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Cargo drones and data swarms: experts weigh in on digital transformation in shipping & maritime

We spoke to twelve individuals that have a keen interest in digital transformation in shipping and maritime, from the innovation heads of large companies to start-up VCs and asked them what the industry can do to prepare for it.

Can you imagine a world where ships might never call a port again? Or where seafarers are participants in a human “data swarm” capturing real-time information that augments their vessel’s own information system? This is what digital disruption in shipping looks like – and it’s coming.

We spoke to several individuals that have a keen interest in IoT and digital transformation in shipping and maritime, from the innovation heads of large companies to startup VCs and asked them what the industry can do to prepare for it.

Read their responses below.

Birgit Liodden, Director, Nor-Shipping

Commercial disruption comes first - the industry is awaiting a necessary breakthrough in satellite systems. Everything required is there - so it's only a matter of maturing the mindsets of industry players. I have discussed this quite a lot with shipbrokers for years now, as I believe some areas of their work will be among the first fields to be disrupted. Xeneta and other platform entrepreneurs have worked on interesting solutions for years.

And now the recent pilot on a digital auction platform launched by the world's biggest iron ore charterer BHP Billiton marks a breakthrough that any broker should be aware of. The move by Maersk to cooperate with Alibaba is one good example of how the industry can proactively approach disruption. An obvious business case arises from the fact that it's nearly impossible for a private person or small company to ship stuff without going to a spedition firm such as DHL, who charges huge amounts compared to the actual seafreight part of the shipment.

But the bigger potentials for our industry comes when satellite solutions go through the same market change that landbased telecom went through, making data traffic cheap and accessible. This in combination with cheap and robust micro sensors both on/in ships and cargo, will impact heavily. And then there is blockchain - opening up the way for safe and transparent transactions of any data. Bills of laden, legal documents, commercial contracts - you name it!

Wolfgang Lehmacher, Head of Supply Chain and Transport Industries, World Economic Forum

There are many areas where we can experience the impact of digitization. I will point out just three developments which have the potential to disrupt the shipping industry: automation, paperless processing, and the digital supply chain.

First, automation has shown over a long time its impact in all areas along the supply chain. Autonomous terminals and cranes in ports are a reality. Drones have been tested to be used to deliver supplies like parts, food, medicine or even smaller cargo from shore to moving ships. One extreme vision is that the ship of the future might never call a port again because cargo drones will take care of loading and unloading of the moving vessels on sea. Cargo ships of the future could be largely crewless and remote-controlled. Conceptually, autonomous shipping is knocking at our doors. Those who master the technology can harvest the benefits and increase their chance to win the commodity play. Players need therefore to review continuously every process and check how automation can yield additional efficiencies.

The second area is secure, accelerated, and paperless processing through distributed ledger technology (DLT), the so-called blockchain. Barclays for example reported the first blockchain-based trade-finance deal in September 2016. The process from issuing to approval of the letter of credit that usually takes between 7 and 10 days could be reduced to less than 4 hours. Maersk, the world’s largest container shipping line, has been participating in a proof of concept (PoC), with blockchain expertise from the IT University of Copenhagen, to digitize the bill of lading, i.e. the list of a ship's cargo, which can generate easily a pile of paper 25 centimeters high. Traders and buyers regularly don’t know the location of the goods ordered, their condition or whether they have been shipped at all. DTL-powered processing can inform all parties about the position and conditions of carriage products, including temperature and moisture monitoring with the results hashed to a blockchain. Also, back-office processes can be digitized. A.P. Moller-Maersk for example is e-sourcing most of its purchasing.

Third, automation and digital processing are turning supply chain management into a technology game, into the digital supply chain. Supply chain management has been the turf of the Third-Party Logistics (3PL) players. Now, technology could enable manufacturers and brands to enter this field. Not because they wish to do so, but because they require service levels, including total supply chain visibility, which traditional 3PL players might struggle to provide. Therefore, 3PL operators need not only to make the utmost effort to deeply understand the customer needs and wants but acquire the necessary digital core competences through internal talent pools and external specialists to meet customers’ expectations. Those who don’t embrace the digital revolution risk to find themselves out of business very soon.

Krystyna Wojnarowicz, Founder, CTO and Chief Strategy Officer, MARSEC Inc. 

Digitalization and the industrial Internet of Things will have a tremendous impact on the maritime operations - simplifying tedious tasks and manual processes both onboard and onshore. The industry players who will embrace this “tidal wave” of change early will be the winners tomorrow. The winning approach here is to “think big but start small”:

Firstly, have a long-term vision and a digital strategy with clear business goals 'how to monetize’ on this disruption and the potential new business models including new revenue streams that will come along with the change. Secondly, start by identifying very concrete “pain-points” and apply digital technology to help you solving them - but keep it tight to your business goals - don’t fall into the trap of doing the "tech stuff for the sake of tech” only. Take your first steps by engaging in well-defined 3-6 months Proof-of-Concept (PoC) digitization projects that will help you understand what technology can do for your business. Then proceed with a full-scale rollout.

Areas most affected by digital tech in the years to come will be: integrated logistics and customized services; operations automation / industrial Internet of Things; sea traffic management / connected navigation; remote operations, predictive and prescriptive condition-based maintenance and supply chain transactions / block chain technology and smart contracts.

Lars Jensen, CEO & Partner, SeaIntelligence Consulting, & Partner, LinerGame 

We'll see a transformation of the way pricing and yield management is performed. The rapid increase in spot rate transparency will only continue to accelerate as more online freight platforms will see the light of day. This will necessitate carriers to develop new pricing strategies to be successful in such an environment. These strategies would need to focus on two key areas. One is an ability to determine freight rates based on yield management calculations taking the totality of the network as well as the booking uptake in various locations along a service into account. The other is the transformation into an environment where contracts are enforceable, in turn reducing the volatility in the industry.

Longer term we will see a complete automation of large parts of the supply chain - at least in the cases where the transportation proceeds according to plan. This means that carriers will not compete on their ability to move a container from point A to point B - it will be a necessity that they can do this in an automated fashion, otherwise they will cease to be a part of the landscape. Instead they will need to compete on their ability to assist the customers when exception occur. And given the nature of the industry, plenty of exceptions will occur due to e.g. weather and mechanical failures.

Oskar Levander, Vice President Innovation, Engineering & Technology, Marine, Rolls-Royce 

Digitalisation is set to revolutionise the landscape of ship design and operations. The collection and analysis of significant quantities of operating data and the development of enhanced analytic capabilities will allow companies like Rolls-Royce to offer a portfolio of products and services - comprising equipment and system health management, optimisation and decision support and remote and autonomous operations - which will allow ship owners and operators to respond to market challenges transforming their operations by harnessing the power of improved connectivity, Artificial Intelligence (AI) and “big” data to manage their ships and their fleets more efficiently, effectively and safely.

With no crew to accommodate remote controlled and autonomous vessels can be designed with a larger cargo capacity, better hydrodynamics and less wind resistance. Certain features of today’s ships, for example, the deck house, the crew accommodation and elements of the ventilation, heating and sewage systems can be removed. This will make the ship lighter, cutting energy and fuel consumption, reducing operating and construction costs and facilitating new designs. As a consequence, an autonomous general cargo vessel might reduce transport costs by approximately 20% compared to a more traditional vessel.

It will be crucial to the development of remote and autonomous ships by providing a massive set of historic statistical data from which robust trends can be drawn and valid predictions of ship reliability made. Significantly more standardised and reliable ships will be essential if they are to operate at sea for several weeks without on-board engineers. We believe remote and autonomous shipping is the future of the maritime industry. As disruptive as the smart phone, the smart ship will revolutionise the landscape of ship design and operations.

Remote and autonomous ships have the potential to redefine the maritime industry and the roles of the players in it with implications for shipping companies, shipbuilders and maritime systems providers, as well as technology companies from other sectors, especially automotive. Constant real-time remote monitoring of vessels worldwide will see ships become more closely integrated into logistics or supply chains, enabling global companies to focus on using a whole fleet to best effect, generating cost savings and improving revenue generation. This has the potential to create new shipping services, such as online cargo service marketplaces, more efficient pooling and leasing of assets, and new alliances. Some of these services will support existing players in the market and others will be more disruptive – allowing new players to enter and potentially capture a significant share of business in the same way as Uber, Spotify and Airbnb have done in other industries. 

Anders Höfnell, Business Development Manager for Sweden, Lloyd's Register

Digital disruption will revolutionise shipping, bringing with it a new era – the ‘cyber-enabled’ ship, computing powers will improve, and the data generated will grow exponentially. Today’s leading manufacturers and ship operators want to innovate using the latest information and communication technology systems, going beyond traditional engineering to create ships with enhanced monitoring, communication and connection capabilities – ships that can be accessed by remote onshore services, anytime and anywhere. Cyber systems provide opportunities to combine traditional components with more complex systems that deliver useful data that can be analysed. One area this will greatly support is condition-based maintenance, and we expect to see the industry move away from fixed maintenance intervals to more tailored and predictive maintenance, reducing risk in operations and providing improved cost-efficiency. To prepare for this, the industry would need to introduce a standardised and secure platform for processing and analysing data (with a consolidated database). Fuel burn, wear and tear, tolerances and vibrations are just a few examples that could be cross referenced to loading conditions and other operational data. It is vitally important that the industry gives special consideration to the training of all seafarers and other industry personnel to make for a smooth transition to a cyber-enabled shipping industry.

Matt Duke, Vice President Digital Platform, Kongsberg Digital  

The age-old need of moving cargo from A to B to C will of course remain, but digital disruption has played and will continue to play a key role in the future of Maritime. In simple terms, digital tends to gain momentum in areas where a benefit can be measurably achieved. Be that improving safety, vessel performance or helping to meet industry environmental goals. Today there is a lot of focus on the main cost drivers for a shipper.

These initiatives tend to be related to improved energy efficiency on-board, and more efficient utilization of crew. We also see a paradigm industry shift from calendar-based maintenance towards predictive condition-based maintenance solutions. Concurrently it has become a C-Level objective for many ship operators to ensure that they are effectively and accurately capturing key information on-board from bridge, engine room, cargo control & related systems. This information is the foundation for business analytics, business-crucial tools to measure, predict and improve performance. We see a true step change in the access and quality of information being harvested from physical assets. IOT is a buzzword, but the results of smartly using sensor data are compelling. In the future we see varying degrees of digital disruption towards the entire shipping ecosystem.

Today we still see a reliance on sub-optimal processes related to areas such cargo documents, vetting, port inspections and dry docking. Anywhere you see paper trails or high degrees of manual work are also targets for digital. These improvements will benefit the industry, with higher degrees of efficiency, safety and reduce environmental footprint. Shippers or those working for them who do not embrace digital change will risk being disrupted out of the shipping value chain.

Michael Wax, CCO & Co Founder, FreightHub 

The logistics industry is currently facing major changes through digital innovations. The disruptive force is best represented by four major trends: Firstly, the rise of logistic marketplaces seeking to connect service providers with customers; secondly, the use of Supply Chain Analytics, which enables companies to increase transparency by gathering and analyzing data, e.g., of rates or trade volumes; thirdly, the deployment of IoT-based tracking systems that aim to provide end-to-end tracking of cargo and fourthly, the rise of online forwarding platforms, which control the entire value chain, ultimately leading to better data quality and higher service levels.

All of these trends decrease operational cost, increase efficiency, improve user experience and are driven by start-ups. Whereas B2B start-ups in logistics are still lagging behind B2C delivery start-ups in terms of funding, they are catching up on their mission to democratize global freight and urge the long-established players to step out of their comfort zones.

Dr. Phillip Belcher, Marine Director Intertanko 

On digital disruptions there are a number of aspects that are particularly vulnerable. Firstly, the signals received from such things as GPS. With very integrated bridge systems, the GPS signal is key and very vulnerable from external interference. This though is easily combatted by the use of other traditional navigational such as parallel indexing techniques on the radar and visual bearings. The second area is the third party data packages sent to ships to upgrade software. This risk can again be mitigated through the application of the industry guidance on cyber security.

Ivan Tintore, Co-Founder & Executive President iContainers 

We are talking of a huge industry, possibly being one of the latest to be disrupted by technology. I think that the disruption will most likely come on the way the Exporters-Importers book and make shipments. The technology now is giving a wide view to the users of pricing, booking and transit-times very similar to what happened in the Travel industry more than 10 years ago. This is very important in this opaque industry where the user is not given all the information. Putting an online, transparent pricing and booking process kills the opacity and makes the business transparent to every player.

Nicholas Chan, Managing Director, Fredrik Marine, Founding Partner, Azione Capital

The biggest area for digital disruption is the on-shore time-sensitive maritime value chain (ie. Agents, chandlers, port authorities, etc). Significant fragmentation and lack of unified systems/processes means significant improvements can be achieved when existing paper work processes start going digital incrementally towards Electronic Data Interchange globally with a slow but steady adoption of technology, the tipping point should come in the next 5 – 10 years. The shore-side stakeholders would do well to seek out providers that can rapidly improve their operations by the procurement of software systems with industry best practices (for a start) and prepare for Electronic Data Interchange 3 - 5 years after they streamlined their operations.

Next big area for disruption is integrated ship-to-shore management with greater automation in preparation for near-autonomous vessels. With satellite broadband gaining adoption and the cost of sensors dropping, the ability to simultaneously gather big data from vessels via new sources (i.e. drones, sensors, sensemaking cameras, triggers) and manage/tweak vessel operations (i.e. Real-time main engine monitoring and control) is becoming more a reality, resulting in greater efficiencies and assisted decision making and expertise Over-The-Air while retaining the same baseline number of crew for safe operations.

This applies equally to commercial shipping and the oil and gas industry. The operators would do well by hiring or contracting with experts in maritime technology to implement sound policies that maximizes the technological spend which most operators consider as an operating expense and convert it to an investment which yields safer and more efficient operations.

The last part of disruption is the seafarer. Almost every seafarer now is equipped with a smartphone. The ability for each seafarer to be able to capture real-time information either automatically (by proximity sensors) or by choice (ie. taking photographs or having applications to capture voyage or engine data at the seafarer’s station) acting as a “data swarm” augmenting the vessel’s own information system to be able to contribute to the vessel and also in its environmental management. The Ship Management firms would do well to seek how to make use of the seafarers’ digital devices rather than seeing them as a distraction to work.

Brian Laung Aoaeh, Partner, KECVentures  

During our research on shipping, the themes that emerged as opportunities start-ups are pursuing most were: marketplaces that make it easier for shippers to communicate directly with NVOCCs and ocean carriers, and perhaps transact primarily on a spot-basis; data platforms that increase the end-to-end real-time transparency that shippers, and their customers, have into the location, and condition, of merchandise being shipped, and software that can be used to increase the operating efficiency of ocean carriers.
A theme that kept occurring while we researched freight trucking, and shipping, is end-to-end transparency across shipping and trucking. I anticipate that these will be the areas of the shipping industry that experience the most change over the next 5 years or so.

To prepare for these developments, I think shipping industry incumbents should begin spending more time learning how the products start-ups are building can solve the most pressing problems they face - the industry needs to become less insular, more open to working with outsiders, and more transparent.

Olaf Merk, Shipping Today & Organisation for Economic Co-operation and Development (OECD)

How is it possible that in 2017 so many seafarers cannot contact their loved ones? Not more than a fifth of seafarers has internet access onboard. We can fill whole books about digital disruption in shipping, but could we for a start provide seafarers with the means to stay in regular contact with their families?

TAGS: Technology