Big Waves in the Shipping Industry

Shipping is quietly undergoing huge technological changes that bring cutting-edge IoT sensors and satellites to the age-old industry of high seas shipping. This industry has historically lagged behind others in terms of adapting to new technologies, despite being responsible for carrying 90% of the entire world’s traded goods (https://tinyurl.com/htwdqe4).

The issues that this industry drowns in range from exhaustive documentation requirements, ensuring the origin of products, spoilage, or the total loss of the product at sea. The news has reported on this extensively in the form of “food fraud,” with olive oil being adulterated with peanut oil, honey being watered down with corn syrup, and all sorts of seafood being sold as whatever name yields the highest market price (https://tinyurl.com/we64e26, https://tinyurl.com/t99dv3g). Due to a lack of proper atmospheric control, a lot of shipped product is simply written off as spoilage. It is estimated that between 2.5%-5% of food is spoiled during supply chain handling, while approximately half of US spoiled produce is due to suboptimal shipping conditions (https://tinyurl.com/sk52pff). Finally, containers are routinely lost at sea as well as to the depths of various computer systems and shipyards worldwide. By one estimate in 2011, around 10,000 containers are lost each year (https://tinyurl.com/ulaoete). Aside from the waste issue this causes, there is also a large financial liability issue as most shipping companies are only liable for losses up to a certain maximum (usually $500 USD) per container regardless of the contents. Suffice it to say that technology has played a shockingly small role in a huge industry that is rife with tracking and origination issues.

To be fair, there were barriers that prevented more accurate tracking. Ships have historically been unable to communicate data while at sea, and even with the internet and satellites the cost has been prohibitively expensive. More recently, ships are able to access the internet at reasonable cost via satellite. Coupled with the immutability of blockchain, the possibility of 24/7 accurate tracking mechanisms became possible through IoT sensors on individual containers.

Essentially, the modern remote container management (RCM) solution is to have each container equipped with an IoT connected sensor (can sense for over 50 different things including humidity, temperature, light, g-force, movement, etc.). These sensors are connected to a computer that has a satellite uplink, which then uploads to a closed and permissioned blockchain-based web application that customers can view in real time. This allows for transparent tracking of goods from factory or farm to the eventual point of sale through RFID tags, QR codes, or other mechanisms. Walmart was an early adopter of tracking food via the IBM backed Hyperledger blockchain, and now Walmart analysts can track the origin of a single mango in 2.2 seconds versus 7 days (https://tinyurl.com/vnc8gz2).

This technology allows customers to make more timely logistics decisions and ensure proper care of their goods. A prime business example of the power of the technology is in the fruit industry. Utilizing this technology, a fruit company like Dole or Chiquita can monitor the market price for bananas at different stages of ripeness. It can then remotely activate ethylene gas to be distributed in their containers on board ships worldwide to ensure that on the day the ship docks, the bananas are at a level of ripeness that guarantees Dole or Chiquita the best possible price on the market.

The biggest players in the shipping industry saw this confluence of events coming. If they did not embrace this change and offer enhanced tracking to their customers, another player in the supply chain would come in and unbundle the tracking service from what was historically provided by the shipping company. Some players in the shipping supply chain that are looking at offering a blockchain based tracking service utilizing IoT sensors include container manufacturers (Daikin), shipping container leasing companies (Textainer), shipping companies (Maersk), as well as technology companies (IBM) (blog.orbcomm.com/reefer-container-operator-stays-a-step-ahead-with-iot-telematics/). To ensure they were not disrupted and had the service unbundled, the largest player, Maersk, teamed up with IBM to create TradeLens in 2018. TradeLens allows for streamlined documentation, tracking, and container utilization through an online RCM platform. Shippers have been hesitant to team with TradeLens, which would give Maersk an even larger foothold in the industry. Instead, other shippers and ports have created their own platform they call the Global Shipping Business Network, or GSBN that accomplishes much the same as TradeLens. These platforms have created a whole new business based on shipping, essentially a knowledge or data-based platform business that can generate healthy revenues via a subscription-based model. Moreover, whoever controls this system has more data on worldwide shipping patterns than any company has ever had, which could certainly be monetized for the gain of the operator if involved in the industry or sold to other firms.

Due to innovative recognition of cheaper internet and satellite uplinks coupled with the advent of blockchain and IoT sensors, Maersk has managed to not get disintermediated and have tracking unbundled from their service offering. Large industry players, through TradeLens and GSBN, have managed to harness innovation and create huge value to A) customers through an information rich subscription-based platform and B) to themselves, by recognizing the change before unbundling occurred and creating a new business model and revenue stream.