Mentat for

When I was working in the ship repairs industry we had a saying: if we could make the ship sail with half a propeller or even one fin, ship-owners would use it immediately. What was meant with this is that shipping is a business that is extremely cost sensitive and ship-owners create operational margins out of ruthless cost cutting. There are of course periods of high margins as the market goes up. Lots of money is made during these times. But often these good times are followed by troughs in the business cycle, when ships are sold, decommissioned, scrapped, slow-steamed and possibly mishandled to make the business sustainable.

In particular employing ships in the spot market can have incredible revenue volatility. Spot markets, where vessels are chartered on daily floating rates are cases where free market conditions prevail and thus strategic advantages are quite short lived. Ship owners and operators are price takers and there is little room for negotiation. Consequently, ship-owners need to cut costs to make margins.

Anything between brilliant strategic thinking to reckless business maneuvering are used to save costs in seaborne trade operations.

Shipping and related supply chains in general, have been operating for a long time in a regime of opaqueness and heavily constrained information flow. This is changing recently, not so much around the cost part, but in terms of opacity. Operations, under the pressure of regulators and charterers alike, are becoming more transparent. This puts a lot of pressure onto the supply chain and this is an irreversible fact. Think of the oil majors: chartering a crude carrier vessel that is subpar and results in an accident, is bad for everyone, catastrophic for the environment and ultimately severely damages the brand long term. Vetting of ships is one aspect but the broader operations of the principals are also of interest. Authorities on the other hand are tightening regulations on how ships can operate in different locations. The most vivid example is IMO2020 whereby ships should ensure that their SOx emissions are capped especially in emission control areas. Thirdly, the entire supply chain wants to optimize its operations and avoid uncertainty and associated bullwhip effects. Contracts are tightening and penalties are becoming more granular depending on the operation of a ship.

Under this pressure for transparency, the industry is obviously in transformation. All the stakeholders are seeking to optimize their operations beyond what was achievable by the great business minds of the past. Optimization requires precision, thus automation and most crucially data. Data flows are increasing and will continue to do so, as the ship and the supply chain interlace with a growing grid of sensors, IoT enabled devices, services and machinery. As the ships are sailing somewhere in solitude, satellites take up the load of conveying the data. Modelling and simulation are tasked with predicting the near future and providing guidance for routing and operations. The ship is also a big factory, packed with machinery and instruments that suffer breakdowns multiple times within a year. It also hosts a crew, that needs supplies, gets sick and — let’s be frank here — is sometimes anything between unreliable to reckless due to poor training. All this is happening in an adverse environment : nature is relentless and this is especially true for the open sea. Add to that the operation along with other ships of all sizes in ports, terminals or through straights, or in areas of the world where there’s political turmoil, piracy or difficult connectivity.

It is not the ship so much as the skillful sailing that assures the prosperous voyage

George William Curtis

The increase in data flows also introduces the dangers of cybersecurity. Hacking a ship is becoming a possibility. Not only are the connections vulnerable but also the ship’s systems. Moreover the crew has low IT literacy and can easily introduce malware. That creates a whole new area of potential innovation in a critical sector where awareness of cybersecurity is from non-existent to at best low.

This vast, complex ecosystem lends itself to complex but substantial business opportunities given the addressable market. The shipborne commerce is a healthy 90% of global trade and will continue to be so. The seaborne trade is a 500 billion USD yearly market with over 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over one million seafarers of virtually every nationality. Cargo ships are technically sophisticated, high value assets which can cost over 200 million USD to build in some cases.

There’s a massive gap between the need for technology and the actual state of deployed technology, and that’s where a substantial opportunity lies. The traditional model of the operators controlling almost every aspect of the ship is slowly but surely getting challenged. The ship is a floating bundle of disparate systems that streams data to a remote HQ location where operation specialists may or may not review it to take decisions. The amount of data is overwhelming, making constant data connectivity expensive not to mention difficult to achieve in remote areas. Furthermore, the model suffers from its capacity to process data on-site and provide guidance. Let’s draw a parallel to the automotive industry here. Consider the car that needs to emit all its information to a central authority in order to determine its health state and how to steer it. That would be unacceptable. Although the tolerable latency is higher for ships, this is still a major bottleneck. Furthermore, the decisions to be taken are much more complex and involve a balance between several variable classes: operational, maintenance, contractual just to name a few. The fleet could be seen as a distributed computing system where a lot of decisions are calculated on board, and different pieces of information are directed to the different stakeholders. In addition, operators and ship owners are concerned about the financial performance of fleets and subsets of fleets so further decisions for the planning can be taken on-shore using different KPIs than those on the ship and require the coordination among the ships. The ship is therefore a key component, but there are several management views, the operators, the ship-owners, the port/terminal authorities, the agents. There is a clear and urgent need for true edge compute and analytics capabilities that do not rely on a constant satellite uplink to the HQ servers. On the other hand, adaptive and unsupervised anomaly detection models can determine automatically if any data needs to be sent back to HQ outside infrequent predetermined datacomms windows.

A number of existing and future technology solutions, adapted to operate in a true edge environment can establish a smart ship IoT platform that replaces the guesswork of the “noon-report excel attachment” process. The current outdated model of once-daily manual data entry and macro driven upload of a small subset of metrics back to HQ will be transformed dramatically. Automating data collection, computing with appropriate real time machine learning models optimal courses of action, helping the crew optimize operations using AI, automatically parsing unstructured data in legacy systems using NLP, reducing substantially fuel usage and environmental footprint via adaptive optimization, paving the path to eventual maritime asset autonomy … the list is endless.

Shipping is a massive global industry that is moving to new models of operational efficiency. Data will indeed be the new oil in the maritime technology whitespace.

*Original article appeared here