ShipCrunch

Shipping's big idea: Living with uncertainty

An ambitious effort, to define and share shipping's core skill, begins. Join it.

By Ryan Skinner (email)

Alas, this blog almost died.

Almost.

I work in a different city now, and with companies whose interest is far from those curious concerns of shipowners (most of them, anyway). Today if I say ECDIS or Aframax people look at me funny. They respond "gesundheit." There's no reason to explore shipping anymore. And what should I blog about then?

But. But. But....

How could I abandon shipping so easily? I could not.

There is the sober money that enthrals, in London or Oslo. There are the hungry metropolitans of Manila and Shanghai. Not to mention the garrulous, frank, cunning and generous guys and gals who hold countless strange stories of what really happens in this industry. Cycles within cycles within cycles.

No.

As if to bookend to the Nor-Shipping that much of me was building up to, I feel it oddly appropriate to launch a new, different shipping-shaped enterprise.

This describes that enterprise.

I aim to focus like a laser on the one thing that shipping does so excruciatingly well that any industry can, and must, learn by it.

A business in any industry must apply this kind of focus on what the market wants of its industry, and become so good at it that the business becomes unavoidable - a synonym for its industry.

So what is this skill, this expertise, in the shipping industry? I argue: uncertainty.

Risk.

No industry in the world deals with a larger set of variables on a daily basis than shipping. Even the gaming industry is simply dominos by comparison.

In other words, if businessmen everywhere could learn one thing from the shipping industry it would be this: How to live with, and win by, uncertainty.

I've said it before. I'll say it again, and again, and again. This is shipping's big idea. It's not about how much crap is moved from A to B. Or why it's moved. Or where. Or when. Or on what damned piece of steel. It's about the wobbliness upon which the whole enterprise rests, and which an industry lives and thrives.

Anyone who's ever crossed a border, planned a party, mail-ordered a package, introduced himself to a foreigner or assessed whether a leap was too far, or not, can relate to the big idea, if in a small way.

Shipping's real value lies in professionalizing, and perfecting, an approach to risk and uncertainty. That is a lesson and a skill worth exploring and exploding, for an industry determined to make its presence felt.

So that's just what I aim to do. Explore this big idea, by talking to the kinds of people who are determined to excel at it. The people who take financial risk, political risk, legal risk, and every other kind of risk as seriously as one can take it. Who want to be so good at it, that it marks them, and everyone they touch.

I'll be looking for sources for this project. Do you fit the bill? Let me know. Do you know someone, a person or company, who excels at this skill? Tip me off, or tip them off. This is a topic I'll be returning to in the continuation of this blog, until there's a book-sized piece of knowledge to share.

And then I'll turn it into a book.

SmartShipping - How 'bout it?

Finally, an event dedicated to preaching the beauties of big data to big shipping!

By Ryan Skinner (email)

A couple months ago I was talking to a very clever guy at The Containership Company who was describing for me the challenges of using data to improve ship operations. He basically said: the equations get too complex, too quickly and the solutions aren't sophisticated enough to calculate knock-on effects fleetwide. In short, data's great, but we're not where we can act on it yet.

Contrast this with the pleas from god-knows-how-many entrepreneurs and small businessmen with analytics tools promising shipowners to create massive efficiencies through smarter decisions. If only...., then my man John Konrad (@gCaptain) came through:

One compelling entrepreneur, Tom Stitt of Staxxon (you know, those ingenious folding containers), took the data challenge to the heart of geekville: SXSW Interactive. This annual event in Austin, Texas draws the who's who of nerds and the marketers who cling to them. He wanted the geeks to see shipping as a kind of social media, and apply their algorithms to containers as if they were facebook friends or twitter connections.

Pin a medal on Stitt, somebody. While 99.9% of these coders are more interested in LOL-cats than container traffic, all it takes is to light a fire in the fingertips of one of these dudes and you can change an industry. If Stitt's managed to do just that, we have good things to look forward to.

With all the efforts of the kinds of entrepreneurs I've talked to here at ShipCrunch, the ground may slowly be moving.

With an event this autumn, I'm hoping for an earthquake. I caught wind of a new event from Jon Chaplin of TradeWinds months ago, and now it's a reality: SmartShipping. If I've read the signals from TradeWinds and ShipServ (the team behind it) correctly, they're eager to put the focus on big data. That is, how can we accelerate all of these efforts to use data and analytics to leap ahead, in terms of fleet efficiency?

I particularly fell for the words of ShipServ CEO Paul Østergaard: "I think SmartShipping has nothing to do with size. It's not about being the biggest; it's about being the smartest. In fact, a lot of the technologies we're looking at enable smaller companies to gain some of the scaling advantages of larger companies." Words to warm enterpreneurs' hearts...

Here's the full video:
  

That ShipServ and TradeWinds are behind this can be no accident. What ShipServ is doing to apply data to the supplier side of the industry (traderank, peer review, etc.), TradeWinds seems willing to do for operations. At least, it may be a start for TradeWinds.

It's going down in Singapore in October, and it's apparently where the smartshipping crowd will be. Wish I could be there.

Contribute to the ShipCrunch community?

If you've got original thoughts about shipping, this may be a place where you can share them.

By Ryan Skinner (email)

I'm going from a day-to-day shipping mindset to a day-to-day digital PR mindset. That means I'll be blogging less about shipping. That means an opportunity for you.

I'm convinced ShipCrunch can go from a one-man blogging affair to a community think/do-tank affair.

Hundreds of profoundly intelligent and knowledgeable people in and around shipping read this blog. Their contacts number in the thousands. That's you and your network. Here's my proposition:

Maybe you've thought about blogging, but the trouble of building and managing the platform discourages you. You doubt you'll be able to post often enough. You wonder how it might impact your day job.

I'm offering you this platform to share your ideas and opinions. I like to think that the readers of this blog are industry trend-setters, particularly in terms of technology and innovation.

This is a chance to throw your original thoughts and ideas* in front of a dynamic audience, and see what traction you get.

Taking part in the ShipCrunch community includes feedback on your article, from advice on your angle and approach, to simple copy-editing. And the final post will deep-link to your own profile or site - an excellent SEO booster!

So, how do you get started? Just send me an email expressing interest, and we can discuss. Or fire through a submission for the blog. I'll get back to you right away.

The only thing we can count on is change. And I think that this is a boon for ShipCrunch and the community of people around it. Welcome!

*When I say original thoughts, I mean original thoughts. Do not send through your press releases and expect them to be syndicated here. This is about sharing what you've got on your heart, not on your sales calendar. 

Announcing Portfire 1:40 - The Banksy of shipping?

The person deemed most worthy of inclusion in the Portfire40 is a man (or woman) of mystery.

By Ryan Skinner (email)

After a considerable nominations process and then voting, the first winner of Portfire40 was selected! Months ago, in fact.

Unfortunately, this first honoree is a shy man. Months of attempts to get him to talk manifestly failed. Finally, Peter Mello of Sea-Fever proposed we consider him as a little like the Banksy of shipping - a mysterious, influential figure.

You see, he calls himself HAUS. He seems to be a seafarer. And he edits Wikipedia articles.

That's it.

Some of you may ask: "How does this qualify him for inclusion in Portfire40, which is about people who are having a lasting impact on the industry by the novelty and vigor of their thinking, the strength of their passion for improvement and the impact they have on the community?"

Lloyd's List vs. TradeWinds: Two visions of shipping news

What news do shipping professionals really want? What do they really need? Two answers?

By Ryan Skinner (email)

It's all about this: Be the go-to source of information for the kinds of decision-makers who lead the industry. Any one pitching a story at a Lloyd's List or TradeWinds editor (and I've done it not a few times) will often hear them say: "If it doesn't interest the big shipowner boss, it doesn't interest us."

The shape and speed of what interests big shipowners may be changing, however.

The mother company of Lloyd's List, a pretty large media company called Informa, recently announced its annual results. Note how two aspects of this report play together:

1) "They are still benefiting from cost control measures implemented across the business." - Basically, they've slashed expenses related to news production, among other things.

2) "Informa were concentrating on premium intelligence and increasingly looking at enterprise sales of subscription content." - They're betting on supplying data to businesses.

An induction: Informa cuts Lloyd's List's budget down to less than it needs to survive long-term as a newsroom. It lives off of past glory and decent distribution only long enough to build up its data and decision-support business - Lloyd's List Intelligence. This is where the future lies.

Shipping technology picture by 2020, briefs from DNV

DNV published a nifty book on technology recently. Here are shipping's outtakes.

By Ryan Skinner (email)

This week I was at Høvik HQ and a DNV person shoved a fresh little publication in my hands. The tome's called "Technology Outlook 2020". Its remit was broad, from global megatrends to oil and gas, but there was a sweet spot on maritime technology. Here is the highly, highly condensed version. For the whole enchilada, see below.

The low energy ship
"Multifunctional ship types and or technological advances in drag reduction, propulsion, and materials herald new ship concepts"

• Air bubble lubrication: Uncertainties in the physical mechanisms, and the scaling and technical feasability of this system, need to be solved by 2020. Negative interaction between bubbles and the propellor must be addressed.
• Air cavity systems: 10% fuel consumption decrease is possible. Negative side effects include destabilizing free surface under the hull, and energy loss when bubbles pass through the propellor inflow.
• Hybrid materials: Widespread adoption by 2020 is unlikely, due to high costs, manufacturing and recycling challenges, and fire resistance issues.
• Hybrid propulsors: Though capital costs are high, these can cut fuel costs by 10%, depending on utilization and ship type.
• Ballast water free ships: Even after 2020, ships without ballast water will be more expensive to build and have construction challenges. Competition from onboard treatment and port facilities will be tough.

The green-fueled ship
Implementation of technologies like LNG, biofuel, wind or nuclear face significant technical and economic challenges, and the time frame ranges from a few years for LNG to decades for nuclear.

• Natural gas: Changes in CO2 emissions range from a 20% cut to a net increase. Newbuild costs are on average 10-20% higher than diesel ships. Within 10 years, a considerable share of new ships (particularly short-sea) will use gas fuel.
• Kites: These can substitute up to 2000 kW of propulsion power, and require little of the crew (but can foul deck equipment). Expect to see retrofits over the next 10 years.
• Biofuels: Biodiesel and crude plant oils are most promising, but challenges include fuel instability, corrosion, microbe growth and poor cold flow. Price and availability will probably decide.
• Nuclear: "....will not be commercially available for civilian shipping by 2020." Barriers: nuclear proliferation, investment costs and societal acceptance.

The electric ship
"Supply vessels and ferries with high fluctuations in power demand are the most suitable candidates..."

• Hybrid ships: By 2020, these will mix conventional and superconducting motors and generators, fuel cells and batteries, first to service, passenger and small cargo ships. For larger ships, probably only as auxiliary power.
• Marine fuel cells: Initially, auxiliary power, such as hotel loads, then supplementing propulsion in hybrid electric ships. "During the nexst decade, fully commercial marine fuel cells will become available."
• Batteries: By 2020, a battery pack of 0.4 MWh, with a 4 MW peak load, could weigh 2-4 tonnes and take up one cubic meter. Nano-technology advances may lead to a breakthrough here.
• High-temperature superconductors: These could massively reduce engine size, but require complex cooling technology. Redundancy will be an issue.
• Cold ironing: By 2020, standardised connections will be available in many ports, and on both newbuild and existing ships. Hurdles are sufficient grid capacity on land (for big ports) and infrastructure (for small ports)

The digital ship
"While some e-Navigation technologies are presently in use by front runners in shipping, by 2020 the majority of the fleet will have followed."

• ECDIS: A key e-Navigation technology, coupling to non-navigation systems could extend its potential to port scheduling and customs clearance. Competence on ECDIS will be vital.
• Advanced weather routing: Towards 2020, accuracy and resolution of met-ocean data will be better, along with data collection from ships, and reductions of fuel consumption up to 10% common.
• Piracy detection and deterrence: High-performance radars reaching up to 10 Nm by 2020 will be key. Service providers will use satellite info to provide advanced warning services.
• Ship-port synchronization technology: "By 2020, berth planning algorithms, using satellite tracking and weather routing, will be integrated into ship-port communication systems."

The arctic ship
"Increased demand for seaborne trade in the Arctic will lead to the introduction of larger vessels that require novel icebreaking services."

• Novel icebreakers: Over the next decade, oblique icebreakers (sideways operation in heavy ice) are expected to be widely adopted for Arctic operations.
• Iceload monitoring: These are expected to become prevalent by 2020, so Arctic vessels know when to slow down, and when to find alternate routes, to prevent damage in ice.
• Arctic evacuation vessels: Special lifeboats for evacuation in Arctic conditions will employ an Archimedes' screw concept for movement, with two large, screw-like pontoons on each side of the vessel.
• Ice routing software: Such software will by 2020 provide routing based on ice conditions, from sat images, weather observations, ice charts and weather and ice model forecasts. This will allow navigators to programme ideal routes.
• Ice navigation training simulator: Given the lack of competent personnel, these are expected to gain broader usage. Challenges include modelling ship behaviour in different conditions.

The virtual ship
"To manage the complexity and risk inherent in innovative solutions, there is a drive towards use of advanced, model-based techniques for assessing novel concepts and technologies....from a lifecycle perspective."

• Integrated ship design tools: By 2020, these will support distributed, parallelised and coordinated execution of design tasks using multi-processor architectures and internet infrastructure. A crucial factor will be access to reliable data.
• Model-based ship machinery design: "Modular computer tools will be available to model, simulate and optimise the operation of machinery systems under realistic operational profiles."
• Model-based hull design: By 2020, hull design tools will allow design towards sub-optimal operating conditions, compared to today's systems, which are based on still-water conditions and design loads.
• Large-scale demonstrators: Showcase projects combining industrial and shipowner partners will accelerate innovative technologies to commercialisation.

That's it. If you want the whole book, drop a comment and I'll put it in the post to you! 

 

International Criminal Court for Shipping?

Could a ferocious supranational arm of justice for shipping, solve all of shipping's problems?

By Ryan Skinner (email)

I've been there before. The rulebook that's pulled over the shipping industry like a straight-jacket doesn't work. It creates paper-compliers (following only the letter of the law) and stifles innovation.

Nobody (except Norwegians, god bless my host rulers!) likes a nanny state, which is the demeaning status the IMO has been brought to by its class of uber-technocrat mandarins. Their rules become an impenetrable barrier between people who do things and true excellence.

But, how can you prescribe a certain level of performance without rules? Let's abandon the territory of sticks for a second, and look at carrots. How many national R&D systems long ago understood that steering the direction of innovation (via technocrat diktat) was hopeless, and gave the steering back to industry itself?

That is, shipping companies themselves know what performance means. They know what failure looks like. Let them direct their own resources towards excellence.

But, but, but, but, I hear you whining, how about those who run operations of zero-quality to compete purely on price? How can a quality operator compete with them?

They can't.

You don't need to be a Nobel economist to understand that price is alpha and omega. That's always been the fundamental of shipping, hasn't it? Move things from here to there at the lowest possible price.

At the same time, you don't want to see oil slicks the size of Rhode Island pouring from countless tankers strewn about the world's beaches like bulimic bikini models.

Shipping has always seemed to have an enforcement problem. Because it crosses borders daily and operates in international space, efforts to police the industry have always seemed handicapped.

A few years ago, I delved deeply into the Milosevic case in the Hague, and particularly the unique status of the International Criminal Court, whose creation Wikipedia deems "the most significant reform of international law since 1945." Here was a body who managed to apply a set of global morals in the face of rigid and protectionist nations.

Even if I hate his despotic technocratic cousin, I do love Johnny Law. Nothing warms my heart like a tough sheriff (must be my American blood). Imagine if shipping companies were allowed, within some limitations, of operating as they saw fit. So far, so good. But if they screw up, they get hit hard. Very hard. We're talking very, very painful fines here.

After the Valdez incident, US authorities created OPA 90 to burn tanker companies that messed up. At the time, I was able to document how some shipping companies created straw management companies to minimize their liability. That was a fault with a national law. Let's empower a real supranational authority to bring some international order to the high seas.

It's either that or slowly suffocate from rules. These are the choices. Pick your poison.

Playing with shipping's business models

Monetizing what's most important for shipping's buyers. Your product? No! Compliance...

By Ryan Skinner (email)

You should only make money when you create value.

Um, yeah, alright.

Most shipping suppliers ship off their products to customers, then tick the box marked "Created Value". A bill follows.

But in how many cases was any value really created? That is, what is the value of a part beyond the pure cost of producing and delivering the part?

Arguably, many of shipping's suppliers are missing the golden opportunity to provide what shipowners really want: Compliance.

Two anecdotes illustrate this:

1) I'm engaged in a minor bureaucratic situation. My situation doesn't fit like a key into the bolt of the bureaucracy's rules. So I ask them, and ask again. However they answer, I won't get a real answer until my case is decided yes or no. What I would pay for up-front certainty? It's priceless.

2) On behalf of a client, I have asked the market for queries related to a particular area of shipping rules. Not surprisingly, every user's situation was unique; none fit precisely in the rulebook. Thus no one understood whether they might be stopped in port state control, or not.

Businesses hate uncertainty. And shipping companies are, by their very weather-prone and trans-jurisdictional natures, exposed to more uncertainty than most businesses. Eliminating uncertainty must have a very high dollar value for ship managers.

What I'm proposing is something as wild as a compliance guarantee. This kind of thing is being done in different guises. I believe Wilhelmsen offers something of this nature, even if the guarantee has no fiscal teeth. Wartsila seems to more or less argue for managers to outsource propulsion (like Rolls-Royce did in aviation).

It would require some inventive business modeling and an excruciatingly sharp focus on contractual clauses, but this model has merit. Any business needs to focus only on where the customer seeks value; if you do that, you'll only get better and better, in your customers' eyes.

Is there anyone in the business that gives customers a compliance guarantee? I'd love to hear about them, as an example....

For those willing to go down the business model re-development road, I can recommend two references that I have recently built off of:

• Business Model Generation: A manual for thinking afresh about how you do business
• Develop Ideas That Will Disrupt Your Industry

Yes, finally, a few words on piracy

What it takes to put an issue like piracy on the high seas,
higher on the public agenda

By Ryan Skinner (email)

Piracy's a subject I long ago decided not to touch with a barge-pole. Why? It doesn't need attention from the likes of me, and so many people know so much more than I. Let them fill the airwaves with ideas and opinions.

It's a tragedy that piracy has not gained more attention, though. An utterly solvable problem of heart-rending proportions taking place in full openness has generated less overall attention than, say, one memo from a Nokia CEO.

Don't blame the public. Until these pirates are stealing our women and raping our cattle, we're not going to give it two thoughts. It's not an issue that is touching people where they'll feel it.

The industry has seemingly crafted pretty strong economic arguments against piracy. I've heard cost of piracy figures ranging from $1 billion up to $12 billion (can you say piracy bubble?). I'm sure these facts and opinions get the creaking machinery of the bureaucracy moving, but there's no urgency.

I've seen little in the way of emotional appeals. The closest it came was during the Maersk Alabama incident, but that story turned into an action movie featuring a sniper.

Suspend your disbelief for a sec. I see Leslie Stahl of 60 Minutes in the humble home of a Ukranian second mate, who describes the harrowing ordeal of an extended period of incarceration on his own ship at the hands of pirates. Stahl asks the mate's young daughter "how did you feel when your daddy was kidnapped?" The young girl cannot explain her fear, but we can see it better than any words can convey.

Stahl interviews one of the warlord pirate leaders in Puntland, and a couple 16-year-old pirates who are about to board a mother ship. "Why do you do this?" Through the translator, we hear them say "It's a living."

Stahl talks to shipowners, negotiators on both sides, IMO leaders and Navy admirals. She paints the picture of an entirely avoidable state of affairs, beginning with a collapsed state harried by fish poachers and illegal dumping and ending with a menace to a salt-of-the-earth workforce.

Who's going to pitch this story to 60 Minutes? Take Producers David Gelber, Howard Rosenberg, Shachar Bar-On, or Associate Producer Sam Hornblower. All have friends of friends in shipping. Go ahead and look them up in LinkedIn. Maybe you know someone who knows them, or another producer.

It's all about the stories. Who knows a seafarer with a piracy story that hits heart-strings? Our piracy experts have countless colorful sources on both sides of the piracy equation. We know the navies, the IMO and the shipping industry will talk about it.

For a producer of gripping television documentaries, this story has a bow on it.

Here are some examples of other people trying to put some color to this story, if on a more modest scale than 60 Minutes:

Kirk Klocke's 3-part documentary on the shipping industry and piracy

A CBC documentary that has, unfortunately, been taken off the air

Sky's Ross Kemp in search of pirates

My cousin the pirate on Vimeo

Somaliland Piracy (but only if you understand Italian)

Mandatory ECDIS the worst thing that could have happened?

They say everyone chooses their own kind of hell. For shipping, it just might be the rules.

By Ryan Skinner (email)

It's total sacrilege, but I'm going to say it. Maybe DNV f*cked up.

Now, I have all the respect in the world for the guys over at Høvik. They're brilliant. Even if I kind of panned their Quantum thingy, they're still leagues ahead of most outfits in this business. They're what passes for bleeding edge in (let's be frank) an oftentimes dull industry.

But consider this ECDIS business. Over and over again, people pushing ECDIS cite the DNV studies, which demonstrated that mandatory ECDIS would reduce groundings by some dizzyingly high percentage. It was more or less on the back of these studies that the IMO went whole-hog and made these chart computers mandatory on all SOLAS ships PDQ.

The rules logic goes awry on the graph where x = some not-too-distant point in the future and y = a metric tonne of rulebooks. Suddenly, a rule requiring every master to have his mother on the bridge to hold his hand, doesn't work. The sheer weight of rules sinks the ship.

Now, I'm a big fan of ECDIS. It's ingenious like the GPS in a car, which I don't use but love on rentals. And perhaps that's the difference. No one mandates a GPS. No one argues that every GPS operates a little differently. No one moans about the need to update a GPS now and then. No one needs to take any special training to use one.

Would it not be better for regulators to get far out of the way, and let technology adoption take its own natural path? If ECDIS is just an example, is the profusion of rules making shipping safer, or more dangerous?

In order to apply a little science to this question, I've created/found a few graphs that help illustrate the problem. The first illustrates the expanding stack of rules that apply to shipping operations:

As we can see from this well-documented study, the amount and detail of rules-making has grown out of control. This chart is anecdotal, yes, but anecdotal evidence from shipping companies suggest it's approximately true. Is it having a beneficial effect on safety? Here are two charts taken at (relative) random regarding maritime casualties.

Granted, increasing volume of accidents and value lost may easily stem from a much larger world fleet. Nonetheless, it doesn't seem as if more rules = more safety. Is it then wise to create, yes, even more rules?

When considering mandatory ECDIS, perhaps it would be best to look at accident figures for high-speed craft (ferries and the like). ECDIS has been mandatory on these for many years; has it resulted in fewer incidents? Anyone have the data on that?

Both shipowners and officers are rightly grumpy about ECDIS mandation. Many people are simply PO'd that this thing's being pushed down their throats. Officers hear that they will get dual ECDIS and paper will be gone, and they worry. What about viruses? What about system crashes? Others rejoice.

I know the ECDIS fan-boy crowd is going to come down on me hard for this. They argue (in many cases, rightly) that without mandation the merchant fleet simply won't do ECDIS. Why? Because it's costly. And that may be true. But costs come down. Applications increase. And pretty soon ECDIS would be mandatory for entirely different reasons, not legal ones.

You can legislate yourself into a thicket, and I fear this may be happening more and more often in shipping and at the IMO.