There are “disruptive technologies” emerging that many say will entirely reshape the next gen supply chain. Will a Futureship be one of them?
Today, the shipping industry could be changing right before our eyes in a dizzying blur of new technologies and be driven by new regulatory mandates. With so-called “disruptive technologies” emerging like mushrooms from a ground well-nourished by capital looking for a cause, the time might be ripe for a futureship to slide down the slipways, so different as to alter the entire supply chain?
Supersized Shipping
Back in 1974, South African journalist Noel Mostert wrote a book Supership describing life aboard a supertanker, the “new” generation of VLCCs (Very Large Crude Carriers) and ULCCs (Ultra Large Crude Carriers). While the main thrust of the narrative concerned environmental impacts of these tankers, the undercurrent theme was about scale – how tankships were supersized. At the end of WW II, the T-2 wartime tankers plying the trades were just over 16,000 dwt and a “giant” was more than 20,000 dwt. But during the 1970s tankers were rapidly increasing in size as ships over 200,000 dwt were commonplace and 300,000 dwt vessels were being launched at an astounding rate to keep pace with the demand for oil from the Middle East.
The explosion in tankship size continued until the mid-1980s – peaking with a ship at an astounding 1,500-foot length and 550,000 dwt. These half million dwt behemoths had grown so large they couldn’t transit the English Channel, Panama and Suez canals, had trouble with the Straits of Malacca and found few ports and terminals with the combination of depth and turning basins to accommodate them. It was the ship version of an evolutionary dead end.
But what drove the dramatic increase in size in tankers (and dry bulk carriers) was the concept of economies-of-scale: Basically, bigger is more efficient economically and this leads to greater returns on the investment (ROI) from the ship.
At about the same time that tankers stopped growing, the containerships’ growth spurt took off. Back in 1985 the Panamax boxship was around 4,500 TEU. By the late 1990s ships were 8,500 TEU and ships now top 20,000 TEU…dubbed with a certain homage to brethren tankers, Ultra Large Container Ships (ULCS).
And there may be larger ships coming on-stream in the near future. The Shanghai Ship and Shipping Research Institute (SSSRI), a subsidiary of COSCO, has reportedly done the preliminary work on the 25,000 TEU class vessel. Although many in the industry have expressed the belief that a vessel this large won’t be built, similar remarks have been uttered before with nearly every new and invariably larger generation of boxships.
Nonetheless, the economies-of-scale are still the guiding mantra for containership operations. Even with the consolidation of ocean carriers and alliances, the primary weapon in the battle to show an ROI is still bigger is better. There are more caveats to the “bigger” philosophy as advances in technology and the digitalization of components in the supply chain take hold, but for now “bigger” remains better. But for how long?
Boxship Impact
These days it is hard to think of containerships as “disruptive technology” – the buzz word of the age of digitalization – but when the Ideal X made the inaugural voyage in 1955, it was the prototype of a disruptive technology. The box was more efficient and completely upended the entire system of shipping goods from source to store shelf. To appreciate the extent of the “disruptive technology,” one need only look at two bridges: the Bayonne Bridge in New York and the Gerald Desmond Bridge in Long Beach. Would either bridge have been rebuilt to their present specifications (and costs) if boxships hadn’t increased so astonishingly and rapidly in size?
Still, at over sixty-five, container shipping is a mature technology that might be showing its age.
From a containership operator’s perspective, the roller coaster ride between profit and loss is representative of a technology that often isn’t delivering a satisfactory ROI. For the shippers enduring blank sailings, surcharges and terminal congestion (inside and outside the gates) the remarkable achievement of containerization is often lost. And for other stakeholders in the system, like the port authorities and terminal operators, who are vested with trying to keep pace with demands of larger ships for a customer that can sail away to another port, should they fail to measure up, the capital costs simply keep rising [like more dredging with 50 feet looking necessary, wider turning basins, gantry cranes with longer reach and higher handling velocity].
But for all the angst, the boxship backed supply chain is delivering goods cheaper than any time in history. Would China’s “factory-to-the-world” export-based economy have developed as rapidly and extensively without a supply chain based on the box? It’s difficult to separate the rise of consumer oriented globalization of the last thirty years without the boxship.
Disruptive Technologies
Still, there are more potential disruptive technologies in the pipeline than ever before. Take for example, the box itself. Companies like Seacube are already leasing boxes with advanced capabilities for temperature and communication, and boxes with more sensors and greater technology are in the works. Cloud-based software systems already offer a greater degree of supply chain transparency than ever before. Today there is a digital provider arms race underway to offer more supply chain stakeholders complete end-to-end transactional data. Companies like E2open (which recently acquired Inttra, the ocean carrier portal system), Descartes, Transplace and a host of others are part of a new wave of logistics providers that exist outside the traditional supply chain service providers but are reshaping the industry into something entirely new, whose ultimate reach is far more encompassing. With the rise of e-commerce and the rising importance of last mile, the very structure of the supply chain is up for grabs. For example, will the Big Data systems redesign vessel scheduling? If the consumer information is available in real time, will the demand for velocity outstrip the parameters of economies-of-scale? In the coming decades, will ships have to be smarter, faster and more flexible to serve a client base where just in time (JIT) means I want it now?
Many ocean carriers like Maersk are already embracing the concept of the digitalization of the industry. In some respects, it’s a natural extension of the efficiency efforts borne of slim margins.
But what will life in the cloud look like for the ocean carriers of the future? Possibly a lot different –shifting the carriers’ tasks as data drives an operator’s profit into different new and unseen business lines. If nothing else technology has often blurred the lines in business.
And there are some potentially game changing technologies lurking just over the horizon. How far off is an autonomous boxship? Some say several decades but others say it could happen before the 2020s are out. (see Anita Parlow story on page 4). How about autonomous drays with autonomous trucks moving containers from terminal to distribution centers and beyond with trucker shortages a thing of the past. And with more velocity in the supply chain, would DCs need to be as large and could they be located closer to the consumers?
Finally, there is 3D printing, possibly the most disruptive of the disruptive technologies on the horizon. And how much and what will we need to ship, if we can order it from our own “3D” factory down the street or better still make in our own “replicator” at home? While it’s hard to foresee what type of ship will be calling ports in the future, a 3D built Futureship might just be one of them.
