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In our blog we will provide a continuous stream of shipping and information technology related topics on an informal basis and hope to give you something to think about or work with.


 

Be bold

Prediction is very difficult, especially if it is about the future! But that doesn’t prevent the best minds from gazing into their crystal ball and suggesting what might be in store for us in coming years. 

Back in 1967, McKinsey (the global management consultancy) was asked its opinion on where shipping would be in 50 years’ time – around today, in fact. Whilst they got some things completely wrong (the UK would need only five ships to handle its entire trade with North America), they were uncannily accurate in other areas. Economies of scale would encourage containerised cargo to be handled by a small number of large organisations; the rush to get on the container band-wagon would lead to substantial over-capacity; containerships of more than 10,000 TEU capacity would be available; and feeder services would replace direct calls as ships got bigger. We’ve paraphrased McKinsey somewhat, but their insight back in the 1960s was remarkably astute.

Asked again to make predictions for the next 50 years, McKinsey have again come up with a number of thought-provoking forecasts set against a backdrop of the influx of digital technologies, big data and the Internet of Things (IoT). McKinsey is predicting future ships being completely autonomous and carrying 50,000 boxes in a single unit. Global container trade will increase as much as five-fold. The current “value-destroying” overcapacity and consolidation cycles will give-way to three or four major container lines with a strong emphasis on customer focus and innovative commercial practices. Complex multi-modal supply chains will include terrestrial and ocean components with cargo being autonomously loaded onto autonomous ships, trains and trucks and with drones managing the “last mile” of distribution.

McKinsey’s predictions are both sobering and exciting. And, depending on how much we rely on their foresight, we need to understand how we can capitalise on an industry about to embark on an unprecedented transformation. Unsurprisingly, McKinsey offers advice.

Investing in digital technologies is top of the list. Digitisation can help differentiate products and services, improve customer service, enhance productivity and reduce costs. Once digitised, McKinsey is encouraging a period of integration. Integrated logistics providers will seamlessly marry bigger vessels with terminals, arrivals, berthing, unloading, storage and onwards transportation of cargoes.

We’ve been delivering services to shipping companies for more than 30 years and these two pieces of advice would top our list also. It is staggering to walk into a shipping company only to discover dozens of standard functions being performed either semi-manually, or by a series of stand-alone, unconnected IT processes. We stifle the urge to ask, “why on earth?” and attempt to explain how easy it is, in today’s relatively inexpensive hardware and software environment, to become both digitised and integrated. That said, upheaval is an issue that most companies will want to side-step, but upheaval is required if change for the good is to be achieved.

McKinsey’s final piece of advice is “be bold”. It rightly points out that shipping “was built on the vision of strong leaders who dared to sail through the storms”. The storms to come over the next 50 years might be more metaphorical than physical, but strength of character and commitment will certainly be needed. Re-aligning a shipping company to face future challenges is not for the faint hearted, but these days, embarking on the vital steps of digitising and integrating core processes is not the giant leap it once was. So, be bold and take that step.

Big ports, big ships, big data

A few years back there was a fad for “port-centric logistics”. The theory was to do away with the old-fashioned but perfectly sensible idea of building a distribution facility in the middle of a country and sending out freight from that central hub. Instead, you locate your warehouses at the port where your goods arrive and distribute from there. This does away with having to send your freight on two separate journeys – the first from the port to the distribution hub; and the second, from the hub to the end-user. It’s often the obvious solutions that get overlooked and many logistics professionals were soon asking themselves why “port centric logistics” wasn’t thought of earlier.

Ports are the true multi-modal centres of the supply chain. Uniquely, they harmonise ocean transport with road, rail, shortsea and inland shipping - and they provide the facilities for transhipment. As ports begin to extend their remit to include storage, manufacturing, processing, transhipment and other services, so their (perhaps unintended) role as an information collector and disseminator builds.

A range of industry players are feeding data into the port. Information is coming from shipping companies, logistics players, weather forecasters, road and rail companies – and most of it is supplied in real-time. Those ports with tech-savvy staff have already built API-centric solutions to help them cope with the influx of information.

Big data is also raising its head above the quayside. Smart sensors are gathering information on road traffic and rail conditions, on expected weather enroute, and even on availability of parking slots at the berth. Aquatic drones are filming underwater conditions, including the actual depth at the quayside. Some ports have installed sensors on their cranes, trucks and forklifts to collect minute-by-minute information on their location and usage. And more and more boxes and swap bodies have become “smart containers”. This means they can communicate information about their location to help logistics companies arrange for collection and onward transportation through the supply chain.

Technology in the form of big data is driving ports to improve quality, enhance productivity and reduce costs. This is important in a sector where margins are thin and where time spent in port increases costs for the shipowner. World trade continues to grow, as does the global fleet, both in terms of number of hulls and also the size of individual vessels. Even from a single vessel perspective, a container ship is required to send many pieces of information prior to arrival. There are the six individual notices needed to cover the six standard container moves in port, but coupled with this are booking confirmations, release orders, bills of lading, invoices, notices of arrival and delivery orders. And as this is required for each container being moved it is easy to see how quickly the amount of data builds up and how important the efficient handling of information becomes.

Software is managing the information flow and without efficient IT solutions, port and shipping operations would simply grind to a halt as the sheer amount of data becomes overwhelming. But perversely, IT is also adding to the information over-load as it enables sensors and other collection devices to report on the minutiae of port and cargo operations. The trick is to harness the information in a format that allows the data to improve the workaday activities of port operations. We don’t need to be too clever. Too much information will confuse and confound. The ports that will benefit from the continuing upsurge in data collection will be those that can sort the useful data from the background noise and not fall victim to paralysis by analysis.

I’ve seen the future…

Someone very smart once wrote, “I’ve seen the future and it is very much like the present – only longer”. In the same vein and from another public figure: “those who cannot remember the past are condemned to repeat it”.  Both quotes seem apt for shipping, particularly if we look at freight cycles. Although perhaps elementary, freight rates tend to follow a series of peaks and troughs influenced by many factors, but mainly by simple supply and demand dynamics. When cargoes are scarce, freight rates plummet. Conversely, when ships are scarce, rates spike. High freight rates encourage owners to build more ships. More ships flooding the market disrupts the supply/demand balance and rates subsequently fall. A falling market leads to vessel lay-ups and scrappings. And a paucity of vessels drives the market upwards again. Of course, there are many other factors influencing the market, but simple supply and demand rules tend to dominate. 

 

The best qualification of a prophet is to have a good memory” – said another clever person. So why doesn’t the industry learn from the past and temper its actions to create a smoother and more reliable market? Predictions are not always bunkum and in shipping we have enough history to make some informed forecasts on what might be around the corner. Earlier this year one respected commentator from a 3PL was asked what might be in store for the container sector in 2018. Here (paraphrased) is what he said: 

 

  • More consolidation, even more than in 2017. Carriers outside of the broader alliances are likely to evaluate their service strings and loading factors, then slot charter agreements and work with other carriers to keep up with what’s happening in the market.
  • More alliances. It is likely that the alliances we know today will change and the entire alliance landscape will be disrupted.
  • Overcapacity will continue, particularly on the Asia to Europe trade – and this will impact on other lanes. Scrapping of vessels younger than 20 years is at an all time low. Carriers will reduce capacity through blank sailings to stabilize supply and demand and preserve rates.
  • Last mile delays caused by various choke points will continue to rise. This includes terminal congestion, rail delays, chassis shortages and labour issues. Increasingly carriers must navigate around these issues.
  • Even with rapid employment of technology, the containership industry has not seen a meaningful transformation. Almost half of bookings are still manual and as many as half of all invoices contain errors. These are basic and fundamental areas of our business that need improvement.

 

Unpalatable they might be, and even if we think predictions are hogwash, most of us probably see more than a grain of truth in this list of horrors. As software experts, our eye is inevitably drawn to prediction number five - almost half of bookings are still manual and as many as half of all invoices contain errors. In 2018, and with the choice of solid, reliable and cost-effective technology platforms available to suit every pocket, this is unbelievable. Just think of the amount of time and money tied up in raising paperwork and chasing payments. But the sad fact is that we believe this prediction. We see it when we’re invited to pitch for business with potential new clients. Often, that’s why they call us in. And it’s so easy to fix.

Let’s finish with our own prediction. In 10 years’ time, all containership carriers will be running streamlined and efficient operations from up-to-date technology platforms and intelligent software solutions. Wait a minute, who was it who said “I have a dream”? 

Focus on cybersecurity

Last year’s (Not)Petya ransomware attack that cost A.P. Moller Maersk over $300 million highlighted the vulnerabilities the maritime industry faced when it comes to cybersecurity. Despite this, a recent Pen Test Partners report has pinpointed the same vulnerabilities once again.  

What is most concerning about this recent report is how avoidable many of the vulnerabilities are. The paper shows that user names and passwords found on the bridge often use simplistic formulations such as ‘password12345’ making it easy for those wanting to cause harm to hack into a ship’s operating system and cause chaos.

It is often easy to cast a disparaging finger at scenarios of apparent ignorance such as this, but the reality is that the speed in which the world has become dependent on the internet over the past decade has had a huge impact on how the world works. For conservative industries such as maritime, it has been hard to keep pace.

Many of the vessels and indeed crew that sail the seas today were built or trained in a time before technology had such an impact. Unlike most other industries, maritime has been slow to appreciate that it now operates with the support of digital technology and with that, the associated risk of cybercrime now poses a significant threat.

While it is difficult to pinpoint exactly why maritime has evolved at a slower pace, when it comes to ships, there are some clearly identifiable issues that can help paint the picture. For starters, there are the numerous classes of vessel which operate in a diverse set of environments. These vessels have computer systems built into them that are designed to last the entirety of a vessel’s lifespan. With technology advancing at vast speeds year on year, it doesn’t take long before vessels are running outdated, unsupported software, which is prone to cyberattack.

When this is then exacerbated by the dynamic nature of a ship’s crew, which is often changing, it makes it difficult for operators to ensure that all members aboard any given vessel have the necessary familiarity with that ship’s systems. With this mind-set it is understandable why shortcuts, such as having operating system user name and passwords made easily available on the bridge, makes sense.

Crews are fundamentally tasked with moving a ship from one place to another, but in a changing world of how that is achieved, both technology and regulation have a role to play. The industry must strive to give those tasked with managing or operating a ship the best possible tools to avoid the stormy seas that poor cybersecurity can create.

This, naturally, also requires a requisite level of cyber security for software systems employed by those onshore, and by the partners and agencies they associate with. Achieving this means wholesale buy-in to the idea that protecting our businesses requires us to protect our software systems, and means of communicating with each other. The onus, here, is on the company to ensure the right systems are in place and constantly updated, and that their staff or personnel are given the tools and training to do their part in maintaining safe and secure networks.

The problem with disbursements

Keeping track of disbursements can be a major headache for many of us. For most companies, money in equals money out, which means cashflow and the ability to continue to trade is severely impacted if disbursements are not managed efficiently and accurately.

Data entry errors are probably the biggest culprit. Manually entering data from a variety of formats takes so much time and, inevitably, results in some wrong information being captured. Interestingly, a recent survey says that 88% of spreadsheets used for business accounting contain significant errors; and finding and correcting these errors takes a huge amount of time. If you are still using a spreadsheet for your disbursements – beware!

Losing invoices is also a problem for companies with many to process. Not only is it time-consuming to call up and ask for a copy, it is also highly embarrassing when you are being chased for payment on an invoice you’ve no record of having received.

Invoices are supplied in a variety of formats – paper, fax, email, for example – and often we have our own ways of dealing with each type. Inconsistencies lead to errors and inefficiencies and any hope of streamlining the process is lost. Without streamlining, the entire process slows down. Automation can speed a manual process by up to five times – in other words it enables one person to do the work of five; or five times as much work can be done by the same team. And, of course, timely processing avoids late payment fees or, more positively, can attract early-bird discounts.

Wise men say that “time is money” and there’s no reason to dispute that assertion. Inefficient processing of disbursements increases your cost per invoice as staff costs are highly significant in a manual process. And if your records are not accurate you could easily pay the same invoice twice or make an overpayment. Unless you have an effective back-stop, you’ll never see that money again.

Liner companies manage a global network of agents, and port agents manage port calls for many clients. These are just two examples where shipping companies have to deal with disbursements as a fact of life – but it needn’t take over their life. Introducing consistency and automation will significantly reduce the headache. Ease of accessibility is a key requirement and the cloud allows multiple and global entry points as well as instant access to data. It also allows all parties to see their current balance, reversal of billing amounts and commissions for all relevant voyages; and an up-to-date record of their own disbursements, which is important. All information in a single system facilitates the coordination of closing statements and allows credits to be carried forward as required. To save manual follow-ups, a good automatic system will send auto-reminders to chivvy up the timely entry of important information from all outstations.

In a business where cash is king, it is important to take back control of your finances and your cashflow. Gone are the days when an army of finance clerks are needed to push paper around the office. Investment in a globally available, streamlined and intelligent disbursement accounting system can cure your headache.

Joining the cultural shift

As with all new technologies or trends, those with true staying power must reach a tipping point before they reach their full potential. They must be understood, and their capability to add value to our lives must be tangible.

With software solutions or IT technologies, this is particularly true. In many cases, this requires a social and cultural shift in how we perceive new concepts and technologies. Smart phones were adopted slowly, at first, before there was a tipping point in terms of access, affordability and rates of adoption. After all, there had to be enough user demand to justify investment in the infrastructure that supports these devices – development of 3G networks, applications available, widespread availability of Wi-Fi in public places, as well as affordable devices and data packages.

The same shift is now becoming apparent with the roll-out of cloud-enabled technologies and solutions. For this to happen, we need to properly understand what ‘The Cloud’ is, and why it matters. For the shipping industry, it is time to engage with this dynamic shift, and harness the benefits of this new wave of technology.

 

Developing cloud cover

Cloud computing is essentially the outsourcing of software programs, which traditionally would have operated offline from a server and a static device such as a desktop computer. By storing all information on a remote server via the internet, programs or digital applications are available online from anywhere, and from any web-enabled device, most often including smartphones. There is no limitation on storage of data or information, and programs can be readily integrated with other networked applications.

For the shipping industry, the potential for cloud-based applications and software is becoming virtually limitless, thanks to the now marked cultural shift in their adoption and the economies of scale this provides. The shared infrastructure means that software solutions – including those specifically designed for shipping companies – enable users to only need pay for what they use.  Services can be tailored to the individual and upgrades and security enhancements are provided automatically.

For every shipping company across every aspect of the supply chain cloud computing services can make operations, communications and collaboration easier for a workforce spread around the globe.

 

Taking agents into the cloud

Take the ship agent as an example. To compete in todays increasingly connected shipping industry, agents who want to add value have a responsibility to assess their own limitations, and potential to improve. Technology is the great leveler here, if used properly. Softship.SAPAS, for example, is an intuitively-designed cloud-based solution designed specifically to manage all administrative, reporting and service delivery functions of a ship agent of any size.

The software was created with a responsive design to ensure it can be used from any web-enabled device, including mobile phones. It does away with the paper and spreadsheets and, importantly, eliminates the re-keying and constant transferring of information from one medium to another that can bog down even the very best agents. The Softship.SAPAS central database is flexible and can be customised to suit individual working practices. For example, port tariffs can be hugely complex and based on a range of factors such as vessel GRT, NRT, LOA, port stay days or some other measure.

It is important to capture all this data, aggregate and synthesise it into useful information that can be automated and applied seamlessly to provide significant operational and efficiency savings. This is how ship agents add value – by making operations in port faster and more cost effective.

Delivering their services, and completing their administrative requirements with the support of the cloud means no agency business today is limited by their size, or ability to invest in software solutions developed specifically for their needs. For every agent, and every shipping business, with the cloud, the sky is the limit.

The dilemma of human error

For any individual to be able to perform the many hundreds of tasks required of a port agent day-in, day-out without making a single mistake is a monumental challenge for anyone. According to FONASBA, the industry association for port agents, there are more than 130 separate operations that a port agent may potentially be required to undertake during any port call; each of which has to be documented, actioned and invoiced for.

For an individual to work effectively as a ship agent, they need to possess a forensic understanding of the shipping industry, local, national and global ports as well as connecting logistics infrastructure. They also need a critical eye for detail; to be able to spot mistakes, omissions or errors at a glance, and must also demonstrate a comprehensive understanding of the myriad and constantly changing rules and regulations that could potentially affect their customers, suppliers and partners.

 

Using the right tools

To be able to perform every task required of a port agent without the right software support requires a full glossary of hundreds of acronyms, abbreviations, and terminology to be committed to memory, and communicated clearly to people across all languages and cultures. A good port agent must also be able to quickly and accurately document reams of very specific information without error, for several different clients, at the same time.

The expectations we have of the appointed agent – a person in port -  are significant, exacting, and at times quite unrealistic. Agents are, after all, people; and no person is always right. Many agents, quite surprisingly, still operate from notepads, spreadsheets and memory, despite there being smart and cost-effective IT tools available to support them. Unfortunately, there is no room for error in a shipping supply chain – a small mistake in a cargo manifest, a missing digit or three in an invoice or a wrong letter in a customs declaration has wide-reaching consequences. 

 

A costly mistake

According to the professional indemnity insurance provider ITIC, liner agents’ errors or omissions resulted in claims presented to them in excess of US$13 million over a five-year period. That’s only one mutual insurance provider. Most of these claims, ITIC asserts, relate to simple negligence, omission, and human error in administration. In our experience, many of these errors occur during the administrative process, which is both complex and pressured.

Many of the claims made against agents are simple typo’s or errors: San Tiago in Chile entered instead of San Diego in California; ‘BAF’ or Bunker Adjustment Factor used instead of ‘BAL’ for balance, for example. Improving the accuracy of individuals without reducing their workload or affording them more time to review their work more rigorously would be an expensive solution for port and liner agency business which trade on their ability to work quickly.

For example, verifying the condition of the cargo, recording measures taken to decontaminate cargo holds or engage the relevant port authorities are all done in person, whilst the agent is in port, and working directly with the ships’ master. If the agent has to wait until they get back to the office to type up their notes from hours earlier, this risk is certainly amplified. Such errors in any organisation are to be expected – humans are, after all, inherently flawed creatures; but these mistakes can be avoided with the right IT solutions, and the ability to work on-the-go.

 

Are you paying attention?

For this reason, it is so important that port agency businesses equip their people with the right tools and software to help them as they go about their duties, and – importantly – to alleviate the pressure placed on the individual.

For almost every agent, there are simple solutions – and additional profit to be made – in bolstering their IT capabilities with software that will automatically flag errors, omissions or duplications. Identifying the right systems, tools and software for your organisation and your exact business needs is critical, here. Time should be taken to consider all options and identify weak-points in administrative processes that are leaving you wide-open to risk. Software solutions developed specifically for port agents, like Softship.SAPAS, provides the ship agent with the support they need.

Blockchain in Maritime

The maritime industry has traditionally been a slow adopter of the internet age which makes the industry’s early interest in the next generation technology blockchain all the more compelling.

In this post we will be looking at how the maritime industry has approached blockchain and examine the ‘early adopters’.

Avocados and roses

In 2014, a team of Maersk IT specialists began following containers of avocadoes and roses from Kenya to the Netherlands. The team’s goal was to document—in order to digitise—the maze of physical processes and paperwork that impact every shipment and add costly drag on cross-border trade.

Industry interest

Journalists at mainstream maritime outlets began tentatively discussing blockchain in passing from the middle of 2016 but it really wasn’t until Maersk turned the research they had been undertaking into an announcement in early March 2017 that they would be entering into partnership with American multinational technology company, IBM, to develop blockchain technology that maritime really sat up and took notice.

Media timeline

Once Maersk had thrown their hat in the ring the media seriously started to question the old rules, and the conversation of digital generally became a hot topic. Was the industry ready to transform digitally? Would ‘disruptive’ technology mean new risks? Was this the death of certain careers? The conversation soon changed to a more positive tone from the underlying partnership and sharing benefits inherent in digitisation with some asserting that every aspect of shipping must now be digitalised.

The NotPetya cyberattack last year on Maersk and a number of other logistics organisations highlighted a number of broader problems in maritime and seemed to be the wake-up moment for the industry to embrace new technologies. By autumn 2017 the potential use of blockchain technology had become widespread in the news, and watercooler conversation.

Who are the early adopters?

In addition to Maersk’s partnership with IBM, Israel-based container shipping line ZIM, has completed a pilot of electronic bills of lading from China to Canada using a system based on blockchain in partnership with IT firm Wave. South Korea’s Hyundai Merchant Marine piloted the technology for shipment booking and cargo delivery in September 2017. On land, the port of Rotterdam authorities have teamed up with the city’s municipal government to introduce a field lab that will develop practical applications and solutions from blockchain technology.

What next for Blockchain?

The technology is being applied to a number of different maritime functions but all are in their infancy, either as pilots or as research. There will undoubtedly be plenty of challenges and a full blockchain integration into shipping looks unlikely to happen in the immediate future. But, as an industry once slow to evolve into the digital age, it is encouraging to see so many trying to make up for lost time.

Has post 2008 been all bad?

Before the economic crash in 2008, most of us were sitting pretty. Trade levels were high, finance was freely available and there were just enough ships to service the growing volume of cargoes. Freight rates were at a level where owners could easily service their mortgage, maintenance and regulatory obligations and still turn in a respectable profit.

Then things changed.

Trade volumes plummeted, ship numbers exploded, fewer cargoes needed moving, lines of credit dried up, freight rates spiralled downwards and there was less cash all-round. Not great for anyone.

So what happened next?

At a macro level, interest rates across the globe dropped to historic lows whilst governments worked hard to shore up the banking system and reassure Joe Public that his life savings were not about to disappear into a digital void. Trade started to grow again – albeit slowly – but shipyards continued to churn out new ships to join an already bloated global fleet. And we all know the result – a sustained, depressed market for almost every sector of shipping.

Just to survive, shipowners have had to work extremely hard throughout the extended down-cycle and many have either joined forces, refinanced or simply succumbed to the hard times. Tough though it has been, some good has definitely emerged in that many owners renewed and extended their search for concepts, processes and innovations to help them contain costs. Two good things to have come from the poor shipping markets are efficiency and innovation, particularly when one results from the other. That’s not to say that the industry doesn’t innovate in good times, but there seems to be more urgency when times are tough – and the appetite for owners to take notice is so much sharper.

Better hull design, improved propeller configurations, enhanced engine processes and more effective anti-fouling hull coatings are all helping shipowners boost their fleet’s efficiency, burn less bunkers and reduce emissions. And, of course, the more revolutionary innovations such as LNG dual-fuel concepts are rapidly becoming a reality. Aside from physical improvements, the downturn has also spurred better operating practices and processes. It started with slow-steaming to conserve fuel and lower emissions but has now permeated through to almost all areas of a shipping company. Commercial chartering, vessel scheduling, back-office admin, financial and booking keeping tasks, and much more are all significantly more efficient in many companies than they were 10 or so years ago. And that’s been achieved on the back of necessity as well as an active willingness to improve. Of course, technological advances have also spurred progress, particularly in the IT and software world where some major strides forward have been seen.

It’s important to keep ahead of the game and not to stifle innovation simply because cash-flow has become turgid. Those companies who gripped this opportunity in recent years are likely to emerge from the downturn much leaner and fitter and ready to take advantage of the kinder markets which will inevitably return. And then they’ll realise that the years post 2008 had been bad – but not all bad.

The pace of progress

As perhaps the most public-facing segment of the global shipping industry, liner shipping has repeatedly been targeted by tech companies and digital startup’s as an easy market to tap. Liner shipping tends to attract interest from venture capitalists and technology entrepreneurs because it is global, formulaic in its operations (and therefore easy to build algorithms around), and essential to the global economy.

Container lines, as such, are constantly being pitched supposedly “revolutionary” or “disruptive” digital technologies claiming to offer them a golden ticket to guaranteed profitability. A recent report by Alphaliner stated “container shipping related start-ups have raised over $500million in venture funding since 2010, while transactions involving shipping related technology buy-outs have exceeded $1 bn….”

In the past year alone, we have seen the introduction of a raft of bitcoin and blockchain solutions for liner companies, alongside the launch of a host of freight marketplace and e-commerce platforms, which are branching out into the shipping sector. All of these offerings in their own way seek to ‘disrupt’ container shipping by giving the end customer more control over the cost and shipment of their goods. But why would liner companies want to forfeit even more control over their supply chains to a distant end user

Despite there being inherent advantages in the increased use of digital technologies to manage container shipments, these new disruptive (in the sense that they seek to transform how operations are performed) digital technologies have not been particularly well received by liner companies, their partners or customers.

The reason for this? The majority of these ‘revolutionary’ digital solutions such as blockchain and bitcoin offerings, have been developed by industry outsiders who do not understand the shipping industry, and promoted by organisations that have failed to recognise that container shipping does not need to revolutionise. It simply needs to evolve.

The poor uptake of these more ‘distruptive’ digital solutions can be explained by the fact that many of these solutions ultimately overlook the fact that container shipping is successful in transporting goods because it operates within clearly defined parameters. It works because of its well-established supply chains, in which every party has a set part to play in getting goods from A to B. Liner shipping companies do not operate in isolation, but rather within a complex logistics infrastructure and networks – digital solutions for the shipping industry therefore have to offer a solution for improving the supply chain, not complicating it.

The lack of uptake largely comes down to the fact that each of these disruptive solutions that have been targeting the liner sector is piecemeal in nature; failing to understand the complex workings of the entire shipping supply chain. Significantly, many of these products ignore importance of the administrative requirements of ensuring that goods are moved safely, reliably and efficiently across the world’s oceans. For example, the use of bitcoin or crypto-currencies by an end-used booking freight on a containership would significantly complicate the liner agents’ their ability to pay a third-party supplier in port.

To meet the changing needs of liner shipping, therefore, we have to understand the necessary course of evolution for container shipping companies, their customers and partners – not merely the potential. The most important element of this development or growth is in ensuring that liner owners and operators, their agents and partners, have the digital capabilities to operate efficiently in the increasingly digitized world.

They must upgrade their systems with digital solutions to ensure that are fully compatible with the world around them currently and in the near future, and take advantage of systems and solutions are designed to sync every element of their operations. Ultimately, they should embrace technological solutions that are designed to enable liner companies to keep doing what they do best, and ensure that they remain relevant in a changing world. 

2020 regulations fuelling the need for administrative oversight

Management of fuelling costs has long been a going concern for ship owners and operators; with particularly astute owners/managers carefully managing both bunker purchasing decisions and bunker supply processes since fuel prices rocketed a few years ago. While energy costs have since lowered, the fuelling picture for commercial shipping is set to become increasingly complex, complicated, and difficult to manage.

Come 2020, when the International Maritime Organization’s (IMO) 0.50% Global Sulphur Emissions Control (ECA) regulations enter into force, the need for comprehensive administrative oversight and control in the procurement and supply of bunker fuels and lubricants will become more important for players across every shipping supply chain.

The compliance options chosen will not only dictate the commercial management of a vessel, but will have a measurable impact on the bottom-line of every voyage, and will have far-reaching influence over the overall efficiency of shipping operations. This change is, after all, not simply about keeping engines running; compliance come 2020 will inevitably require a new way of working for many shipping organisations – from engine room to board room.

Taking into consideration just one compliance option in particular here – switching between Marine Gas Oil (MGO) or Low Sulphur Fuel Oil (LSFO) bunker fuels and compliant lubricants and cylinder oils, we can get a sense of how new fuelling requirements will impact every commercial department, third party suppliers and customers. Current projections suggest that the majority of vessels are expected to regularly switch fuels, rather than utilising exhaust gas cleaning systems or burning Liquified Natural Gas (LNG).

This is particularly true for older vessels, ships trading primarily outside of the lower 0.10% ECA areas of the Baltic and North Seas, North America and US Caribbean Sea, and trades that are heavily dependent on spot business. Switching has implications on trading routes to ensure adequate access to quality MGO and compliant lubricants, and requires trained personnel onboard. Sea-based management personnel and third-party suppliers engaged in fuel supply must also ensure that they are equipped to cost-effectively deliver and document more complicated procurement and supply scenarios, access to lines of credit and emissions reporting requirements.

But delivering on these fronts – regardless of what the OPEX modelling for any given compliance solution suggests – will come down to shipping companies’ ability to document and coordinate physical bunker supplies. It’s time to get down to the nitty-gritty, and think about the impact of bunker compliance on the wider functioning of shipping and ship agency businesses.

Therefore, the administrative burden of 2020, as well as the operational complications or amendments, must be carefully considered and prepared for in advance of the implementation date.  Both shipping companies and their service providers – most notably the ship agents which often coordinate bunker supplies on behalf of the vessel operator – must ensure that they have suitable software solutions in place, ensure that those IT systems are properly integrated, and that staff know how to use them.

Thankfully, help is available from many quarters. In the Softship portfolio of software solutions is the vessel operations package (VOYCES) which assists with the administration of bunker contracts, submission of bunker orders and consumption calculations including costs and bunker planning. One clever feature is the ability to get an immediate update on the impact on bunker consumption and cost when a vessel’s schedule changes. This allows the operator to try a number of options and pick the one that has the least impact on the bottom line.

These systems or software packages should enable carriers to continue operating efficiently and ensure absolute control over the costs incurred in fuelling their fleets long into the future.

Back to basics

There’s a lot of talk about autonomous ships. In the media, at conferences and generally wherever shipping people gather. It’s hard to get away from the subject. But do we really mean “autonomous”, or do we mean “unmanned”? The difference appears to be in how the ship is controlled. An “unmanned” ship is likely to be “driven” by a real person sat behind a bank of screens in a remote office controlling the ship by joystick. An “autonomous” vessel is more likely to have been set off to follow a defined route by computer with minimal human intervention until it reaches port. The difference, as far as we understand, is important in as much as it determines whether the vessel is in compliance with international maritime regulations. Apparently, unmanned (but remotely controlled) vessels might comply, but autonomous vessels don’t. But that’s largely academic as regulations will – or should – be amended to suit incoming technology.

Surrounding all this talk is the wider issue of security – or more properly, cyber-security. There have been many instances of vessels and their systems coming under attack from hackers and the pundits, quite rightly, are arguing that autonomous shipping will open a potential new playground for these misguided techno-trolls to unleash their own particular brand of chaos. The ramifications of this are mind-bowing.

But aren’t we getting ahead of ourselves? Some say that unmanned – or autonomous – ships will be a reality by 2025. We’ve already had reports of such vessels being trialled on short, contained and straightforward routes in certain parts of the world. But before pushing ahead with navigational and operational automation, shouldn’t we be getting the basics right first?

How many shipping companies are currently fully automated? Very few. Many will say that they are digitised, but how many are integrated? Again, very few.

Ask any shipping company if they use an accounting package and all, without exception, will say yes. Ask if they have a system that handles quotations, sales and bookings – again almost all will say yes. Then ask if those systems communicate with each other – we’d fall off our chair if more than 50% said yes. These companies are digitised but not integrated and they are missing the most important trick in the book of information technology.

In a fully integrated company, the tariff system will capture all the complex information relating to individual customers, ports, terminals and cargoes. When a customer requests a quotation, the quotation system should automatically look up the relevant tariff to create a bespoke and accurate quotation. If the quotation turns into a sale, the system will, again, automatically create the required documentation, shipping instructions, bills of lading, packing information and more. And once the vessel has sailed, an invoice will be automatically generated and that information will be input to the accounts package via an interface.

This is integration and this allows information to flow seamlessly from one activity to another without the need to re-enter data. Retyping leads to errors, errors lead to delays and delays disrupt cashflow and cost money.

We believe that at least 10% of all outgoing ocean freight invoices are wrong due to a lack of integration and the need to retype data. That means that even a small ocean carrier with revenues of just $100 million a year will have $10 million in dispute at any one time. Disputed invoices are usually put aside by the accounts department and who can afford a 6-8 week payment delay on 10% of invoices?

A lack of integration is often a legacy resulting from companies growing in size without a thought through IT plan. Systems are introduced to handle individual processes but are never connected. Putting this right is not always easy – a case of one step back to take two forward – but it must be the first step in harnessing technology, enhancing efficiency and making more of a margin. And surely that has to take precedence over operating a fleet of unmanned ships and all the investment that requires.

Providing certainty in uncertain times

There is no denying it; the world as we know it is in flux. It is changing at breakneck speed; throwing our certainties about life, about who’s who; what’s what and what ought to be into question at every turn. The constant roar of a confused news cycle is keeping us on our toes (or waring us out) and betting on the predictable outcome – in politics, in business or entertainment - is time and again proving to be a risky game.  

Traditionally, our ability to make assumptions about global trade has been made within the parameters of relatively slow-changing trade agreements, or incremental cycles of demand governed by well-inked commodity exchanges. In today’s pre-Brexit, mid-Trump, post-Truth world, the ability to roll with the motions will, perhaps, be every organisation’s most dependable asset.

For this reason, building flexibility and agility into your operations – whatever your business – is of critical importance. And the role of technology in enhancing the ability to respond quickly to changes in the markets around you should also not be underestimated. This is particularly true for ship agency businesses, which survive and thrive based on their ability to respond faster than their competitors, and to rapidly adjust to the changing needs and requirements of their customers across all trades.

Like the rest of us; agents need to build a business based on baseline assumptions, which they can amend and alter quickly when the parameters change. By this, we mean that they must be able to build upon the fundamental requirements of every port call, with supplementary services as and when their Principals require it (provision of emergency medical supplies, sudden customs or visa changes for crew, etc).

In doing so agents can play an important role in supporting their Principals as they adapt to quickly changing rules and regulations, and to provide important counsel at a time when absolute certainties are an uncertainty for any business. Those agents who do not have the processes in place to ensure that they can cut through the noise around them and provide clarity for their customers, will find themselves pushing against the tide.

To make sure that they can do this well, with accuracy, transparency and speed, agents must invest in IT solutions that allow for the comprehensive collection, dissection, and analysis of a wealth of information and data, which they can translate for their customers as and when their requirements change. They need to get ahead of the news cycle, access and provide their customers with information directly from the source, and position themselves as a pillar of certainty, authority, and dependability for their customers, regardless of the whirlwind of change whipping up around them.

Who is monitoring your vital signs?

Our digital networks have become our lifeblood. They reach into every aspect of our lives and our businesses and ensure that we can function in a world that is in every way intrinsically linked through our ability to access (and manage) our digital spheres. As advanced and advancing societies, we are in every sense irrevocably connected by our digital tools, and our shared access to information online.

From a business perspective, the internet should be the great equalizer in that it provides a level playing field in which all businesses and individuals can access open information and tools to enhance our business offering and ability to provide services – irrespective of what we do. However, this assumption has its limitations. Particularly when it comes to our capabilities as businesses to keep pace with technological developments or advancements specific to our industry or area of service provision. It is here that we can miss a beat, and begin to falter.  

When it comes to being able to leverage technological advances in order to remain competitive, there can be barriers to access which broadly fall into three categories: financial constraints, operational impediments, and human reticence. Yes, advances in technology often incur a cost – to upgrade a piece of hardware or pay for subscription services, for example. Yes, changing the technologies and processes we use can require changes to how we work. It is the third category that is the most problematic. The reluctance of people to progress simply to avoid the process of change. This is especially true if it is the people responsible for your IT systems that are giving you bad advice.  

It sounds perverse, but in-house IT departments or support teams do at times deliberately restrict the progress of companies and their adoption of new technologies. Some IT departments – and thankfully they are the exception, rather than the rule - have been known to put their own interests at the expense of change for the benefit of the entire organisation. They are going against prescribed wisdom for their own short-term relief.

We can sympathise with the concerns of in-house IT teams. They shoulder a great responsibility for keeping their company afloat, in good health and able to operate. Naturally, they will be risk-averse. But we also know that putting off addressing a problem will only make it more severe in the longer term.

It is for this reason that we often still see some companies across the maritime sector desperately clinging on to legacy IT systems for dear life. Doing things the way that they always have – with pen and paper, or hundreds of disparate excel spreadsheets and reams of emails for which there is no oversight or archive. Yes, shipping businesses can survive in this way. But they are now on life support.

But the prognosis is good for these companies. Change does not have to be difficult, and they will be all the better for it. Particularly if they surround yourself with the right people, and the least invasive solutions, developed to meet their exact needs. This is where we come in.

New year, new start?

The start of any new year always seems to involve some sort of clichéd resolution connected with eating less and exercising more. Made with the best intentions, these self-promises are usually forgotten within a few weeks as we revert to more comfortable habits. But what’s wrong with being fat and lazy anyway?

Following quickly in the wake of a new year resolution will be a list of things we want to achieve in 2017. For most of us, getting a new job or earning more money will top that list but, like everyone else, we soon bury our ambitions deep in our sock drawer as we come to terms with reality.

Starting 2017 full of doom and gloom might be defeatist and it is probably is, but a reality check on life is a good way to ensure we end the year in a better place than when we started.

“Doom and gloom” is certainly an apt descriptor of the container market outlook for the coming year. 2016 was exceptional only in its continued ability to set record new lows as the year wound down to a dismal end. The global fleet grew by just 1.5% which was the lowest annual growth rate in history. New deliveries also fell by as much as 46% on the previous year’s figure. Some 60 deliveries were delayed and at least 18 vessels were cancelled amidst appalling employment prospects. Ships lying idle soared to a record high of 1.59 million TEU which only added to the general misery.

And for 2017? Well, it’s not likely to get any easier. The supply glut is set to worsen with at least 1.7 million TEU of extra capacity expected to be dumped into the market over the coming 12 months. And that’s even with the current orderbook-to-fleet ratio languishing at just 15.6% - the lowest since 1999. Average freight rates in 2016 were 19% lower than in 2015 causing Hanjin’s ignominious departure, amongst other pain.

Generating more cash must feature large on a carrier’s 2017 wish list but the chances of that becoming a reality will depend on who goes to war with whom over box prices. The battle for market share is likely to hot-up meaning freight rates will continue to suffer. And adding to a carrier’s woes is the upward movement of the crude price and the consequent increase in bunker prices which doubled in 2016.

So where does that leave us? Too many ships competing for too few boxes; carriers fighting amongst themselves for market share; and operating costs starting to creep up. Not the best start for the new year.  

In light of this pain, what should an owner’s new year resolution be? Surely it must be to build less ships, clear the supply overhang and boost freight rates. But that all takes time. So whilst waiting for the supply/demand balance to re-set, owners should be looking to introduce as many efficiencies into their operations as possible to remain in the game. Easier said than done we know, but unless carriers work smarter in 2017 their chances of being around to make a new year resolution in 2018 will be slim.

What is the key to a happy relationship?

The Federation of National Associations of Ship Brokers and Agents (FONASBA) made a bold move earlier this month calling for the existing commission-based system by which liner agents are being paid by container lines to be replaced with a ‘fixed-fee’ or ‘flat-rate’ payment system. The announcement followed the annual meeting of the industry group, with several key figures reportedly making the case for a compromise in the payment structure for liner agents, given the continued low freight rates and challenging market conditions in the sector.

The reason being that liner agents generally charge container lines based on a percentage of the freight rate of around 5%. Port agents, by comparison, usually charge vessels a fixed fee for port calls, and are therefore able to control their costs more reliably. Looking to level the playing field and protect vulnerable liner agents FONASBA, the industry voice of ship and port agents worldwide, argues that a percentage-based system is simply untenable for liner agents in today’s market.

Liners and their agents’ - once very compatible bedfellows in more prosperous times – have grown to become more competitive and quarrelsome in recent years as each has sought (understandably) to protect their business interests. In response to the call from FONASBA, container lines, one would presume, are likely to argue that they are also suffering as a consequence of low freight rates and increased operating costs; so, they should not have to shoulder further burden to support liner agents.

While the debate may continue for some time container lines, liner agents and port agents must ensure that they are able and willing to adapt to change; to think long-term and seek to operate in a way that maximises profitability and guarantees the sustainability of their business for the future. For all parties, having the processes and software solutions in place to enable them to quickly adapt their accounting procedures and maintain control over disbursement accounting on behalf of their customers is key to any transition.

Ultimately, the container and agency sectors have and will continue to have a relationship of mutual dependency and will benefit from a continued close partnership that considers the needs of both parties. Like a good marriage, both parties should listen carefully to the concerns of the other and, if common wisdom teaches us correctly that ‘compromise’ is the key to a happy relationship; we can look forward to enjoying happier days ahead.

Collateral Damage

Time and again we’ve heard the adage “it’s too big to fail”, and time and again, we’ve sat witness to the avalanche effect when the big boys fall. Fannie Mae and Freddie Mac; check. General Motors; check. Each was bailed out by its respective government and supportive partners because their business interests were so broad that the fall-out from a complete collapse of the organisation would be cataclysmic. Despite widespread belief in a likely government bail-out by the South Korean government, container line Hanjin, one of the world’s ten largest container carriers, however, did not have the same fortune. Despite being responsible for handling the transportation of a very significant proportion of the country’s exported goods, Hanjin was left floundering and to the surprise of most, it was allowed to sink.

When Hanjin entered into receivership in August, the effect on the container market was immediate. Spot rates soared, vessels were seized or left abandoned at sea, along with their crew. Owners jumped to protect ships that they had chartered to Hanjin, forwarders scrambled to trace assets and we all sat with mouths agape, momentarily. Now, a few weeks on, Hanjin has published the status of its 97 chartered and owned container and bulk carriers, creditors are banging at the door and the fall-out is gathering pace.

Players across the supply chain – companies large and small alike – have suddenly found themselves exposed. There are also those that are unfortunate enough to have placed far too many of their eggs in the Hanjin basket. We’ve already seen the impact on key ports – the Port of Long Beach, for example has released figures showing that container throughput declined 16.6 percent year-on-year for September; Hanjin containers reportedly account for approximately 12.3 percent of volumes. This means that ship suppliers, port agents, operators and forwarders are all impacted. So are their respective suppliers, partners, and customers. Consumers, businesses, organisations across the board have become the collateral damage.

As the complex web of interconnections between all those with interests in Hanjin gradually unfurls, we will likely see the collapse of many smaller businesses across a multitude of supply chains – with the consequences being far reaching and, for some, severe. This includes those partners and organisations further afield that provide provisions and services to both shippers and end users; those businesses that might not realise immediately that they are even connected to the shipping giant.

As a technology provider, of course we advocate for the important role that good IT systems can play in providing an effective, efficient and reliable safety net in times of crisis. Through carefully integrated software solutions, port agents, liner agents and carriers can maintain complete visibility across their supply chain, continuously critique their operations worldwide and utilise efficient applications to keep abreast of who and what is where, and when. Aligned to this though, as an astute business, we also know the importance of spreading our assets and ensuring that we are not disproportionately servicing one or two clients. We also ensure that, as a responsible business, we conduct the most stringent (and regular) due diligence checks on our suppliers and customers. As such, we are not exposed to the risk from taking too much business from a single organisation; regardless of whether or not that company is ‘too big to fail’.

In all, the unbuckling of Hanjin is all a very sorry affair, and time will show what could have been done to save the organisation and its subsidiaries, but we should take a moment and pause for thought. If nothing else, the case of Hanjin serves as a stark reminder that when tides quickly turn, we can all be dragged along in the current. We need to make sure that, as a business community, we are not overtly exposed to the ramifications of a failing business – and not exposing each other - to undue risk.

Has anyone invented anything life-changing recently?

We doubt you are old enough to remember the early to mid-part of the last century, but in those days the well-to-do could afford to buy a range of innovative things that most other people simply could not. Things such as a fridge, a washing machine, a radio, a television and later a dishwasher. And most importantly, a car. In those days, these things were staggeringly expensive but they also changed lives. Henry Ford was rightly credited with creating the world’s first production car, but he was also responsible for getting the population moving. No longer would populations grow-up, work, live and die within a few miles of where they were born. And if the motor car allowed people to migrate, the introduction of the passenger jet magnified that impact many times over.

But that was then, what about now? Of course money will buy you a better car than the one on the driveway next door, but having a fancier car won’t change your life. Turning left when you get on a plane and sitting in a business class seat is much more comfortable than being herded to the back of the aircraft, but it won’t get you to your destination any more quickly. So although we can improve on what we already have, have we reached the end of our inventive powers?

Of course not. What about the internet, social media, radical advances in medical research and solutions to life threatening ailments? All these have the potential to change our lives – and even save them. But the point is really about finessing what has already been invented, and in many cases making it cheaper. The internet and social media are about information and communication. This was already available from libraries, the telephone and, dare we say, going out and actually meeting people. In the same way, in days gone by, only the rich could travel by airplane but most of us can now afford what was once thought of as a luxury and is now regarded as a chore. We might have to travel cattle-class but we still reach our destination at the same time as those upfront. Setting aside the real new inventions, what we mostly have today is modifying what’s already been thought of and making it better, cheaper and more accessible.

Leaping to our sector of software provision, the creation of solutions to streamline the manual shipping processes were – back in the day – expensive and cumbersome to develop and implement. Only those carriers with deep pockets could afford to make the investment. But today, those inventions have been re-worked and re-packaged so they deliver far more than they ever did and – much more importantly – they are so much more accessible. In effect, the playing field has been levelled giving small, medium and large carriers the ability to benefit from technological solutions that were once way beyond their budgets.

Life changing solutions continue to be invented, but clever people are also taking existing inventions and making them better – and that’s also changing the way we live and work.

Will shipping be bothered by Brexit?

Last week, the people of the UK woke up to the stark reality that their country would be leaving the brotherhood of the European Union. Britain’s electorate flexed its democratic muscles and, by an ever-so-slim margin, chose to go it alone. Years of effort spent in bringing together the many countries of Europe for trade, free movement, security, friendship and a myriad of other reasons were effectively placed on the scrapheap. Britain believes it can do better on its own.

On the plus side, the UK clearly has the confidence to listen to its people and to follow-through what the people have demanded. But one can’t help wondering if the result was as much of a shock to the Brexiteers as it was to those who voted to remain. Stocks fell sharply, the pound weakened exponentially, the prime minister tendered his resignation and the leader of the main opposition was ostracised by his own political party. Shock-waves indeed, but like all earthquakes the tremors will slowly fade until their presence is no longer felt. Britain will leave the EU but the current political, economic and social upheaval will not last forever.  And when the UK is back on an even keel, the current turmoil, whilst never forgotten, will not be making its presence felt in the way it is today.

So what are we left with?  Uncertainty seems to be the only certainty. The UK is the first country to exit the EU and no one really knows how the process of departure will play out and what the future will hold. But it is safe to say that relationships between Britain and its neighbouring countries will never be the same again. Trade deals and bi-lateral agreements are sure to be forged in time, but the cosy friendships perpetuated through EU membership are bound to frost-over.

So is this likely to affect shipping? Again, who really knows? The easy answer is that shipping is a global and generally US dollar denominated industry and so the withdrawal of one country from a regional trading bloc is unlikely to have any real impact. The answer from a UK perspective is somewhat different. Britain is no longer a significant shipowning nation, but it does supply the majority of maritime services to the global industry – finance, legal, insurance, P&I, chartering, consultancy and more. There are many pretenders to the UK’s crown and Brexit might just be the start of an unpicking of this pre-eminence. Some leading banks are already making noises about packing-up and moving to another EU state and their departure could weaken the foundations of “maritime UK”.  But “maritime UK” has faced such challenges in the past and has a track-record of adapting and re-emerging as a robust and sustainable shipping centre. Perhaps this is just the wake-up call it needs?

In any event Brexit, whilst a shock to everyone on the planet except the 54% of UK citizens who voted for it, will soon become a reality but the global shipping industry is likely to brush it aside and carry on regardless.

Keeping up with the regulators

International shipping is conducted in a sea of rules and regulations. At every turn, we find volumes of paper governing how we operate our ships, load our cargoes, declare our voyages, and report our activities. The daily actions of a ship’s master are governed so tightly that almost all autonomy is lost and their existence on board is becoming merely a link in the chain that allows the shipping company to comply with the regulations.

This might be a slight exaggeration, but it is certainly true that maritime regulations are far more onerous than ever before. Is this a good thing? If it serves to enhance the safety of our mariners, or help protect our planet, or make the process of moving cargo from one place to another more efficient, then yes, increased regulation is a good thing.

In the main, global maritime rules are developed by the International Maritime Organization (IMO), a UN body based in London. This year, IMO is poised to issue a range of amendments to some of its major Codes including the International Maritime Dangerous Goods (IMDG) Code, the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC), the International Convention for the Prevention of Pollution from Ships (MARPOL) and the International Convention for the Safety of Life at Sea (SOLAS). All this activity shows that shipping continues to evolve and move forward – one hopes that it also makes shipping safer and more environmentally friendly.

One change to SOLAS which is to be implemented in July, is the obligation for shippers to declare the weight of their containers before they are loaded on board. This new amendment is probably long overdue and has been discussed in the industry for many years. Misdeclared container weights are a perennial problem for carriers and something that is likely to have contributed to many a maritime incident. Many believe the broken back of MOL Comfort was caused by over-weight boxes and the recent UK investigation into the grounding of the Hoegh Osaka found that wrongly declared cargo weights were partly to blame.

These new regulations place the onus on the shipper to weigh and declare the weight of each container to the carrier, they also give the ship’s Master the power to refuse to load any box whose weight is not declared and documented.

As with most incoming regulations, the majority of the industry waits until the last possible moment before taking the steps required to implement them. This appears to be the case here and there is concern in some quarters that supply chains will be interrupted as un-weighed boxes languish in terminals.

These regulations are not going to disappear and so shippers, carriers and 3PLs should be looking for the most effective solution to handle them before the deadline hits. And they should be talking to their suppliers to ensure they are ready also.

At Softship, we’ve invested resources in upgrading our software so that our solutions can capture, store and communicate the “verification of gross mass” (VGM) information which is required for each box before it is loaded. This means that carriers using our software are able to automatically receive this information, process it and relay it to colleagues responsible for stowage planning as well to the terminal as part of the load/discharge order and, of course, to the ship’s Master as part of the manifest/loading list.

Regulations are often thought of as a necessary evil, but at their heart is a will to enhance the safety of life at sea and the protection of our natural environment. But to ensure they are implemented effectively, we must be ready to handle them with as little fuss as possible.

Users versus developers?

No one can dispute how technology has allowed us to make huge leaps forward. Just look at medical advancements, global transportation, mobile communication and the free flow of information. Remember the old days when we wanted to research a project? Often it would involve a physical trip to a library, sometimes having to reserve a number of books in advance. We’d sit in the reading room taking notes with an actual pen and an actual notebook, and then return home to write-up what we’d discovered. Today, all that information plus a mindboggling range of associated material is freely available from the comfort of our own homes and offices; or from almost any other place we choose to work from.

But are we making the most of what we have? Take the standard Microsoft Office products for example. Most of us use MS Word as a day to day word processor but are aware of what else it can do? We probably use less than 10% of what Word can deliver and we are likely to be blissfully unaware of at least 50% of its power. Why is that? Is it simply because we don’t know about all that functionality or is it because we are too lazy, too incompetent or just too busy to care? Certainly there are many functions included in some technologies that are there just to demonstrate how clever the developers are – smartphones are great examples of this.

Perhaps it’s best to start with the customer rather than the techies. Spending time understanding exactly what the eventual user of the technology wants to achieve is likely to be time well spent and should guide the technical folk to develop something that is both wanted and used to its full potential. Of course, some customers will have hugely unrealistic expectations and expect one click of a mouse to solve their problems and eliminate their workload. But at least that gives the techies a challenge!


The trick to this must be somewhere in the middle. Combining the requirements of potential users with the expertise of technical developers at the outset should result in a much more rounded product. Users can keep developers grounded while developers can stretch the imagination of the users – it’s a two way street.

But then it needs education. There is little point in developers including all sorts of cool stuff if the users don’t know how to use it or even that it exists. Perhaps a bit harsh, but developers are not always the best communicators and so it is vital to have someone who can talk to both sides – techies and users. This requires a sound understanding of the business, an ability to manage expectations, and a knowledge of what might be technically feasible. 

It should never be a case of users versus developers. The best solutions are those that are created when a business analyst can bring both sides to together and translate for each.

“No one ever got fired for buying IBM”

That must be one of the most compelling marketing slogans ever created. In the 1980s, IBM dominated the IT landscape with products that were installed in almost every blue-chip corporation worth their salt. The implication was that IBM’s solutions were so good that it was a no-brainer for your purchasing department or your IT colleagues to buy from them. It really didn’t matter if IBM’s competitors were selling products that were superior, cheaper or better supported, the mantra of buying IBM was followed by all those who wanted to keep their jobs.

IBM had it all its own way for a number of years, but that dominance began to wear off as IT became less of a black-art and purchasers became more savvy. But the big beasts of the IT world are still able to exert a major influence, particularly with the larger corporations who continue to believe – rightly or wrongly – that a big corporation needs an equally big IT provider to deliver its solutions.

DHL is a great case study that spectacularly disproves this hypothesis. Recently this German-based express and logistics giant invested over USD320 million in a new IT project supplied by one of the major providers – but it didn’t fly.  All in all, the entire project was seriously flawed from the outset and resulted in a number of resignations and internal restructuring plus a considerable, but wasted, financial investment.

One DHL senior employee sensibly said that to move forward, DHL needs “evolution not revolution” and that is an excellent piece of advice to keep at the forefront of your mind when thinking about commissioning a new IT system.

What companies really need are solutions that have been tried and tested but which can be customised to suit individual requirements. IT shouldn’t hamper the singularity of a company’s culture or dampen its enthusiasm to deliver something different or more competitive. IT should facilitate competitiveness rather than forcing all companies to conform to the same mould. And – it’s horses for courses – get an expert in your sector to create and implement your IT solution. Non-experts won’t understand your industry or your processes.

The IT world moves rapidly and its constant reinvention makes it challenging to maintain pace. That’s probably why large companies with deep pockets choose the “safe” option. But as DHL found out the hard way – the “safe” option is not always safe.

Take care when selecting your next IT solutions provider and don’t think that biggest is always best.

Takeovers, mergers and alliances

The papers are full CMA CGM and its take-over of Singapore based Neptune Orient Lines.

When the deal is finalised it will firmly cement CMA CGM as the world’s third largest container line with a capacity of 2.33 million TEU, behind MSC (2.71 million TEU) and the mighty Maersk itself with 2.98 million TEU.

It seems that NOL has not turned in a profit since 2009 and is just one of many container lines that are struggling from the sector’s chronic overcapacity made worse by a general worldwide slowdown in demand. In an effort to make ends meet, NOL previously sold its Singapore headquarters as well as its logistics arm, cut back on a number of services and off-hired much of its in-chartered tonnage.

With the box sector in such dire straits it is not surprising that talk of these deals are regularly making the headlines. What’s interesting is that there are not more of them. But when we look at the make-up of our industry we immediately see a singular mix of very large, family controlled companies sitting alongside firms that are heavily influenced by government. This combination has tended to favour the creation of semi-formal alliances rather than corporate tie-ups. Governments, perhaps rightly, want to protect their maritime import/export routes which is why - in an amazing reversal of fortunes in 2008 – Germany rejected NOL’s bid to buy Hapag-Lloyd, it’s largest container line.

Certainly the purchase of NOL will suit the French line. There are obvious geographical synergies to be had and, very probably, operational advantages too. But it is likely to be economies of scale where the real gains will be made. Larger ships, bigger fleets, a global service, added flexibility and other similar benefits are all playing into the hands of the big companies giving them the survival tools they need to ride out the current rough markets.

But does that mean that the smaller players will be squeezed out? The answer is no. There are many profitable medium and niche players operating in the container space. Depending on the region, operating patterns and other factors, it is perfectly possible to run a successful container operation with smaller vessels and a small fleet. But irrespective of the size of the operation, all container lines need to contain costs. Clearly there are many options to achieve this and one alternative is to focus on the back-office processes where there is ample scope to streamline and improve activities through automation; and to join up activities where data and information can be stored and re-used efficiently. This is what our software seeks to achieve and its scalability means it is just as useful for a two-ship operation as it is for the CMA CGMs of this world.

AIS aids decision making

Big data has become a big agenda item lately. Industry discussion seems to be wide-ranging with quite a bit of focus now on AIS systems. AIS has quietly begun to have a significant and almost stealth-like impact on our industry. It has shifted from being just a novelty website that many of us would look at to help us through a boring day at work to something approaching an indispensable business tool. The AIS revolution was born from IMO requirements insisting that all vessels over 299GT carry a transponder. Receiving stations were initially set-up as an academic exercise but quickly grew to deliver global coverage. Today, there are many providers of AIS positional data, almost all are free but most try to charge for value-added enhancements.

Interestingly, the rise and rise of AIS has led to it becoming a target for hackers. Earlier in the year, the media reported many stories of vessels being way out of position or having sailed impossible distances in short times. These issues have largely passed and AIS providers are saying that well over 99% of their data is correct – with “crowd sourcing” highlighting any anomalies.

But the real revolution is the use of AIS in business.

We’ve spoken to a tallyman who uses AIS to check vessel ETAs ensuring the right number of people are ready to receive vessels when they arrive in port. We know a freight forwarder who uses the data to discover that day’s port calls. If he has no bookings on certain vessels he will call the line and pitch for their business! In the perishable trades, logistics managers are using AIS to check on vessel progress to make certain of transhipment arrangements and the security of their time-sensitive supply chain.

There are countless similar examples, but the point is that AIS is now firmly established in some quarters as an everyday part of business.

At Softship, we’ve also embraced the AIS revolution and teamed up with MarineTraffic – which operates the widest global network of 2000 responders in 165 countries – to inject real-time positional information to our scheduling software. Our newly released VOYCES Pro application includes a series of add-ons, one of which is SeaMap. SeaMap displays your scheduled voyages updated with your vessel reports on a graphical chart and compares them with real-time AIS positions. This combination delivers a really useful visual overview of actual versus planned progress and highlights delays, unscheduled port calls and other differences.

AIS is a great tool but it’s taken a while for it to come of age. Its power is only just being realised and it won’t be long before we are all using AIS data as an integral part of our workaday lives.

Cutting the cost of containers

Maritime containers are fairly sturdy pieces of kit but they do take quite a bashing at sea and on shore. Adverse weather, overloading, poor lifting techniques, theft attempts, inadequate stuffing and unstuffing and other factors all contribute to damage which must be repaired if the box is to remain useable.

And it should be remembered that container operators maintain large fleets of boxes that are essential to the smooth running of their logistics businesses. A carrier needs a container stock of between two or three times the amount of available on-board slots to ensure enough boxes are ready to service their customers. This accounts for boxes in transit (full or empty), in the depot or simply out of position. And, at any one time, 5% of boxes are undergoing repairs.

The cost of maintaining a container stock is eye-watering. Aside from the initial investment which is, in itself sizeable, an operator is paying around US$1 a day per box to cover leasing (or depreciation), storage, repair and re-positioning costs. So, a fleet with a carrying capacity of 50,000 slots will need to be serviced by around 150,000 boxes – this means $150,000 a day or $54 million a year in on-costs. And that is a staggering statistic. Because of this, it isn’t surprising that carriers are constantly finding ways to reduce their container stock.

One way is to try to lower the 5% of boxes tied up in the repair cycle. Taking the above example, if that 5% could be halved, then the carrier could potentially reduce its container stock by 3750 boxes and save up to $1.3 million a year – which is significant.

But how can half the number of boxes be taken out of the repair cycle? The answer is to look more closely at what is involved. A global carrier will use a wide-range of repair depots across the world and each repair will involve a number of steps to exchange information such as damage and survey reports, photographs, estimates, invoices and work orders. It is this plethora of administration - and not the actual physical repair itself – that bogs down the process.

To free-up the cycle, an easily accessible software platform is required to connect all the parties and streamline the flow of information. Repair expenses can be automatically validated against previously accepted tariffs and these can be further compared with past repair data to either highlight inconsistencies or to check that a “double repair” is not being authorised. Software will also control the invoices to validate what has been agreed before authorising for payment. By providing a common platform, information can be collected, packaged and delivered to the repair manager in a single hit – this allows him to quickly decide whether or not to go ahead with the repair, do a partial repair, re-position or off-hire/sell the box. If he decides to repair, the software platform will automatically inform all parties to get the repair underway as quickly as possible.

It’s easy to see how automating a fairly mundane process such as container repairs can add transparency and efficiency with minimal effort. It’s also easy to see that with minimal investment in the software, how much can be saved financially and in efficiency gains.

Freeing the paper jam

Every eight days a container ship with a capacity of more than 10,000 boxes is delivered into the market. Earlier this month, the world’s largest boxship, the CSCL Globe began trading and she carries just over 19,000 standard containers. The growth in carrying capacity of these vessels is staggering, not only in terms of sheer size but also in design and construction. Many believe that box ships will continue to get bigger as owners pursue their relentless search for economies of scale. Although these leviathans of the sea have already reached gigantean proportions, it can’t be long before they break the 20,000 box barrier. Experts in naval architecture are already predicting a 22,000 teu ship before too long but many believe that is where the boundary will fall. A ship of those measurements will stretch design, build and safety limits and be restricted to all but a few hub ports around the world.

But issues around loading and discharging will also be compounded. The logistics of moving boxes on and off such a large vessel will challenge even the most modern, fully automated terminal as it is unlikely that turnaround times will be stretched significantly. And alongside the physical movement of boxes sits the inevitable paper trail that must be created, followed, checked and reported. The pressure on back-office processing teams continues to grow and the advent of larger ships with squeezed port calls is creating headaches across the industry.

Just take a look at the reporting requirements to move a box from ship to depot. Six separate messages are needed - these are gate out depot, gate in terminal, load terminal, discharge terminal, gate out terminal and gate in depot. Although unlikely – if CSCL Globe were to discharge completely then over 114,000 pieces of information are exchanged. In some cases, pre-arrival notices, release orders, booking confirmations, bill of ladings, invoices, notices of arrival and delivery orders are all required. Together this could create around a quarter of a million messages for a single ship!

Clearly a manual operation would fall-over within minutes and so much of this process has to be automated. But operators should ensure that they are getting good value for money and that the systems they implement deliver added value. It is not enough to simply produce the required information - systems should also monitor, reconcile and report. As technology enhances, any software installed must also be future-proofed. In other words, it must be capable of moving with the times to take advantage of new features and efficiencies that are developed.

Economies of scale created by such large ships can only be positive but some thought must also be given to those who have to administer these vessels. Installing systems to automate back office processes is a given, but operators should investigate the optimum solution and take advice to ensure they install the best available.

Are some carriers more equal than others?

Vessel upsizing has been a feature of the main container trades for some years as carriers continue their search for economies of scale. But the introduction of ever larger ships is beginning to have a knock-on effect on the so called minor routes. On the Asia-Europe route, for example, there are already more than 100 ships in the 7,000-10,000 teu range and with even bigger ships on order and set to replace those already trading, it is inevitable that those displaced will migrate to the lesser routes.

Is that such a bad thing? Probably not as long as the terminals and waterways can handle the larger ships and that they are not sailing half empty. Profitability is, of course, just as important for the smaller carriers as for the larger outfits. We are already seeing second tier carriers begin to increase their vessel sizes. (By second tier, we mean those operating smaller fleets and smaller ships. We do not imply any kind of inferior operating practices -far from it.) At the end of 2013, the average boxship size operated by carriers with a world ranking between 20 and 30 was just over 1,700 teu, a year later it was 1,800. On that trajectory we’d begin to see 3,000 teu vessels within 10 years. In terms of the orderbook for these operators, the average vessel size has now reached 2450 teu and fleet sizes have also grown.

Larger ships bring more economies and a lower cost per box for the operator. Even so, costs per box for operators on the minor routes are significantly higher than those on the main strings. This means that minor operators need to work smarter in order to generate efficiencies – and in some quarters they already have a head start.

Two or three decades ago the big boys invested huge sums in commissioning bespoke technology systems to handle core processes within their operations. That was a smart move back in the day, but many of those systems have become an obstacle to growth rather than the facilitator they were created to be. The problem is that they were built on technology platforms that have remained static and not moved with the times. Many large operators have found themselves stuck with outdated, expensive and generally obsolete IT systems that are hugely difficult to replace. In one such case, a global carrier is currently running more than 200 (yes, 200!) separate systems which have been knitted together to handle their quote-to-cash processes. It will take them years to reverse that legacy and implement a single, streamlined and consolidated system.

On the other hand, the second tier carriers were not able to invest heavily in IT is the 1980s and these operators, having held off for 10 or more years, were able to take advantage of much more modern technology. They bought (and are still buying)  “ready-made” software that has been tried and tested in live conditions. For a fraction of the price, the second tier is, in many cases, working much smarter than their large-scale competitors. They have harnessed IT to create leaner, more streamlined operations in niches that are profitable. The playing field is levelling – or possibly even tilting in favour of the second tier.

Just because the second tier is operating smaller vessels on so called minor routes does not mean that these carriers should be any less profitable than their larger cousins. Equality across the board is becoming the new norm.

Regulation, regulation and reporting

In the old days of sail and steam, a ship’s captain was the supreme ruler in his own wooden or iron-clad world.  Out of touch with his home port he would make decisions on routing, victualing, port calls, cargo operations and even the life and death of his crew. But times have changed. Today’s ship’s master is tied to his company office by the invisible umbilical cord of satcoms and the internet. Decisions have largely been taken out his hands with head office now issuing the orders and directives. There have even been recent reports of a master asking head office for advice before altering course to avoid a potential collision situation – but this must be far from the norm. That said, it is certainly the case that the modern ship’s master has far less autonomy and authority than in the past.

And perhaps that is not a bad thing. The master of a merchant ship has much more to contend with these days than simply getting his ship and its cargo from one port to another without incident. The burden of regulatory and reporting compliance is such that full head office support is required if the master is not to submerge under a weight of codes, regulations, directives, forms and other manifestations of maritime bureaucracy.

The latest addition to this deluge of demands comes from Brussels in the form of Directive 2010/65. This new piece of legislation insists that vessels arriving or departing from EU ports must report export and import information to shore authorities in a harmonized and coordinated manner. And this must be done electronically – fax transmissions and the like are longer acceptable.

On the face of it, this is an intelligent move by Brussels. By insisting that the range of information a vessel is required to report (arrival message, persons on board, waste declaration, health declaration, security information, departure message and much more) is submitted in a standard format and sent via an open protocol will streamline the process, reduce errors and allow greater harmonisation. Alarmingly, Brussels requires all EU member states to be in a position to accept these reports via a “single window” by 1 June 2015. This will mean that each EU member state will operate just one electronic platform over which these messages are to be exchanged. This might not be so much of an issue for the countries that operate Port Community Systems that already deliver the required single window.

For this to be truly effective, the shipowner or agent needs a system that will automatically collect and collate this information and send it to the single window by Electronic Data Interchange (EDI) or a separate platform for manual data entry. It seems that EDI message implementation guides have been established to define the exact structure of each message. This will ensure that messages are standardised across ports and countries so that owners and agents are able to report in just one Europe-wide format. The problem is that not all member states have adopted the guide – but it is hoped that time will solve this pressing issue.

Currently, many owners are not equipped with the in-house knowledge to comply with this new directive and so we suggest they start seeking a partner to help them gear-up for it. The directive is on its way and all European owners and operators will need to comply. The sooner plans are put in place to enable compliance, the better as in the long-term, this directive will make life easier for those who have to manage the necessary reporting burden.

Bunker blog

It’s not surprising to see all vessel operators continuing to place a sharp focus on where they bunker, how to run their ships on less fuel and how to get the biggest bang for their bunker bucks. IFO sells in excess of $600 a ton whilst MDO and MGO ranges from the high $800s to way more than $900 a ton depending on where you bunker. This means that bunkers account for around 60% of a vessel’s daily costs which is staggering when compared with total opex costs of just 12% which includes big ticket items such as crew wages, lubes, stores, maintenance and such like.

The world of bunker management is changing rapidly and it will be the canny operator who actively manages and optimises his fuel expenditure who will win-out in the end. But there is a lot to contend with.

The introduction of eco-design vessels are making a huge impact on our industry. Innovative additions such as saver fins, propeller boss cap fins, enhanced hull design and other creative solutions are taking big chunks out of the daily fuel bill. Slow steaming also seems to be a fact of modern shipping life causing engine manufacturers to re-develop their wares and supply chain managers to re-think how they can organise their stock control and get their goods to their destination on time.

On top of all that, incoming sulphur regulations, particularly the 0.1% cap in Emission Control Areas, is forcing operators to decide between switching to cleaner fuels on entering those areas or taking the alternative approach and fitting onboard scrubbers. The residual/distillate fuel debate will continue to rage for some time, as will the potential of using alternatives fuels such as LNG/diesel and even more forward thinking technology such a fuel-cell, nuclear power or wind energy. But for the meantime, ship operators need help with managing the day-to-day problems of bunkering.

Help is available from many quarters. In the Softship stable is a new addition to the vessel operations package (VOYCES) which assists with the administration of bunker contracts, submission of bunker orders and consumption calculations including costs and bunker planning. One clever feature is the ability to get an immediate update on the impact on bunker consumption and cost when a vessel’s schedule changes. This allows the operator to try a number of options and pick the one that has the least impact on the bottom line.

Whilst bunker prices remain sky high – and the chances are they will continue to go only one way – ship operators must grab every opportunity that comes their way to manage these costs and remain in the black.