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Shipping companies idle as e-commerce players build the future

Shipping companies idle as e-commerce players build the future

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Every time we think of the most powerful e-commerce companies, what comes to mind are images of artificial intelligence (AI) assistants, drones, augmented reality, and futuristic galactic delivery of e-commerce parcels in 15 minutes flat to any destination on Earth. Companies like Amazon, Google and Alibaba seem to be spending money on ideas that may change our lives years from now. At the same time, shipping companies’ appetite for scientific research and otherworldly technology mostly remains subject of conference talks.

This potentially sets up an unfamiliar future of e-commerce giants building the intelligent future of shipping. Unless something dramatically changes, and please don’t point to the Maersk-Alibaba (OneTouch) agreement as an example of such dramatic change, the e-commerce players will decide the shipping world of the future. If you don’t agree with me, just compare Google announcing that from now on they are to be known as the ‘AI-first’ company and [insert your favoured carrier name here] announcing that they soon will have the largest (for a few weeks) container ship in the world. Can you spot the difference?

What could come out of the focus on AI and data-driven decision-making?

We know that data-based intelligence technology is rapidly encroaching on the innovation-stagnant world of shipping. The e-commerce companies, which demonstrated relentless business expansion wielding data as a competitive weapon, might have a very different view on the future of carriers and how each individual container could travel round the world between its origin and its destination.

We don’t know this yet, and maybe even those e-commerce companies don’t know it either, but their knowledge of data flows between the shippers, the middlemen and the carriers puts them and their insight generated from vast data in a very privileged position. Google already analyses users’ web browsing, search history and geographic locations, linking data from popular Google-owned applications to purchase transactions history from third parties. Using AI to connect digital trails to real-world purchase records offers e-commerce companies a chance to alter shipping by creating new business opportunities from which they will be first to profit.

It is entirely possible that some of their attempts at commercialising data-based insights fail to attract viable following, but companies like Amazon are accustomed to failure and dead ends and they are not discouraged by those failures. They revamp their strategies, modify approaches and keep trying until they hit on a winning outcome. Compare this to projects undertaken by shipping companies. Deep insight form big data analysis, machine learning, blockchain, robotics, autonomous vehicles, to consider only a few examples, had to prove themselves in other industries first before attracting some interest from the shipping industry.

The situation we are seeing now is reminiscent of how the e-commerce platforms used shopper behaviour data in the past to drive their own profitable contracts with the sellers perusing their platforms. It firmly positioned the platforms as merchants of information that no individual party could match. In shipping, as the platforms get richer and richer in data, they will gain significant power over the shipping companies, potentially commoditizing every aspect of their present business models.

Another inevitable change could come in the area of autonomous ships. The ship building companies will not be affected, just as conventional car manufacturers have not seen any competitive threat from high tech giants engaging in autonomous car initiatives. However, outside of the car bodies, the technological progress in car propulsion, car communication, and autonomous navigation capabilities have not come from the traditional car manufacturers. These new capabilities came from experiments by Google, Tesla, Amazon and a myriad of their specialised technology partners. Goods delivery capability on the road was a primary rationale for their investments. Imagine what could happen, if they decide that delivery over water is also important to them. Participation of those companies could lead to explosive progress in every area of the maritime shipping network design, management, and operations.

Speaking of that myriad of specialised high tech suppliers, it is worth considering how those companies came to life. The major players have shown relentless focus on creating an entire ecosystem through their start-up funding strategies. Here, just as in the case of their own projects, they don’t expect full success from every venture. Many of those start-ups were allowed to fail, but the surviving few returned the investment many times over. Would shipping companies be willing to invest with similar abandon? Is there an ingrained culture of accepting failure of many investments and benefit from a few that succeed? These should not be rhetorical questions.

The data on shippers’ behaviour combined with data on fleet and network operations would form a massive trove of information ready to be analysed, packaged for value, and resold to any company profiting from planning and executing cargo flows. It could also lead to new modes of transportation defying conventional assumptions on what is possible and what is commercially viable. The Hyperloop project comes to mind as one of those mould breaking initiatives combining advancements across a broad range of theoretical research, advanced technologies including AI, and new commercial thinking.

I hope that the above discussion makes the case for believing that the initiative and innovation in shipping is escaping the traditional shipping companies and creating advantage for others to step into the gaps. This could result in the company with the largest ship ever be not much more than a curious footnote in the development of the future of shipping.

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Kris Kosmala

Kris Kosmala is vice president for Quintiq Asia Pacific. Quintiq is the fastest-growing provider of optimization software solutions for supply chains and logistics.

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