Pay as you sail – How far can we go?

The scope and application of digital solutions in shipping is increasing. There are many opportunities to exploit the data received to generate value and/or control costs. When activities are measured more precisely, they can be managed more precisely, it’s as simple as that.

Measurement and management

The answers to the questions; what is being used, where is it being used, how long is it being used and how is it being used, are all being answered with increasing detail and context. With a better and bigger picture it is possible to optimise and closely align resource with requirement.

We already have some examples within shipping. It was not too long ago a ship engaged in world wide trading would purchase and maintain thousands of navigation charts. The navigation team spent a good part of their time manually correcting the entire portfolio of charts and other publications and meticulously recording the changes. Safety essential and mind numbingly tedious, particularly if the charts were unlikely to see the light of day between purchase and disposal!

Developments in electronic charts and publications made these tasks largely redundant. Beyond this step change the ability to exchange planned routes electronically meant charts can be obtained for the voyage and period needed. The resource and requirement are now matched and you “pay as you sail”. Having optimised the core requirement providers are now focussed on adding enriched context and capability.

In the case of charts then, there is no need to pay for something you don’t use and you only need to use what you need. Could there be other opportunities where the ability to measure more precisely results in a value or cost optimisation opportunity?

Fuel

The classic “go to” optimisation story and we have written pretty extensively on this topic in other articles so won’t spend much time on it here. Emissions regulation in addition to cost is playing a large part in driving change and there is undoubtedly more to come. The data sources are improving and accuracy margins are getting increasingly tighter.

Hulls, propulsion and power

The business of shipping as we know it covers a number of commercial and technical disciplines. There were times when all of these disciplines were contained within the owner’s office. Over recent decades we have seen increased outsourcing of these disciplines e.g. the presence of technical and crewing managers, however they remain part of the business. The business though is about the acquisition, operation and sale of capacity of various kinds. The other disciplines are maintained to support this core purpose. Can digital solutions have an impact here, further separating the business from non-core responsibilities and risks?

Other sectors may have something to offer. Airline businesses, for example, have an established model of leasing hulls and buying propulsion as a service, rather than owning. Increased connectivity, remote monitoring and management may allow existing maritime OEM to develop their products to offer propulsion, power and other technical processes as services. This leasing model might be extended to the hulls themselves with shipyards having through life engagement with their products. These digitally supported service offers could be an important step in the roadmap to operating with fully remote and/or autonomously operating systems in the not too distant future.

Insurance

Like shipping itself this sector has a long history and legacy practices and processes which will be the subject of a digital refresh. Comparable with maintaining extensive chart portfolio, parts of which might never be used, there may be more opportunities to tailor the insurance business to a more closely defined and monitored risk exposure through digital solutions. We have already seen war risk insurers use technology to dramatically streamline process and improve asset monitoring. In other markets such as automotive insurance, we have seen “black boxes” monitor risk behaviour, so why not shipping? What would greater insight and assurance with regard to operating experience change for this sector? It is not difficult to imagine radically different models for tailoring premiums to risk and challenges to existing structures, including mutuality.

Supply chain optimisation and the “Uberisation” of freight

The connection of ships to digital trading and logistics platforms and port communities will see opportunities for improvements in efficiency supporting sustainability goals. Optimisations of arrivals for loading and discharge will require adequate forward visibility of a requirement. Parts of shipping are already becoming an integrated component of a wider supply chain optimisation endeavour. Expanding this development will radically change the freight markets as we currently understand them from origination through contract generation, operation and ultimately compensation.

Freight pricing models are likely to become increasingly automated and adjusted. Value calculations will accommodate different variables including those related to stakeholder community interests e.g. carbon intensity, capacity utilisation and a range of other environmental and sustainability drivers in addition to pure commercial metrics. These changes are part of a much wider “neo-capitalist” movement exemplified by initiatives such as the EU’s Green Deal.

Shipping as a service

Perhaps this is how far we can go with “pay as you sail”, the total transformation of shipping as many of us have known it. Part of a globally optimised, increasingly automated and delegated, trading, supply and distribution network whose value is not generated in isolation but as part of its service to the needs of the world economy, environment and community.

Stay connected and safe.

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