The head of Transas, Frank Coles, provides a curtain raiser today to next week’s Maritime CEO Forum in Singapore where he will be speaking in the future of shipping session.
Let’s go back to basics. Shipping is the transportation of goods, cargo and parcels from producer to consumer. Maritime forms only one link of the shipping chain – albeit an essential link for the long distance and intercontinental movement of large volumes of goods or cargo.
What happens next in the maritime sector will be determined by more than an aspirational digital vision. It will also be profoundly affected by changes in the political and economic climate. Together, these will create various, difficult to predict feedback loops in the shipping and maritime ecosystem.
The maritime industry is not unique; it is just late, old and behind the times. That makes it especially vulnerable to disruption from the likes of young digital start-ups. Even if it evades that onslaught, it will still be exposed to pressures and demands for digital transformation from elsewhere in the shipping supply chain.
This transformation is already underway and creeping ever closer to maritime. When it arrives, the impact will be substantial and likely turn traditional business models and ways of operating upside down. It is inevitable that eventually Amazon will lease ships in the same way it does planes. If FedEx couldn’t satisfy the demands of Amazon, how is it today’s shipowners think they can do any better. The idea of owning and operating assets will be severely challenged.
The global economy is changing and with it the flow of goods around the world. The signs are that growth in regional trade is picking up at the expense of the international commerce patterns that have dominated for the last thirty or so years. Naturally this will drive changes in preferred modes of transport, as logistic operators adjust their use of rail, road, air and ships to optimize the route goods take from producer to consumer. It is not hard to picture maritime transport losing out. This will add to pre-existing pressures for improved efficiency and for responding to a more digital world.
At the simplest level, shipping is the delivery of cargo to the right place at the right time as cost effectively as possible. It does not make sense to have numerous intermediaries – brokers, agents, freight forwarders – bringing unnecessary complexity to this process. Other sectors have made or are making the adjustment and maritime will have to do the same.
Innovation from within the maritime industry won’t be enough unless it dares to tackle the things that disruptors would fix or eradicate. Even then, it might be insufficient to address the fundamentals of the current model.
What we see today are maritime stakeholders scrambling for a place in the world of tomorrow. A world driven by commoditisation, where scale matters and where many stakeholders will find themselves redundant. There are too many players chasing too little value in maritime operations. This endangers ship owners, vessel operators, equipment vendors, insurers, yards, ports to varying levels.
It is the business model, not technological change, which will decide the future shape of vessels and operations. Unmanned ships won’t happen unless the economics make sense. If increased automation and further reductions in crew makes better sense, then that will happen and probably more quickly. Or maybe having ships designed for specific routes managed from ashore in large operations centers will work best.
Ultimately what we have to ask is what shippers want from the maritime sector and how maritime companies can step up, find the efficiencies and compete with other modes. And if they can’t do it, then who will?