When many consumers hear the term ‘shipping’, they’ll usually think about the delivery of a package, one that is transported via air or land. Despite the world’s rich maritime history, shipping in the traditional sense – via sea – often gets forgotten today. However, transporting goods in this way is still a fundamental element of trading and logistics.
Theories posit that the earliest seaworthy boats were developed 45,000 years ago. But it wasn’t until the ‘Age of Navigation’ in 200 AD that we saw seafarers from Southeast Asia and Northern Europe develop vessels for importing and exporting goods. Fast forward to today, and a whopping two-thirds of the value of total global trade, equating to more than $4 trillion worth of goods each year, is transported via the sea. The shipping industry is alive and well and, although the goods we’re transporting today differ vastly from those traded hundreds of years ago, maritime transport is still a key driver of today’s economy.
Despite its significance, the industry still remains largely untouched by digital transformation and efficiencies it can bring. Yet this digital wave is coming, and rather than disrupt the status quo of shipping’s stakeholders, it promises to deliver benefits and competitive advantage for all. So, how big is this wave and exactly what impact will it have on the shipping sector?
Introducing shipping’s stakeholders
Think back to pre-internet days when, instead of being able to browse house listings online, you would check the back of the newspaper and call up the seller of a house you’re interested in. By the time you’d seen the listing and made the call to the seller, there’d be a good chance that the house had already been sold, or the price had gone up.
While shipping is not quite as outdated as those pre-internet days, the sector’s caution to embrace technology to drive efficiencies does mean that uncertainty can creep into daily decision making. Errors can, and often do, cost millions... Why is this? In order to explain this, we need to take a closer look at the sector’s key stakeholders.
First, we have shipowners, who can own anywhere from one to a whole fleet of ships. The shipowner’s main aim is to ensure he doesn’t have any empty ships – that the fleet is fully loaded, shipping cargo on behalf of charterers across the world. Each day a ship is underutilised, there are unrecoverable costs associated with crew wages, fuel costs, maintenance and debt finance. Consequently, shipowners need a real-time view of when potential voyages are available, allowing them to organise the fleet safely to meet demand.
Then we have the charterers, the people or companies with commodities to ship, such as oil or gas. Charterers care about getting the right specification of vessel to ship their cargo from point A to point B safely, efficiently and on time. Price also plays a huge role in the fixing process. Often there are multiple ships competing for the same cargo, with charterers wanting to get the best possible price. Much like a passenger waiting at a taxi rank, where there may be five competing taxi drivers waiting, the charterers will be thinking “who is going to give me the best price?”. With this in mind, charterers need access to accurate, real-time information about the market to get the best deal and avoid paying inflated fees.
The third stakeholder is the middle man – the broker. They gather information from both the shipowners and charterers and combine this to help strike deals between the two parties. For brokers, personal relationships and track record are no doubt important. However, what really counts is having the best market knowledge and the ability to exploit this knowledge. The more accurate and accessible the information about pricing and deals they have, the more likely it is they will be selected by a charterer or shipowner to fix a contract.
Shipping, thanks to its complexity, still lags behind
So, what does trade between all these parties look like? Currently, brokers arrange contracts between charterers and shipowners. This model has become increasingly complicated as the availability, variety and quantity of relevant data has grown dramatically.
Other market sectors have addressed complex trading environments by embracing new technologies. The digital evolution has meant that for many industries, deals can now be made in real-time with traders able to harness up-to-date information to their advantage. However, the shipping industry is complex. Information about potential deals and contracts, ship positions and locations of cargoes is still predominantly communicated via hundreds of emails per day. These emails often contain contradictory information and are presented in a non-formatted, bewildering way from multiple companies. The sheer complexity of this system and the absence of any sort of structured data, has meant that any form of digital transformation has required incredibly complex problems to be solved.
Imagine a charterer who is looking to strike a deal with a shipowner to move a cargo. They receive numerous emails from different brokers with details of ships available, including price and schedules. Analysing these emails to find the best deal is done manually and a charterer will have to cross-check with information from their own spreadsheets, internal databases and public information. By the time they’ve been able to make sense of this data, and are perhaps even close to negotiating with a shipowner through a broker, the price may have changed or the shipowner may have even agreed to a deal with another charterer. Information quickly becomes outdated and it’s not difficult to see the potential impact of missed opportunities.
For informed, commercial decisions to be made, relevant information needs to be absorbed, understood and cross referenced against a large amount of other data related to vessels, ports, routes and trading patterns, as well as a range of commercial, legal, regulatory and environmental factors.
This is where technology comes in. Advances in artificial intelligence (AI) and machine learning are bringing the shipping industry into the 21st century, by providing each stakeholder with the tools to automate and accelerate information gathering and extraction. AI can be used to mix and analyse an array of both private and public shipping data and present this in an intelligent and easily digestible way. Information from emails, fixtures, tonnage lists, ports, public sources and automatic identification systems can be collated and analysed in real-time, giving all stakeholders a much more realistic view of the market.
For shipowners, this means a clearer picture of market volatility, enabling them to make the best pricing decisions and load choices. Much like the technology used in the mapping systems which allow autonomous cars to respond to their environments, AI can also be used to predict where ships are moving next, recalculate the most efficient and safest route and even forecast potential transportation capacity. For charterers, harnessing the technology allows them to fix the right ship, at the right time, travelling via the safest and most efficient route, and arriving within the allotted time frame. Finally, automation takes away the monotony of deciphering reams of information and allows brokers to focus on finding the correct cargo and ships, as well as building those all-important relationships with other stakeholders. Ultimately, AI provides all of the industry’s stakeholders with the confidence to make more informed commercial decisions, leading to greater revenue generation.
A change in the winds
Despite some reluctance, the global shipping industry is slowly recognising the opportunity new technologies can offer. Those stakeholders – whether broker, charterer or shipowner – which embrace digital transformation can look forward to plain sailing ahead. Those that don’t, risk being left on the shore.
Ioannis Martinos, CEO and Founder, The Signal Group
Image source: Shutterstock/Wichy