Modernizing the Maritime Supply Chain

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3Q 2018 | IN-5188

The maritime shipping industry is starting to realize the benefits of digitization and the IoT. Adopting Big Data and analytics technologies, among others, in addition to carefully aligning acquisitions and partnerships, are good first steps.

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Transformation Coming to a US$166 Billion Industry


The maritime container shipping (dry and reefer) industry boasts the largest value in the supply chain, with a material impact on many countries’ gross domestic product. According to the World Shipping Council (WSC), the trade value is more than US$4 trillion in goods on an annual basis. This industry is a critical part in the often manual, fragmented, inefficient, and expensive End-to-End (ETE) supply chain. A typical shipment can leverage more than 200 interactions and 25 stakeholders.

Digitization of possibly the oldest transport industry includes efforts such as: Big Data and analytics, blockchain, electrification, automation, drones and robotics, and Augmented Reality (AR)/Virtual Reality (VR), as well as developments in digital forwarders and marketplaces for maritime. Multiple factors will support increasing digitization within the maritime shipping industry to address issues from liability, safety and security, efficiency, and reliability.

Capital Expenditure, Upstarts, and Formidable Competition


Digitization has been led by the larger carriers and their Internet of Things (IoT) providers. Overall, IoT capabilities and decreases in costs in other industries are enabling faster, cheaper, and better options for the maritime shipping industry, including: simplified transaction processes, inexpensive memory and cloud solutions, updated Radio Frequency Identification (RFID) tags to monitor equipment and cargo, and network integration.

The financial challenges of the shipping industry have an impact on the types of investments. The likelihood of a longer-term Return on Investment (ROI) has been a financial challenge, driving the focus by startups to more granular areas, with more immediate results. This, in turn, led to increasing Venture Capital (VC) funding. The top 10 maritime startups have raised more than US$500 million in VC funding over the last 5 years.

Amazon has continued to march deeper into the supply chain, already creating co-opetition, including with FedEx and UPS. The company was awarded an ocean freight forwarder license to operate from the Federal Maritime Commission in the United States in 2016. By early 2017, the company had already aided in shipping at least 150 containers on Chinese cargo vessels. Last year, Amazon began posting rates for services commonly associated with freight companies. They were posted under its Chinese subsidiary, Beijing Century Joyo Courier Service Co. Alibaba, meanwhile, owns Lazada, which is a logistics company with its own network of warehouses and transportation to support deliveries throughout Asia. It has also partnered with Maersk, CMA CGM, and COSCO.

Early Adoption, Scale, and Fit


Carriers will need to continue aligning their acquisitions and Joint Ventures (JVs), as well as cost reductions and profitability. The remaining smaller carriers will be challenged by a lack of scale and rationale to support increased rates. Multiple industry surveys have indicated a fresh awareness of technologies adapting for maritime freight, as well as a desire to address needs, from fragmented and manual data to security and overcapacity. Challenges include a lack of transparency of real costs due to dated and fragmented systems. Those solutions are simply unable to provide Real-Time Location Systems (RTLSs) or accurate cost models. New digitization solutions, catering to the maritime freight industry offer the game-changing opportunity to leverage Big Data and to significantly reduce paperwork and manual non-value-added activities from a range of stakeholders, while maintaining accountability.

The technologies best poised to disrupt the maritime shipping industry over the next 10 years include: Big Data and analytics, blockchain, electrification, assisted and automated operations, drones and robotics, and AR/VR. Other nascent technologies, such as Three-Dimensional (3D) printing and fully unmanned ships, are farther out in terms of adoption. Many of the technologies above have already been tested or implemented, at least in part, by other modes in the supply chain and in multiple other industries. As in any IoT application, there are no “one size fits all” or feasible go-it-alone strategies. Along with consolidation and pressures on profits, century-old players must adapt and work with other suppliers within and outside the industry, from startups to technology leaders in transportation management, connectivity, Artificial Intelligence (AI), and more, including the competition, in order to align on much needed standardization. All must be aware of the encroaching Amazon effect and regional giants like Alibaba.