Horizontal and vertical change needed for a successful digital transformation

Horizontal and vertical change needed for a successful digital transformation

Digital technologies have the potential to reduce duplication while increasing transparency, however, the industry and individual departments are still working in silos, says former master mariner Melvin Matthews. He believes that a successful digital transformation must ensure change both horizontally and vertically across the industry.

Speaking at Digital Ship’s webinar held November 12, Mr Matthews discussed some of the key digital developments in shipping, how data sharing and digital strategies are changing, the digitalisation of the supply chain, and the changing relationships between owners and charterers.

Melvin Matthews, former master mariner

Digital developments onboard and onshore

According to Mr Matthews, the first part of shipping’s digital transformation includes the onboard digitalisation of ships with sensors and equipment.

“Remote and unmanned operations have already been happening for some time internally on ships,” he said. He pointed to the movement of operations across ships, for example, machine operations moving from machinery spaces to the engine control room, or the engine control room being moved to the cargo control room or on the bridge.

Since the establishment of the Global Maritime Distress and Safety System (GMDSS) in the 1990s to simplify communications, the use of technology has accelerated, with new data platforms capturing data from devices and sending this information ashore.

“Onshore, computerisation has allowed uniformity across systems,” Mr Matthews stated. “Data gathered from various reports such as noon reports, maintenance repots or incident reports, are now received, reviewed and archived by experts ashore. Unlike the past, analysing data is providing actionable insights into performance efficiency, fuel savings, emissions, while reducing delays, wastage and failure.

“Digital systems can now facilitate virtual exchanges of information,” he said.

Breaking the silos

Digital technologies have the potential to reduce duplication while increasing visibility and transparency, however, there is no doubt that the industry and individual departments still work in silos, Mr Matthews told the webinar audience this week.

“This means that companies have to be careful with their digital transformation as without carefully considering how a digital strategy will enhance the business, there can be downfalls.”

For example, he pointed to software solutions that are built to ease tasks, sometimes geared towards specific departments. He said that unless these solutions are built to ensure interoperability, it is likely that they will only further increase the silos.

“In my opinion, one of the issues is the number of point solutions that exist. At the lowest level, even individual departments use so many different software solutions and platforms to assist with their work.”

Mr Matthews believes that there needs to be some uniformity to ensure the right integration. “This way, digital capabilities provide benchmarking and traffic lighting that means more ships can be managed by fewer people and not on excel spreadsheets as done in the past,” he said.

One significant development he has seen over the last few years is the increase in visibility and transparency of operations that were previously unseen. “We now have regulators that can see non-compliance and create new regulations based on measured outcomes. Customers have visibility and emissions tracking of the carbon footprint of their purchased cargo.”

Armed with this new environmental consciousness, Mr Matthews believes that the end customer not just expects, but demands, ethical and sustainable transportation.

“Recently, energy and commodity traders have declared that they will disclose the carbon footprint of their maritime operations. Stakeholders are demanding CSR (Corporate Social Responsibility) and ESG (Environmental, Social, and Corporate Governance) initiatives and evidence that future regulations will be complied with.”

He pointed to the reporting requirements of the Swedish Stock Exchange and the Poseidon Principles that are pushing responsible ship finance to support shipping’s decarbonisation.

Logistics and supply chains

Shipping plays an integral part of the logistics and supply chains and it is therefore important for their roles to be considered when examining maritime digital transformation, noted Mr Matthews.

He explained that it was only earlier this year that he has seen real motivation for supply chains to adjust time principles with a strategy to minimise or even eliminate inventory.

Speaking about Just-in-Time operations, Mr Matthews said that this only really works in an ideal world without disruptions. “In reality, supply chains need to have the flexibility and resilience which only Just-in-Case can provide. By Just-in-Case we mean not eliminating inventory but mechanically optimising inventory to absorb supply chain shocks and disruptions. This is impossible without real time data coming not just from across the industry but from key points along the global supply chain.”

He noted a trend towards localisation where disruptions may only now have a local rather than a global impact like they did previously. Cargo is now expected to be monitored from the first mile to the last mile and this is going to dramatically improve supply chain management, but this is impossible without real time data.

Supply chains no longer stop which means cargo has to move 24 hours a day without the need to maximum human work hours or mandatory rest periods, or take into consideration human errors. This can only be achieved by going totally digital and deploying total automation.

Owner-charter relationships

Looking at commercial contracts today, Mr Matthews said that most of the recent shipping history has been based on charter party contracts. Traditionally, both the charterer and the shipowner have been dependent on the Captain to execute the voyage as per the terms of the charter party. His reports and actions were considered to be an integral and unbiased part of the voyage and therefore the final sign off on important documents such as the bills of lading was always defaulted to the Captain.

Charterers, brokers, shippers, etc would obtain most of their information directly from the Captain or routed through the shipowner, but according to Mr Matthews this is now changing. “Now what is happening is that data has turned us around and data on vessel position, speed or arrival times etc is now freely available from various sources. Real time availability of data is creating a new normal, causing a structural rearrangement of information and a trail that can be followed by the industry. Data can be followed by all parties interested at the same time and this has significantly reduced delays and mistakes.”

One issue Mr Matthews sees is that there is there is a significant amount of publicly available data but much of the time companies do not realise that information they are guarding may be available through other indirect sources. “I therefore believe and see more companies being more open to sharing information. That way they could together benefit from any efficiency gains.”

Another development Mr Matthews sees is the progressive building of relationships and partnerships between owners and charterers. He noted a greater commitment to building trusted relationships and working together for better efficiency and performance. “Data has seemed to awaken a willingness to share and jointly tackle issues, such as emissions, carbon foot printing, environment regulations, and many other issues.”

Operators today can measure and benchmark their performance thanks to an array of advanced digital platforms that ultimately display how well an operator is performing. “Now you can see if you are mid-level or in the top 5 per cent and maybe you think you are profitable but you soon realise you’re not doing as well as other companies. There is so much more visibility coming through now, which is making companies take action.”

Melvin Matthews gave a presentation during a Digital Ship/VPO Global hosted webinar this week. Click here to watch the full webinar on YouTube.