Shipping is Broken – Technology (Part III)
When it comes to Liner Shipping, a reasonable rule of thumb would be that, technologically speaking, they are about two decades behind the rest of the world. That said, many of them are waking up to this fact and embarking on digital transformation plans that they hope will give them a desperately needed edge over the competition.
Unfortunately, there is a common mis-conception, within the shipping industry, that technology is some kind of “magic bullet” that will solve all of their problems. It will rid the industry of manual, repetitive and time-consuming activities. Suddenly, vast amounts of data accessible, analytical tools will be able to increase forecast accuracy, efficiency, vessel optimization, network optimization and, above all else, profits.
It is absolutely correct to say that technology can be an enabler for all of the above, but technology on its’ own, will do nothing for them. Liner Shipping Companies have an enormous task ahead of them, but it isn’t the development and integration of new systems that they should have their main focus on, its’ Change Management. As the saying goes, a tool is only as good as the person using it.
Simply put, Carriers need to think and behave differently if they expect technology to help their business. It’s unreasonable to expect that you can plug in a new system, continue to behave as you have always done and then see a massive shift in the way the industry performs.
I’ve already outlined two very clear areas of the industry that need to be changed, namely, pricing strategy and capacity management. However, it’s worth pulling out a real-life example of technological innovation that millions of dollars have been poured into but has still failed to deliver anything substantial.
This is, by no means, the only area of the industry that cannot be solved by technology alone, but it is one where it requires the Pricing Mechanism and Capacity Controls to be in place so that correct cargo forecasts can be made in order to yield results.
Stowage Planning Automation (or semi-automation) is a goal that many people have chased or been involved in (I fall into the latter category) for decades. On the face of it, Stowage Planning is a very manual, time consuming task and could, theoretically, be automated.
Software companies and their teams of PhD’s repeat the phrase that Stowage Automation will speed up the time spent stowing containers on a vessel plan and increase vessel utilization. Even is fully automated Stowage Planning isn’t possible, semi-automated stowage would allow the vessel planner to use the time that they have saved planning the vessel, to tweak and optimize the stowage plan, in order to increase utilization.
Let’s begin with the idea that semi-automated systems free up the vessel planners’ time. If planning time could be reduced by 50%, then what is really going to happen? Since the costs associated with vessel operations in port are both a combination of virtually invisible and intangible to the stowage team, how do you quantify a tangible monetary amount related to increased terminal productivity and reduction in costs? The simple answer is, you can’t.
What you can easily measure is the number of headcount that a stowage department has so the very first thing that any manager is going to do is get rid of half the department and then show how much money they have saved. The remaining planners now have double the number of ships to manage and they aren’t going to be spending any extra time optimizing anything. I’ve increased the number of vessels a single stowage planner can handle, but I haven’t done anything at all to improve quality, terminal productivity or vessel utilization.
These systems take years and tens of millions of dollars to develop and my only result is to fire half of the stowage team. Let’s just put that into perspective for a moment. Only about 0.03% of a Liner Shipping Companies staff are stowage planners. It’s going to take a very, very long time before I get my money back.
Similarly, the idea that any kind of automation will increase vessel utilization is (currently) a myth. A stowage planner is never just making decisions on where each container is to be loaded in the current port. They are always looking at the ports in the future (See related article). Since forecast accuracy is so poor, in part due to the pricing structure outlined in the first of these articles, a planner is always working with a combination of real data, forecast data, experience and “what-if” scenarios.
The human brain is perfectly capable of working with this kind of combined information, a computer is not. As soon as you input forecasts for future ports into a system, it will take it as fact and stow the vessel accordingly. The system will repeat this process from one port to the next until it finally walks itself into a corner. That results in costly restows, poor crane deployment, increased fuel consumption, to name but a few simply because the forecasts are extremely fluid and will have changed, often quite dramatically.
Lastly, there is the myth that if you can fully automate vessel stowage, then there is no longer the need to have an experienced stowage planner. A system can only ever be as good as the information that is fed into it. It’s very difficult for it to assess the true downstream impact, since the entire stowage plan is built upon a set of assumed information. You still need to have someone who understand what decisions a system has taken, why it has taken them and what will be the impact.
Stowage automation is a bit like Blockchain. Senior management hear of these things, have no real idea or concept of how they can practically be applied to complement and enhance their businesses, but they still see them as something they “must have”.
Technology can certainly improve the way that liner shipping works, but only when it is coupled with well thought out and implemented Change Management programs. Switching to new technology is easy. Changing the way people behave is a much tougher challenge, and it needs to start at the top.