Stelios Koroneos, CEO at Soldecom, talks about the effects of digitisation in the shipping industry. Mr. Koroneos says that shipping has gone through a number of disruptions since the past, which required changes to the way that the whole sector is operating. Digitisation is now the new trend, but it requires vessels to be extensively retrofitted to comply with regulations, or else they will be scrapped.
The last few years there are more and more discussions in shipping about the need of “digitisation”. Usually this could mean different things to different people but regardless the point you view it , one thing is certain. Software is eating the shipping industry, one vessel at a time.
First some background
About two years ago we started looking at future trends in shipping, so we could be pro-active instead of re-active. We are a small company, engineer driven, so making the right decisions early on, is critical for us.
It was a similar process that we did 7 years back when we entered the voip and crew-wellfare markets in shipping. At that point FleetBroadband (with the max speed of 450Kbits and 850MB in bandwidth per month) was the hype, promoting the “allways connected ship”. It was still expensive to use but it provided a new way to manage a vessel, and also provide the – somewhat mandatory – Crew Wellfare/MLC.
Our voip products, at the time were mainly PBX’s customized to work in offices where bandwidth and connectivity were not an issue. As luck favors the bold, we were lucky to get engaged with a forward looking tanker operator who gave us the support and encouragement to proceed.
Mind you that this was at the time that the shipping industry was going in a downtrend. To make a long story sort, we had predicted a number of things that have come true after a few years and helped us grow in a industry that was facing big financial issues due to low freight rates, and the general economic down-trend.
Our work focused on the experiences gathered all these years and our unique vantage point, of looking (and managing) the dataflows and connectivity requirements of a modern vessel.
It also included a lot of “leg-work”, doing cold-calls and visiting shipping companies that were not our customers. They were surprised to hear, that we were not there to sell them something, but we would like to listen to their problems.
This work concluded on a paper we presented on the Royal Institute of Naval Architects (RINA) event for SmartShips in 2017. The major findings we presented on this paper were the following:
- Data is already generated in huge amounts by various systems and sensors. There is a huge demand for that data from all “actors” in the shipping industry but data is mostly locked in proprietary systems, difficult to access, as there are no industry defined standards (or as I like to put it, “The good thing about standards is that you have so many to choose from).This is an even bigger problem than it looks, as vessels within a company fleet, are not the same, but come from a variety of builders, with very different equipment and configurations.
- The bandwidth requirements will soon overcome the available capacity on a vessel, even on a VSAT connection. (We were not alone to find this, about the same time, Maersk, a front-runner in the industry, indicated that in its reports)
- The biggest problem of all was not technical, but what we internally named as “the human firewalls”. There is an inherit reluctance within departments of the same company to share data not just with outside 3rd parties but with anyone, even their peers as they believe that it could jeopardize their position or simply out of technological ignorance and fear.
The paper helped us get additional feedback, insights and thoughts from many in the shipping industry but also from other sectors that are either suppliers or users of the shipping industry services.
Armed with this new knowledge we started digging even further trying to identify what caused this demand for data, and the talks for smart shipping, autonomous shipping and digitization in general.
What we found is summarised to the following
The driver for digitization is nothing more than the need to stay competitive, achieve efficiencies and survive into a fast changing global supply chain, that is being “automated” , getting humans “out-of-the-loop” where ever it can.
Software is eating the world and now is the shipping industry’s turn.
Shipping has already gone through transformations or disruptions several times in the past, when it moved from sails to the steam engine and then to the internal combustion engine and with the introduction of the container box as the main method of shipping finished goods. All these required huge changes not just on the vessels but on the infrastructure and the way business was contacted.
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We have reached an era where bigger ships have diminishing returns and technological advances coupled with the new regulatory requirements set the stage for a new “arms race”. If you look carefully at the new IMO regulations its pretty obvious that the current global fleet of vessels needs to be either extensively retrofitted to reduce emissions or be scrapped in order to achieve “zero emissions” within a period of 20 years. And that will not be enough. The entire way of operations will have to change, monitoring the vessel from the time its build till its scrapping.
The time of a small, family run , shipping company with single number of vessels, managed with excel sheets is approaching to an end, and the new regulatory requirements and technological advances are making the end to come even faster.
There is another reason behind this. Humans don’t scale well. As the race to be more competitive continues, consolidation is inevitable. Having a good superintendent in a company to manage 5 vessels is usually achievable, but finding 20 equally good superintendents for a company that manages 100 vessels is pretty much impossible.
And that’s not all.
Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world.
You may have seen it published on the web that Uber, the worlds largest taxi company owns no vehicles, Alibaba one of the most valuable retailers, has no inventory and Airbnb, the world largest accommodation provider owns no real-estate. And in shipping the new data-driven business models are coming online.Rolls-Royce is extending their “Power-by-the-Hour” strategy from aerospace to shipping by providing a solution to monitor and manage all equipment on several cargo ships.
How did they achieve that ? Software that makes them way more competitive, allows them to scale and execute their plans with the least possible “friction” and by using AI to convert data to actionable insights, they optimize their workflow and generate efficiencies.
But what software needs to thrive is data and here is where the real problem in shipping is.
It’s very difficult to get data.
As DNV has correctly put it in “Creating Value from Data In Shipping”
“While shipping has access to a greater volume of data than ever before, it faces challenges assessing its potential. This is mainly due to data arriving from disparate streams, in dissimilar formats and at varying speeds and quality.”
During our research for the RINA paper and while looking at the data formats available from various systems and subsystems on vessels we found out that there were over 60 (close to 70 actually) different date/time formats in the data produced by these systems.
We met with companies that were trying to collect data and had to spend countless hours converting between formats, units and dates, and at the end they simply gave up.
It really takes sometime to understand that a vessel is actually not 1 “thing” but a combination of platforms. It’s a power generation plant, generating power for its own propulsion and to maintain it cargo and crew support systems; It’s a transport platform, moving diverse cargo, usually costing as much as the vessel it self, if not more; It’s an office that has to handle all the paper-work and regulatory requirements of the regions it travels; And last but not least, is a “hotel” providing accommodations for a crew of 20 or more people for long periods of time.
Regardless of the issues innovative companies with vision and forward-looking leadership have been quick to start on the path to digitization, and this disruption will force change across the industry. What is left to be seen is if the full impact of digitization will be hindered by the fact that few companies have the financial and human resources to fully take this development on board.
If one thing is for sure it’s that the future will not be an extension of the present or as Oren Harari who was a business professor at the University of San Francisco has said “The electric light did not come from the continuous improvement of the candles.”
By Stelios Koroneos, CEO at Soldecom
The views expressed in this article are solely those of the author and do not necessarily represent those of SAFETY4SEA and are for information sharing and discussion purposes only.
Above article has been initially published on Soldecom website and is reproduced here with author’s kind permission.
Stelios Koroneos is the CEO of Soldecom. He has a 20 years experience in embedded systems,VOIP,breaking computers, gadgets and other electronics. Mr. Koroneos has a proven track record of success in a variety of business portfolios, as well as the ability to translate vision and strategy into effective implementation plans.
