Shipping is at an inflection point in the adoption of digital technologies, driven in part as a result of the need to decarbonise and reduce its environmental impact but it is also driven by an increasingly competitive and regulated global logistics market.
There are real challenges to overcome in quickly developing low-emission propulsion systems and alternative fuels, without relying on excessive carbon offsetting. But, it is also clear that the way in which many operators compete is set to change. In October 2023, the EU Commission announced that they would not renew the shipping industry’s exemption from competition laws, painting an uncertain picture for slot sharing agreements and container alliances when the exemptions lapse. These cooperation agreements were formed in part to manage inefficiencies and idiosyncrasies in freight flow versus capacity, which will, at least in part, need to be addressed in other ways from this year.
Significant societal pressure, which has driven a raft of new regulations around the world, has driven the need to decarbonise maritime. Attitudes against changing the industry are increasingly falling into a minority. The industry is now recognising existential threats from environmental, societal, regulatory, and commercial left-fields and has, mostly, turned to look for possible solutions.
Shipping will have a vital role to play in improving the global outlook. Increased trade is a trigger for regional economic growth as well as an effect of it. According to the Office for Economic Co-operation and Development (OECD), for every percentage increase in a nation’s Gross Domestic Product (GDP), there has historically been a ~4% rise in trade to and from that nation. Shipping is an important facilitator, bringing developing nations out of poverty and raising living standards for some of the most vulnerable people around the globe.
But, it is also an industry that needs to minimise harm to the environment, its valuable workforce, and coastal communities. This is difficult to achieve while also maintaining the high freight velocity needed for the economic development of all nations, particularly those that are more distant from the global centres of trade and commerce. Responding to climate change is not the only reason to undertake a digital transformation programme. The other less abstract reason is the changing competitive landscape. In 2020, Secretary General of Intermanager, Captain Kuba Szymanski, illustrated the increase in competition in ship management, telling an industry survey that ‘… cut-throat competition is driving prices of ship management down. In some cases, owners are now paying 60% of what they paid 20 years ago – and that is without inflation’. Elsewhere, the same study reinforced the view that much of this competition was being led by digitally enabled businesses.
The global economy, competitive landscape, and environmental concerns all converge, requiring us to create significantly more value for the same, or fewer, resources.
Digital transformation is a crucial piece of that puzzle, brought about by developing a mature data management system and applying digital capabilities to use cases throughout the operation. Simply put, driving change requires the measurement of impact at every level, from the global fleet down to an individual consumer onboard a ship. What gets measured gets improved, and digital transformation is the only viable tool open to us to measure and analyse the vast array of variables at play with enough accuracy, reliability and scale.
For further insight into the areas highlighted in this article, take a look at our thought leadership report, produced in collaboration with Lloyd’s Register, The Benchmark: Measuring the Progress of Digital Transformation in Ship Operations. This report provides a deep dive into the journey towards digital maturity for maritime businesses. You can download a copy here.
