 270,000 refrigerated containers by fitting them with sensors that enabled two-way communication through cellular and satellite networks.
Maersk set up the project for its own needs and used it to monitor the temperature of each box and make adjustments depending on the vessel schedule, as well as track maintenance and schedule repairs.
In the process it saved millions of dollars in cargo claims, despite the data required being comparatively small, relying as it does on a hybrid shipboard network and satellite connectivity. In June 2017, Maersk opened up the programme to shippers and so far 1,000 beneficial cargo owners have signed up, checking their shipments in real-time with the system and increasing supply chain.
Sometimes - as the humble container reminds us - the simplest ideas can have the biggest impact.
By Rashid Baba
a/Chief Commercial Officer