Global maritime cargo carriers grapple with the great digital divide

Cost, collaboration, complexity key challenges in digitizing the world's marine freight movement

Digitizing operations in both port terminals and container ship operations is critical to improving the efficiency of global supply chains | Chanin Wardkhian/Getty Images

Add digitizing the multibillion-dollar global supply chain atop the list of priorities ocean carriers need to address today.

Depending on who you talk to, it ranks immediately before or after decarbonization and port congestion

For Vancouver-based Seaspan Corp., digitizing its global marine cargo operation “means transforming our whole business model and building new capabilities very swiftly,” said Torsten Pedersen, chief operating officer of the world’s largest container ship leasing company. “That’s a challenge for any business, at least any business that wants to continue to deliver operational excellence during its transformation.” 

In a sector as competitive, interconnected and technologically fragmented as marine cargo movement, decarbonization, port congestion and digitization are as potentially expensive as they are complex, and all three will have knock-on price impacts for customers and consumers. 

But as with decarbonization and port decongestion, digitization is not an option for ocean carrier companies. It’s essential. The new e-commerce marketplace reality demands it. 

So far a lot of those demands are falling on deaf ears. And a big part of the container carrier industry is not meeting customer demands. There is consequently a public relations storm on the horizon for shipping lines. They are filling their boots with windfall profits in a 2021 market where capacity is at a premium and freight rates are headed through the roof. 

In its most recent Container Forecaster report, U.K. shipping consultancy Drewry predicted that 2021 could be “the first year in the history of container shipping when carrier profits approach US$100 billion and average freight rates jump by 50% against a backdrop of huge operational disruptions to the port and ship systems.” 

Coupled with escalating public concerns over shipping’s environmental footprint and tax contributions, runaway prices and indifferent service are not good for customer relations. 

As the Drewry report concludes: shipping lines “are in danger of being cast as profiteering villains, unsympathetic to the needs of their customers.” 

Meanwhile, the Digital Container Shipping Association (DCSA) points out in its digital standards report that the container shipping sector today is opaque and unreliable in large part because of a lack of data – or a least a lack of good data that is available up and down global supply chains. Standardization has also eluded container shipping’s digitalization efforts. 

The industry has consequently missed out on the benefits of seamless, end-to-end internet data communication, according to the DCSA. It notes, for example, that “track and trace data is not aligned or digitalized across carriers and their logistics partners, which means that multi-modal transport chains often appear as ‘black boxes’ to customers, and containers are lost from view at certain points in the supply chain.” 

“Standardizing data handling practices,” the DCSA report says, “is equivalent to installing modern plumbing in a city. Without it, good quality water – in this case, accurate and actionable data – simply cannot flow freely to every household.” 

So, the industry needs, among other things, to embrace what the DCSA advocates is a standards-based digital innovation imperative that will set the industry’s course into the future. 

But there is a long journey ahead to reach that goal. For one thing, sharing is not big in the highly competitive container carrier industry, especially when it comes to proprietary data. That needs to change. Not just for the customer experience, but also for carrier bottom-line opportunities in a global e-commerce sector that is now worth an estimated US$25.6 trillion. 

And it’s not just shipping companies. Ports and terminals need to up their digital game. 

As Eleanor Hadland, senior analyst in Drewry’s Ports and Terminals practice, noted in a recent industry update, “There’s increasingly a requirement for high-quality digital infrastructure, specifically extensive internet and mobile data networks and digital supply chain networks.” 

So ports and terminals, she said, need to “pay as much, if not more, attention to digital infrastructure as they do to physical infrastructure. The shift to e-commerce reinforces the business case for port-centric logistics in many places. And, most importantly of all, failure to invest in digital connectivity could result in a loss of physical connectivity.”

But as Pedersen pointed out, the global shipping sector remains a conservative, competitive business in which there is still little inter-company collaboration. 

“The broader industry is fragmented,” he told BIV. “There are some ‘mom-and-pop’ operators who own a handful of vessels and are laser-focused on cash-on-cash returns, as they probably should be. Investing in digitization, which really pays dividends at scale, doesn’t make a lot of sense for them.” 

But the global marine cargo sector is making some progress on the digitalization front. A.P. Moller Maersk (CPH:MAERSK-B), the world’s largest container carrier company, is spearheading TradeLens, a blockchain-based digital container logistics platform. It was launched on May 10 and was co-developed by IBM (NYSE:IBM). TradeLens users include major carriers such as CMA CGM and MSC Mediterranean Shipping Co. 

But for the most part marine cargo carriers remain technologically anchored in the late 20th century. Alan Murphy, CEO and founder of Denmark’s Sea-Intelligence, noted to BIV that, while much of the wider supply chain has been digitized, container shipping has not. 

“I used to joke – though I still do – that if you want to know where container shipping will be next year, look at where every other industry was 15 years ago. The problem is the vessels all run, basically, on Windows 95.” 

Aside from the inefficiencies of continuing to operate on such dated technology and paper-based systems, Murphy said it leaves ocean carrier companies and their vessels vulnerable to cyber attacks. “Basically, there is nothing to stop somebody from taking over a container vessel.” 

Earlier this year, Lloyd’s List addressed some of the challenges and potential solutions involved in moving a conservative container shipping industry into the 21st century and with it the overall efficiency of the global goods supply chain Richard Meade, editor of the international shipping journal, said during his publication’s March 17 panel discussion with industry experts that container shipping industry stakeholders “have to do more than simply adapt technologies and make them their own. They have to integrate themselves. Shipping has no shortage of sophisticated high-end solutions. But it’s still happening in silos, and it’s still stubbornly unstandardized.” 

Data sharing, the panel agreed, is also fundamental to digital progress in the industry. 

“Dare to share data,” said Soren Christian Meyer, CEO of ZeroNorth, a Copenhagen-based company focused on promoting shipping industry digitalization. “[This is] a big, big change that we are now seeing in the industry. People are beginning to realize [that] we cannot build all the technology ourselves, we have to find out what are our angles, and then we need to collaborate with others.” 

But the drive to digitization in the marine shipping industry will come down to dollars and cents. 

“Can I trade for more goods, can I cut my costs? Can I do more efficient business? … What is the business case behind it? Any type of standardization, any type of transformation has to start there,” said Ioannis Martinos, CEO of the Signal Group, a shipping services company with offices in London and Athens. “Open to collaborate also means that if you’re creating value, you’re also sharing value. And I think that mindset is super important to have as well as it’s not about being afraid of sharing; it is about building something together and making the pie bigger for everyone. And thereby bringing value to everyone in the industry.” • 

trenshaw@biv.com

twitter.com/timothyrenshaw