There’s a tremendous appetite for digitization within the shipping, logistics and commercial maritime industries. For example, organizations want to use AI to improve real-time shipment tracking and supply chain visibility. But implementation can be challenging. In this episode, our experts talk specifics about digitization, data, innovation, and generative AI in the shipping industry and commercial maritime. They cover challenges, success stories and opportunities for growth.
There’s a tremendous appetite for digitization within the shipping, logistics and commercial maritime industries. For example, organizations want to use AI to improve real-time shipment tracking and supply chain visibility. But implementation can be challenging.
In this episode, our experts talk specifics about digitization, data, innovation, and generative AI in the shipping industry and commercial maritime. They cover challenges, success stories and opportunities for growth.
Featured Experts
Ralf Belusa, Managing Director, Hapag Lloyd
Nick Chubb, Founder, Thetius
Tom Rourke 00:01
Hello and welcome to the latest episode of The Progress Report. I'm Tom Rourke global leader for Kyndryl Vital and your host for today's conversation. Hardly any aspect of our lives today is untouched by the impact of technology and in particular technologies such as AI and in particular generative AI. But there are some industries that have operated successfully for centuries using operating models that have been well established and well understood globally using a language and this type of operation that has been stable as I say for centuries. So what is the impact of IT and digitization and digitalization on the shipping industry? And what are the potentials for future growth that may arise out of the application of IT? I'm delighted to be joined today by my friend Dr. Ralf Belusa, Managing Director at Hapag Lloyd, a company with a centuries long history in the shipping industry, but Ralf himself being a leader in the digital space, spanning a number of industries, and bringing all of that experience to Hapag Lloyd, I'm also joined by Nick Chubb, who is an leading independent voice in the maritime industry, and the founder of Thetius and himself, a former mariner. Nick, Ralf, wonderful to have you with us today, as we sort of think about the role of digitization in the shipping industry and commercial maritime, I'm most curious about what do we really mean by that? I mean, are we talking about customer experience? Are we talking about the actual operations in industry? So maybe just for the benefit of our listeners, and if I could ask you first, Ralf, just for a framing. When you talk about digitization in your industry, what's the scope of what you're talking about there?
Ralf Belusa 01:39
Wonderful. Thank you so much, Tom. So from my perspective, I think it's important because it changed also over the last 5, 6, 10 years. Currently, and if I look forward, now, it's really, it's all about efficiency, productivity, profitability, really, in terms of adapting these kinds of new technologies for productivity, efficiency and profitability.
Tom Rourke 02:01
And, Nick, obviously, you work quite widely in a range of roles, what what's your perception of the scope of digitization in this industry?
Nick Chubb 02:10
We actually think of digitization and then digitalization as there's two sort of distinct things. And for us, digitization is the taking of something that is analog or manual and turning it digital. And, you may be surprised, but we're still in a position across the industry - particularly when we look at things like ship operations - there's a lot of stuff still happens on paper, official documents, and all that sort of stuff. So the kind of first basic step is that digitization, taking those into into digital formats. And then digitalization is actually looking at how you can transform the process to make it digital first. And so we kind of see there's kind of two distinct steps to it. And depending on where you go in the industry, there's different levels of maturity to all of that.
Tom Rourke 02:52
What have been of the most impactful success stories, thus far, Nick, would you think?
Nick Chubb 02:57
The most important one that we see today, and where we're seeing a great deal of impact is around digitalization to support decarbonisation. Shipping is an incredibly efficient way of moving goods around the world; it is the most efficient transport method, but it's still a massive emitter. And there is still huge inefficiencies throughout the maritime supply chain just in terms of how ships are operated. So being able to take a much more data driven view to how a ship is being operated, and being able to find those tiny 1% improvements that add up over time to make a ship more and more efficient, and reduce the emissions. We've seen enormous progress in that in the last 10 years.
Tom Rourke 03:36
Obviously, Ralf, you've come from a background outside of shipping before you entered this, you've sort of been involved in digitalization and digitization in a range of industries. And I guess be really interesting to explore your experience of moving from those industries into this industry and kind of what are the lessons you've been able to bring?
Ralf Belusa 03:49
From my experience what I saw in coming to shipping and logistics, it's really complex due to many, many different partners along the supply chain. So that's why things are not so easily changed or adapted to new technologies or to new IT or customer experience to adapt to that. But nevertheless, I think also in shipping logistics, we need to face the reality of emerging technologies, new technologies, setups in terms of automation using modern technologies, and not try to find a digital and IT solution for an established process, which I sometimes do not need or to get into sales or customer service to see all these repetitive questions. When will my container arrive? I have a question to my invoice blah, blah, blah, all that kind of stuff. That's repetitive tasks, which you can fully automate without any disruption because there are so many standardize processes. And standardization is the fully root cause for automation. So if shipping is talking about, oh, everything 80-90% is standardized. You're welcome, be my guest that's 80-90% fit for automation. We are still typing a lot of emails, a lot of getting hundreds of responses with the same question. There's a lot of room for improvement there for the next couple of months and years.
Tom Rourke 05:21
Is there any sense that we're reaching a moment where people also recognize the opportunity for further growth? Is there any space here where digitalization and digitization actually can also be an engine of growth for businesses in this industry? And maybe we might start with you, Nick.
Nick Chubb 05:37
If you're looking at it at a really fundamental level, it's important to say that just for the global economy to be able to grow, shipping as an industry or commercial maritime or however we want to describe it, as an industry has to be able to grow its capacity to transport goods. They are fundamentally quite tied together. To be able to do that, what we need to do, because the resources that we have available to us a finite, is get more from what we've got existing. And actually, as an industry, we've been really effective of that over the last 50-60 years, the invention of the container being the that first standardization, that's not digital at all, but it actually enabled us to transport 10 times as much as many tonnes of cargo per tonne of ship, the biggest growth area we see right now is actually in renewable energy. Offshore wind has become an enormous space very, very quickly - 10-15 years - and it's showing no signs of slowing down. Fundamentally, as a species, we want to continue to grow, continue to do more with the resources we have available, ideally, be able to do that, using less resources because of the climate crisis we're all in. And digital is a really key tool for us to be able to sort of maximize that efficiency.
Ralf Belusa 06:49
Digital is transforming the industry and I think digital really helps to steer the growth or to manage and open the door of growth and optimizing existing channels and revenue, and so on. So it's a huge growth potential on many sides. And what we see also, I call it many times "the educated decision maker." So our clients, our customers, our partners are more and more educated with digital tools, with chat GPT, with the internet, with Google search, and so on with different kinds of solutions. So in comparison, our customers and partners know much more than in the past, and to take also therefore better decisions on that. And if we know that and put that into our daily growth processes to grow the company on sales, on customer service, on pricing on trade management, on acquiring new customers, then we can really do the step by step initiatives to to grow here. And so to say, I would always ask the organizations, 'what kind of different sales methods are we using? Are we using Omni channel sales methods and frameworks? What's the sales method framework besides a customer calling us and having five containers?' So there are different kinds of omni channel sales methods where we can steer and move that forward.
Tom Rourke 08:16
Over the last number of years that we've seen really significant disruptions in supply chain. So COVID drove some changes, we had issues with the Suez Canal during the infamous blockage where somebody turned sideways. And all of those things, obviously have big knock on effects. And I guess, is there a sense that we need to also be more digitally prepared so that we can make more agile decisions when these events occur so that our response to them is not as traumatic? And again, Nick, maybe if we could start with you looking at a kind of broad picture of how these things can create disruption? But do they create new opportunities for more agile decision making?
Nick Chubb 08:53
Maritime to a certain extent has been insulated from digital, digital transformation, for two reasons. One, is just at some point, a really heavy piece of machinery has to move some really heavy bits of metal around. And so digital can only go so far with that. And then the other point is that up until very recently, the levels of connection to the internet that you, or I, or the three of us on this call would experience haven't been available on ships. So ships have been relatively isolated from from the internet. That's now all changed very, very quickly, just in the last year or so with with Starlink rolling out their satellite networks and then other networks like OneWeb. When you're talking about those questions around how it can enable agile decision making and all that sort of stuff. It used to be the case, if we wind the clock back 20-30 years when something major like that happened, there was just not really much you could do about it. In COVID we ended up in a position where some seafarers got stuck on board their ships for as long as two years, which imagine working seven days a week for for two years and not seeing friends or family or being able to step on shore. That's the extreme end, but every Seafarer and - I'm speaking as the former Seafarer myself - got stuck on board for longer than they should have been. And so there was a big disruption there to the supply of people to the industry. And then when we've seen these big supply chain disruptions, like the Suez Canal, absolutely, we've got to a position where we're able to react quicker. The thing about maritime is a decision to reroute a ship round, the Cape of Good Hope, for example, actually has a knock on impact for two, three, maybe even six months on to other supply chains. You've got the immediate response, whether that's running crew changes during COVID, or rerouting because the Suez Canal is blocked, but then you've got the wider supply chain implications that you have to take into account. And that's stuff that's just really difficult for the human brain to do. Because there's so many parameters and so much data. And that's where if you've got the right setup, and you've got access to the data and access to the compute power to run these kinds of simulations, yes, you can make much, much better decisions, rather than just kind of having to sit back and wait for it to sort itself out.
Tom Rourke 11:00
I mean, does that create new opportunities? And maybe Ralf, given your breadth of experience, does that create opportunities for people in the shipping industry to be arbiters of products and services and data services to a much wider set of customers, so the data itself is the product, if I may.
Ralf Belusa 11:17
I see it as this way, because I really love these kinds of opportunities to grow. And also this kind of disruption, that sometimes feels a bit strange to say in that way, disruptions are the opportunities to grow. Because if we get our organization ready for these circumstances, and there is always something happening, but if you train your organization to react to these circumstances, to maneuver left and right, to choose different kinds of methods, towards the clients in terms of pricing, of information, of helping our clients/customers, to do their business, I think that's a huge opportunity. The faster, the more relaxed, you as an organization can cope with that, the better you can grow, and the better you can connect with the customers because the customers feel safe and secure with you. Because we try to handle this try to organize that in a fast and easy way. And therefore also these kinds of management frameworks and information through the organization in both ways, top down and bottom up, must be really trained and used all the time in marketing, in sales, in operations and so on, that the organization gets fluid to that. And then it's wonderful. If a disruption is there, then it's an opportunity to to grow and to do things better than the competitors.
Tom Rourke 11:21
As you kind of work in terms of changing mindsets, getting people to open up to the possibilities here. What do you see as both the barriers that you need to overcome and establishing the right mindset, but also, what are the kinds of strategies that have been effective in getting people to wake up to the opportunity here?
Ralf Belusa 12:55
I think it's good to showcase that all the time to have these kinds of Lighthouse projects or best practice examples, but also training, education, workshops, all the different kinds of things, to show this to the organization and also in different kinds of aspects in customer service, in operations, in IT, in marketing, in all different kinds of departments to get the organization a bit more fluid, and a bit more vibrant to new topics to try out. And if it fails, then it's also okay, it's fine. Just do it.
Tom Rourke 13:30
And, Nick, same question to you. You deal with quite a broad range of stakeholders here. What do you perceive are the key ways of trying to overcome some of the mindsets that we may have in the industry?
Nick Chubb 13:40
There has to be some kind of recognition that we're going on a journey that will take some time. A good example is bills of lading. You know, there is an industry wide initiative at the moment to move bills of lading to become fully electronic. And I think I think Hapag Lloyd is absolutely leading the charge on that as well. And the target date to get to 100% electronic bills of lading is 2030. And the technology to do it has existed in some way shape or form for about the last 20 years, 20-30 years. So you kind of have to ask the question, 'well, why is this not happened yet?' And my personal view is that it's very easy to say, why do we do this is because we've always done it that way. But I think in reality in shipping, at least, the reason something's always been done that way is because it is a very long standing convention. Bills of lading have been around since the 1500s and are relatively unchanged from that very early time. And therefore all of this infrastructure has been built up around them. For example, the UK has become one of the first countries to recognize electronic bills of lading. And so, at the moment in 80% of countries around the world, if you get into some kind of legal difficulty about your shipment not turning up and you're using an electronic bill of lading, potentially, you may have difficulty going through the courts to get that result. We're waiting for countries, various countries around the world, to adopt legislation to allow electronic bills of lading to be used. And because the existing paper-based, analog system - that is highly manual and highly complex and very wasteful - because it works 100% of the time, the switching risk even to go from 100% to 99% uptime is actually really quite high. And it's a big leap to take to get to a point where we can get this sort of stuff fully adopted across the industry.
Tom Rourke 15:22
I think when you're very close to the technology, you see a lot of the potential about what the technology can do. But for it to really make have an impact, you've got to reach much further out into their kind of mindsets of a much wider group of people. And as you said, there's a reason bills of lading have worked, because they've worked for centuries in a way that's commonly understood across cultures, across geographies, cross language, all that kind of thing. Would you both be optimistic on our ability to educate people about the potential here? Or is that always going to be a slow road?
Ralf Belusa 15:59
There's always hope!
Nick Chubb 16:04
One of the interesting things that we do is, is track the adoption of particular technologies. And we see you know, Gartner does that does a hype cycle. We see that play out in real time in our roles, and it's fascinating, and I think blockchain has been the best example of that. Recently, if you wind the clock back, two years all anyone in maritime wanted to talk about blockchain, and now it's become AI. And blockchain has kind of died to death. And I think a lot of these technologies will become ubiquitous to a certain extent, they will become kind of part of the maritime infrastructure, but that does take time. I think what I would describe as a kind of a problem-first approach, if you really want to understand where technology can help, you first have to understand where the real problems exist. And I think that's kind of where blockchain went a bit wrong over the last few years, an amazing technology trying to find problems to solve, when really everyone who's kind of not involved in technology day-to-day just has a lot of problems and they'd love someone to come along and solve it, whatever technology. And so I think as technologists, it's our job to understand what those problems are, and then go out and find the right technologies. Rather than try and push a particular technology agenda on to the industry. I think if we can do that successfully, the education piece will start to take care of itself, because the industry will kind of wake up to the power of things like generative AI when they can kind of see that that task that used to take them four hours now takes them 20 minutes.
Tom Rourke 17:33
You mentioned earlier about how the extent to which shipping, particularly, very large pieces of metal moving in relative terms, slowly, very long distances have been insulated from Tech. I'm sure there's a law somewhere that says you can't have a podcast in 2024 about mentioning generative AI. In that mode, I was curious, is there a potential for something like that to be a catalyst for a faster pace of change? For example, its ability to bridge across digital and non digital content, right? So if you think about like a world where you are looking at some of the efficiencies around with some of my bills of lading will be electronic, but some of them are going to be physical, but actually I'm going to process them at certain steps in the process as if they were digital. I'm going to consume them and process them. Like, is that a stretch too far? Or is that something that we might see begin to have an impact?
Ralf Belusa 18:25
From my point of view, I see that generative AI and these kinds of technology is really a good opportunity for all these kinds of sales, customer service, repetitive tasks, getting customer informations out, route changes, port changes, all these kinds of stuff on these local specialities and so on, it's giving us huge more freedom and flexibility and being more creative, to put the other things together also with generative AI, but also it gives us huge opportunities to automate to streamline, but also to be more creative in thinking about how we change and shape solutions. For example, what have we told our customers in the last six months about the topic X, Y, Z? What are the market conditions in Latin America? And what's currently trending? And what do we need for future shaping our information in the next couple of weeks? And put these together in some newsletter or whatever. So you can formulate and produce things much easier. What you were not able last year or the years before, because you could not even think about that complexity. And now it's easy in our hands to get better information. With more background and with our own history towards our customers, with just the click.
Tom Rourke 19:49
One of the things we very definitely like to focus on is the idea of progress. And I'd be curious to understand from both of your perspectives and maybe starting with you Nick. What if you look to the the next two to five years would represent progress for you? The progress that you would both wish for and anticipate in this field?
Nick Chubb 20:06
There are three areas that we are most interested in as an organization and, I think broadly, the industry is interested in are safety, sustainability and profitability. On safety, what progress would look like is 100% seeing a much wider adoption of digital tools to improve the safety of ships, but also kind of risk management in a global supply chain. On sustainability, we have to recognize that the industry must decarbonize and at the highest international level, the targets have been set that the industry will decarbonize, there or there abouts by about 2050. We are at least, I would say, a decade away from any kind of alternative fuel being available at a wide enough scale for it to be deployed across the maritime industry. Begs the question in the meantime, 'what should we do?' We can't sit and do nothing. And so using digital to improve the time mile efficiency of the fleet, so how much CO2 per tonne of cargo moved around the world. Digital technology specifically has a really important role to play first in actually just allowing us to really get a good measure on this stuff, because it's not easy to actually measure that. And then secondly, to find where it can be optimized and kind of look at options for optimization. On the profitability question, I think a lot of what Ralf has talked about in terms of how we use technology to work with customers, and how we use digital technology to improve our interactions and find growth opportunities, respond to crises better, respond to opportunities better, I just think there's a there's a huge amount of potential there. So I would love to see the industry as a whole be able to move in a direction that historically has always been very, very cyclical industry to move into a direction where some of that can be smoothed out by our use of digital. So those are the three areas that I look to when it comes to progress.
Ralf Belusa 21:56
So from my perspective, if we're looking now a bit into the future, it's all about the people, about us humans to make life easier for us, for our customers. So at the center, it's really to "human us" as such that we make our life easier and better also for the future. But what is also key for the future, what I see is the terms of automation and AI, because if an organization, if shipping logistics are in any other industry, if we are not adapting to automation, AI of improving that, for generating progress, growth opportunities, being creative on that stuff, if the competitors is doing that, then we are anyhow lost. So that's why I really can also only encourage all organizations and people to try learn, educate and feel comfortable and motivated with that new technologies coming up, because then we can shape the future, that together in that sense how we would like to have our future. So that's why don't be afraid of that. The future is always bright.
Tom Rourke 23:03
Obviously, given my role as as global leader for Kyndryl Vital, I would have a point of view that this seems to argue for we need much greater collaboration and co creation, as we both identify the right problems to solve and come up with the right way of solving them. I'm particularly struck though, about the connectivity between themes such as digitization, and decarbonisation. I'm also struck by the fact that it's very important for us to reflect on what are the changes we're trying to achieve here and not simply deploy technology and digitization for digitization sake. Personally, I've noted maybe the contents for at least another three podcasts so we may well be back to talk to you. And Nick, Ralf, thank you very much for your time this afternoon.
Nick Chubb 23:42
Thank you very much. Thanks, Tom. It's a pleasure.
Tom Rourke 23:46
Thank you for listening to the latest episode of The Progress Report. And to keep your finger on the pulse of progress, don't forget to like, share, and subscribe. I'm Tom Rourke, thank you for listening.