Maritime Commerce - more than just COSCO and MAERSK

Published on November 12, 2018

COSCO together with eight other major ship and terminal operators just launched a Blockchain alliance called Global Shipping Business Network (GSBN), in competition with MAERSK’s Blockchain project with IBM, TradeLens.

As maritime giants like Maersk and COSCO made news lately, it is timely to remind ourselves that maritime commerce is not just about container shipping and these giants. There are other bigger shipping segments, and they are made up of small and medium sized enterprises (SMEs). As well, Blockchain technology and all its subsequent applications are not necessarily the only innovations in maritime commerce.

Innovation is not just for giants nor just in Blockchain
Blockchain technology may hold great promise and seems a favoured subject by big companies for now, but majority of shipping companies do not have the interest or means like COSCO and Maersk to build a Blockchain platform or solution. As a matter of fact, most analysts expect years before Blockchain can truly perform and deliver its full value. But with such big news and interests in technology being linked with “disruption”, many may think that technology, and specifically Blockchain can only bring benefits to these big giants or other big companies.

Prospects to Innovate and Leapfrog no more limited to Big Boys

This may be true in some ways as according to an OECD’s study, the gap between the most productive firms and the rest is continuously widening, and technology is accelerating this trend, and many of these are big firms. But, with smart use of web-based technology which democratizes the ability to freely and easily connect people and networks, including new ways of doing business, SMEs now have the real prospect to become the most productive ones as well.

 

World of Maritime commerce includes a lot of SMEs
If we do not just focus on the container segment (about 17% of all 10.7 billion tons of seaborne trade), which is unusually dominated by only several big alliances, a big majority of the maritime industry is actually made up by SMEs. For example, in the chemical shipping segment which I am familiar with over 30 years of engaging it, > 90% of some 450 operators are SMEs, each operating fewer than 20 ships. In Asia, many operate a fleet of fewer than 5 ships. Even the international operators, many are not big companies. This is true also for other tanker and dry bulk segments.

SMEs want Change for the better, but first things first
As I gradually re-connect with old friends in the chemical shipping companies as a tech guy, I start to learn about their needs from a tech perspective. They are from good companies, though not as big as Maersk or COSCO. When we meet, they don’t ask me about Blockchain or A.I. What they want is easy and ready to use tools that can simplify their daily vessel operations and reduce cost. I generally call these tools “ground-tech”. It is not a surprise that they have little interest in revolutionary tech for now: Today, most of them keep their data and information using Excel, cut-and-paste and pass such data via WhatsApp and email. Maritime shipping people are not conservative, they are simply practical: walk first then fly.

Our experience as an Example
One key pain-point from these carriers we identified comes from port services, which every vessel needs when it comes to port. Most of these port services like tug, launch and bunker barges use manual booking and other operational processes. It is common that vessels need to wait and reschedule port services, which incur consequential and cumulative waiting time and cost. In order to help my friends and make money from them, I somehow need to improve port services here:

So, James Kim, my business partner, previously Hanjin chartering manager and our colleague Wilson Ko spent over 6 months at the piers to investigate the working process, practices and culture of Singapore’s launch service. I have to say: It’s a headache to change the launch business with a business model dated back to the 1950’s.

Adoption challenge is Cultural and not Technological
We created a launch boat online booking system after the long research and collaboration with a few of the launch-operators. However, when it was ready to roll out, we got resistance from them to adopt. There were simply ‘too many changes’ that the people now realised they were not prepared to make. That set us thinking, and got us to come up with a new service called Aggregated Launch Service (ALS). ALS gathers several small shipping agents’ launch requirements and bundles them to get a discount from the launch operators, and passes on the discount to the shipping agents. These agents had to change their old way of booking, but because there is a benefit for them, they were willing to change. We also created a mobile booking App for the shipping agents who can now book a launch via his mobile phone and track his booking. The adoption to use a mobile App to book was not an issue as the change in booking the launch directly to booking via ALS. At the same time, ALS became a customer of the launch service. This rattled some feathers but got the launch-operators a first-hand experience with possible disruption that is coming. ALS was not our goal, our goal is to help port services digitalise. But these experiences show digitalisation transformation is as much a cultural endeavour as it may be technological.

Lesson learned
These experiences while finding solutions for the chemical carriers teach me a good lesson about innovation in maritime commerce. Simply talking about maritime innovation or disruption but ignoring the SMEs will not get us there. Maritime commerce is a complex web and very much a people and process business with many parties involved. Digitalisation has to start at the ground. Each party or stakeholder in this process has pains that he faces and needs solutions for in his business and operation. There are plenty of opportunities, but it takes not just time and efforts, but a true desire and ability to solve their respective pains.

Author’s LinkedIn Profile:

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I invest, mentor and grow a group of startups which specialize and focus on creative maritime commerce innovations and solutions via digitalization, data-science applications, work tools, etc.

I believe for now, ShipsFocus’ maritime venture studio model is an appropriate one to most efficiently and effectively overcome the BIG innovation conundrum.

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INTERVIEW WITH COO, JAMES KIM

What is really unique about Chemical Shipping (vis-à-vis other segments of shipping)?

James: 1) other bulk cargoes like oil, ore, or even container liners move in one direction, chemical cargo has more myriad ways of flows to/fro multiple ports and berths. 2) chemical cargo is not generic: there are hundreds of different types of cargoes and grades by multiple producers, users and traders involved. that leads us to: 3) the hardware: chemical ships have multiple segregations. voyage options and decisions for which cargoes to combine to where and how are much more varied, furthermore 4) while there may be some standardisations, many ships are built for specific needs. with this multiplicity of factors, optimal loadable quantity and performance of a ship can be a BIG VARIANCE. ironically, this also makes for an attraction and a low entry barrier into chemical ship operating as each operator believes in his one-upmanship within that big variance.

How is that uniqueness important in what you and ShipsFocus are doing?

James: maritime shipping faces various issues, like in 1) HR: people with great skills and experience are aging and leaving the industry, while new ones are not catching up fast enough; 2) PR: constraints to improving its image as an industry that has a wide spectrum of jobs ranging from off-shore to land-based; 3) TALENTS: shipping lull in the last decade did not help in attracting talents; 4) 24/7 nature it’s hard to sell ‘work-life balance’; 5) SYSTEMS: experience, know-how and network within a knowledgeable person are not captured systematically over time.

Our role is to fill gaps, bridging 3 major gaps: (1) between the ‘Old’ and ‘New’, (2) more and better use of data (3) optimising the ‘variance’ and efficiency. there are not many people in this unique space, and on such pursuits. to make it work, we have to cater to this uniqueness, using our unique knowhow, experience and network.

Which part of your background is most helpful to what you are doing now?

James: I believe it’s my background as a ship-owner and operator. I was with Hanjin first in VLCC and then Aframax, then to Chemical Tankers. that gave me tremendous opportunities adjusting from one to another. there were so many varieties and details in high frequency I had to know and adjust to. i became sensitive to the uniqueness in Chemical shipping. coincidentally, Hanjin was undertaking a PROCESS INNOVATIONS initiative, and I was required to provide inputs for a chartering and operations system, including on how it should work. unfortunately, users had to work for the system when it was developed, not exactly a system i dreamed of.

What is the biggest challenge in marrying tech and shipping, and what is your specific strength in this respect?

James: mainly it’s people’s fixed mind-set that’s the biggest obstacle. people say they are busy, while tech can help, they are reluctant to adopt such change. it’s a chicken and egg issue. our strength is the ability to cater to the specific and minute details that make chemical shipping unique, and the network we’ve gained trust from previous roles we played as shipbrokers. we get better chances than the tech people to hear the pain points and thus introduce the right solutions.

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