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Is digitisation in shipping disruption or racketeering?

Is digitisation in shipping disruption or racketeering?
December 3rd, 2018

Panos Patsadas from DS Multibulk takes issue with the myriad software salespeople knocking at his door.

I have been quietly observing for months now the on-going debate about the digitisation of shipping and reading time after time how this is the future. Be it voyage estimate software, complete integrated software to link operations with chartering and accounting, software to match supply and demand of vessels and cargoes, or even blockchain to tighten cybersecurity. A lot of hype, but where is it all coming from, and is it really disruptive to the model?

Over the years, working in operations and chartering, I have sat across a desk from many software engineers, trying to sell me or the company I have worked for the next big thing in shipping software. No one, without exception, has ever been able to justify the pricing of their product, that is no more than an Excel or access based template with a ‘facelift’, to make it look more user friendly for the old school technophobes. Worse, the majority is developed by software engineers who think they understand the problems of shipping yet try to develop a software suited to a fast-moving consumer goods (FMCG) supply chain. Hours worked in shipping? Zero! This is the very reason why the so-called digitisation revolution has found its biggest appeal to date in container shipping, which funnilyy enough is the closest thing to a FMCG supply chain. I am pretty sure there will be plenty of critics, but the bottom line is, there is a whole new market of ‘digital shoemakers’ out there, who make ‘digital shoes’ size 10, and then try to convince companies to buy that ‘shoe’ whether they need running shoes or hiking boots, whether they are a size 8 or 12.

What I also fail to understand is the sales pitch that often comes with such software. Digital brokerage platforms, for example, promise everything technically relevant or irrelevant to shipping, but make no reference to ‘relationships’, the single most important ingredient of our business. They talk about managing supply and demand and all kinds of information, but this is all like food without spices. Frankly speaking I couldn’t care less if you find a cargo for my ship, because everything can be fixed at a price. The million-dollar question is, “What is the best I can fix at in this particular moment?” No software can give you this answer yet. Only personal relationships, built over years of trading, can provide you with this info. This info is the very added value we are trying to extract day-in, day-out; to get a small advantage over our competitors. Why should we buy into a product that excludes such a vital element? That is ‘efficiency’ coming at a very high price in my opinion.

Still ‘efficiency’ and ‘integration’ are the buzzwords surrounding most digitisation promising software and platforms. And again, I will single out the container industry as being standardised enough to possibly gain benefit from such integration, but what about the rest of shipping? We really need to ask ourselves. If this new technology is supposedly there to help you make more money, why does it not find appeal in some of the world’s most successful nations, such as Greece, Norway, Denmark, Germany, and is still met with a lot of hesitation? Why is the price – up to $100,000 – such a big number to pay, if it will make a business so much better? Digitisation does not yet present a paradigm shift in shipping and how things are done. The model of successful organisations still remains buying low, selling high, and trying not to lose money while waiting for the next cycle peak. Does digitisation change fundamentally what happens between the trough and the peak of a cycle? No! The real value, even in today’s market, is still extracted from the sale and purchase of the asset, and much less from operating it in between.

And the part about integration. This is the biggest paradox. I have had the chance throughout my career to work for some of the most forward-thinking companies and also some very old school companies, where all emails coming in are still being printed. Every department has a distinct role, every employee has a unique function, and it is not everyone’s job to know what happens to their left or to their right. This is how shipping companies traditionally work, this is how principals want it, whether we like it or not. In fact, in the majority of cases the owner himself, or his front man, are the only ones with a real view of the business as a whole.

To cut a long story short, the need for a paradigm shift, is not yet coming from within the industry, but it is due to external hype. Rest assured, when the principals feel the need to change how things are done, they will do so, with the same conviction and ease they changed countries or jurisdictions overnight, (like in the early 2000s from the UK, or following the capital controls in Greece three odd years ago). There is another part where digitisation can contribute, but this is not what the software companies are offering.

The gap that banking has left in ship financing, and the need for private equity, VCs or other funds to bridge the same, does call for more neat reporting procedures which may not be in place. This is an area where digitisation could have a positive and facilitating impact. It would create value by making traditionally introverted companies more accessible and attractive for investments from financial institutions. Such value propositions could find a place in shipping and add value, but creating software products, and then trying to present them as a solution to a problem that may not be there, in my eyes edges closer to racketeering and less towards disruption.