The container shipping industry, widely seen as slow to embrace technology, could be on the verge of a year of significant advance.
Driven by hundreds of millions of dollars of investment in new innovations, an urgent need in the industry to trim costs, and growing demand among shippers for greater efficiency, speed and transparency, the industry appears ready to put digital technology at the heart of many of its processes.
Blockchain, the Internet of Things (IoT), and artificial intelligence (AI) are some of the technologies that have in recent months moved from being newcomer oddities to ideas that are increasingly discussed in terms of having potentially transformative impacts on the industry. Online marketplaces, which have been around in different forms — largely without success — for more than two decades have also attracted a second look.
Dozens of startups have emerged in recent years aiming to transform the maritime industry, steered by founders who see the industry as hidebound and technologically lagging, with some companies still using telephone, fax, and e-mail to do business.
More than $500 million in venture capital and other investment has poured into the startups in the past five years, according to a Journal of Commerce analysis of investments documented in Crunchbase. And some of the companies now have had enough to time show what they can do, or can’t, said Gordon Downes, CEO of the New York Shipping Exchange, a marketplace that uses a system of contracts to tackle the problem of carriers rolling cargo and shippers who fail to send the volume of freight that they committed to sending.
“There is still a lot of hype around technology in our industry today,” Downes said. “I think 2018 will be the year we see which technologies actually deliver value to the industry, and which don’t.”
Downes is confident that his own business, which launched a marketplace in the summer, will take hold in 2018. He says that having moved thousands of containers so far, the site has seen a more than 99 percent fulfillment rate. In other words, less than 1 percent of cargo was rolled by the carrier, and left at the dock, or never arrived there because the shipper sent less than the volume it committed to send.
On average, only 76 percent of shipments industrywide are completed as planned, he said. After operating for several months, he said, his company has “hard data that really proves both parties are actually happy to make and honor commitments when the conditions are fair and transparent.”
The shake-out cited by Downes could be most severe in the marketplace sector, where more than a dozen companies vie to provide an easy online platform through which shippers, freight forwarders and others can book freight onto a ship, and secure logistics services. Israel-based Freightos has secured venture capital funding of nearly $60 million. However, others are far less well-funded, and in 2017 the startup Haven — once a marketplace — opted to focus instead on developing a transport management system.
Other technologies appear to offer more clearly defined benefits that are more integral to the efficiency of the supply chain. Technology that provides visibility, or the ability of shippers and service providers to see where cargo is in real time, gained much attention in 2017, as did technology to track the whereabouts of containers, chassis, and other equipment. That will likely continue as the technology get better and cheaper.
Number crunching, in the form of big data powered by artificial intelligence and machine learning, is also seen by some industry players as key to the future. ClearMetal, with $12 million in venture capital backing, provides software to its customers that enables them to better organize data held internally and to forecast the progress of cargo — right down to an individual box — through the supply chain. That knowledge enables the user to better make decisions about resource allocation, preparation for the arrival of cargo, and how to use carrier space more efficiently.
Haven CEO Matt Tillman said that while freight forwarders and logistics providers have until now adopted technology, they “haven't forced their shippers to do the same.
“We'll see that change in 2018, if customers expect to continue receiving great customer service,” he said. “Shippers of low-margin, high-volume merchandise will continue to get squeezed and will turn to modern technology to prevent logistics destroying what little margin remains.”
Meanwhile, San Francisco-based Flexport, perhaps the best-funded of the new wave of startups, is likely to continue its effort in 2018 to move beyond its digital roots into the non-digital sector. With more than $200 million in venture capital — just over half of it secured in the fall — the company has rented warehouses near Los Angeles and Hong Kong, and is moving into trade financing via a partnership with new backer Wells Fargo Strategic Capital.
Andy Barrons, senior vice president and chief strategy officer for Navis, which specializes in technology solutions for the marine terminal industry, said that with the wave of industry consolidation and restructuring activity on the wane, the industry will start focusing on “tools and technology” to support business plans.
The new alliances, and their increased operational complexity, will require smart technology to help manage them, said Barrons, whose company supplies software that helps manage and coordinate the activities of a port terminal. Terminal operators want “centralization and consistency” in operations, and that requires technology that can communicate with numerous parts of the enterprise, he said.
Barrons pointed to a survey of 200 maritime industry executives that the company completed in June in which respondents on average said supply chain processes could be improved by 50 to 60 percent, if the industry updated its IT systems and shared more data.
“There’s a good understanding of the problem and solution and many believe that change is coming,” he said, noting that over half those surveyed said that the “industry mindset” was one of the biggest roadblocks to accepting technology. “The good news is nearly half say their companies are investing in new technologies or increasing their investments.”
“In 2018, I expect more focus on using cloud technology” to help players along the supply chain support each other,” he added. “This will require greater focus on planning collaboration and data sharing, knowing not just who and what, but where are my shipments, when will they arrive, and what’s the next step in the chain.”
This year may also determine the fate of blockchain’s importance — or lack of — to the shipping industry. The distributed ledger technology has gained industry supporters, including Maersk Line and IBM, who teamed up to study how to deploy the technology. PSA International, Pacific International Lines, JD.com, and the Port of Antwerp have all carried out tests of blockchain, and Hyundai Merchant Marine said in September that it had completed its first voyage using blockchain, from booking to container delivery. So far, however, its use has not been widespread.
“Blockchain has garnered the most attention, even in its infancy,” said Rob Maidman, director, North America, for TIM CONSULT of New York. He said the technology could prove powerful for the maritime industry, through its ability to “enable all participants in a supply chain transaction to use a single platform rather than access multiple sites as is now the case.”
Yet the technology’s progress may be limited by the threat of cyberattacks, and an inability to provide security, he said, citing the chaos reaped by a cyberattack on the Maersk Group in June.
“No other single challenge has had more impact,” he said.
Contact Hugh R. Morley at Hugh.Morley@ihsmarkit.com and follow him on Twitter: @HughRMorley_JOC.