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www.drewry.co.uk
Impact of Digital Revolution on
ShippingMarine Money China Ship Finance & Offshore Summit
Arjun Batra
Group Managing Director, Drewry Shipping Consultants Limited
9-10 May 2017
2www.drewry.co.uk‘Impact of the Digital Revolution on Shipping’
We are in the midst of a revolution
Industry 4.0
Source: Various
3www.drewry.co.uk‘Impact of the Digital Revolution on Shipping’
We are in the midst of a revolution
Industry 4.0
Source: Mjølner Informatics, WEF
Steam power, electricity and computers defined the first three industrial revolutions while
the fourth will be shaped by sensors and artificial intelligence.
When compared with previous industrial revolutions, the fourth is evolving at an
exponential rather than a linear pace. It is disrupting almost every industry in every
country. And the breadth and depth of these changes herald the transformation of entire
systems of production, management and governance.
Klaus Schwab, founder and orchestrator of the WEF Davos
4www.drewry.co.uk‘Impact of the Digital Revolution on Shipping’
We are in the midst of a revolution
Digital Disrupters! What will Artificial Intelligence bring?
Source: Various
"Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most
popular media owner, creates no content. Alibaba, the most valuable retailer, has no
inventory. Airbnb, the world’s largest accommodation provider, owns no real
estate. Something interesting is happening. Tom Goodwin in TechCrunch
5www.drewry.co.uk‘Impact of the Digital Revolution on Shipping’
We are in the midst of a revolution
Economic impact of digital revolution
Source: Bloomberg, Economist, WSJ, Various
Labour & employment patterns• Labour entering a new phase – the great divide
• Industrial revolutions in the past have boosted
productivity with gains split between skilled and less-
skilled workers, and between owners of capital, workers
and consumers.
• Industry 4.0 is empowering right skilled individuals as
never before and opening up the great divide between the
employability and earnings of skilled and unskilled
persons as well as capital-owners and labour.
• Removal of middle income; more hourly paid workers
and highly paid skilled and technology enablers.
• Consumers – a major beneficiary of the ‘digital age’
• Less disposable income as more ‘hourly workers’
• Higher spend of the consumption wallet online on non-
physical goods
• Less spending on physical goods
Consumption patterns
• 3D, and now 4D printing
• Benefits of ‘Economies of Scale’ disappear
• Enabling of ‘low-volume manufacturing’ leading to more
‘near shoring’ and ‘bespoke production’
• Technology creates a level playing field and allows
niche producers to compete
Manufacturing technology
• Physical shipping volumes to decline
Merger / Miniaturisations of devices
Productivity• Productivity is likely to grow in leaps and bounds
• Technology is likely to have a major impact on global
productivity. The rise of machine intelligence and
robotics will create redundancy in assets, capital and
labour.
Real estate• Disruption of ‘real estate values’
• Less need for shopping malls, parking and roads, and
office space – need more city fringe warehouses and
distribution centres.
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We are in the midst of a revolution
Shipping volumes being disrupted
Ratio of world merchandised trade volume growth to world real GDP growth, 1981-2016
• Historical correlation between global trade and GDP is being disrupted
• Growth in global trade fell below growth in GDP in 2016 for the first time in 15 years according to World Trade
Organisation (WTO). However in its latest outlook, the WTO expects trade recovery in 2017 and 2018, amid policy
uncertainty.
Source: Sources: WTO Secretariat for trade, consensus estimates for GDP
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Impact of Digital Revolution on Shipping
Shipping wakes ups to technology
Source: Various
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Impact of Digital Revolution on Shipping
Shipping wakes ups to technology
Source: CBInsights
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Impact of Digital Revolution on Shipping
Shipping wakes ups to technology
WIN
Rate & Service
Information
CargoSphere Catapult
Okargo
Drewry Xeneta
Source: Drewry e-business research
Online Sales
Platform
Fleet Searates
Transporteca
Freightos
Cloud-Based
Online
Forwarder
Flexport Icontainers
Kontainers
Transport
Management
System
OTM
Portrix
SAP TM
Freightgate
MercuryGate
Kewill
WiseTech
Descartes
Technology-
Driven
Forwarder
Network
BuyCo
Centrolene
3PL’s Online
Forwarding
Panalpina eCommerce
DHL eCommerce
Knfreightnet
eCommerce
Tech Giant
Alibaba
Amazon
Agree Freight
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Alibaba and Maersk partner in container shipping
Ocean carriers experiment with new revenue stream“As a global integrator of container logistics with the ambition to digitise global trade, we aim at exploring a disruptive
technology such as blockchain to solve real customer problems and create new innovative business models for the entire
industry.” Ibrahim Gokcen, Chief Digital Officer, Maersk
Innovations and changes include
• Shippers can obtain simplified, online
shipping via e-commerce sites.
• Ocean carriers get paid upfront.
• Apparently, capacity is guaranteed to the
shipper.
• Alibaba-Maersk partnership is more a new revenue stream for carriers
than an e-business disruption. CMA CGM and Zim have followed.
• Cross-border e-commerce is growing fast and attracts a lot of digital
innovation in shipping.
• Alibaba may have bigger plans to control shipping and distribution.
Large shippers - direct
Medium shippers -
direct
Medium shippers -
direct
Medium shippers – via
forwarders
Medium shippers – via
forwarders
Small shippers – via
forwarders
Small shippers – via
forwarders
New: Small shippers
– via Alibaba
New: Small shippers
– via Alibaba
Main revenue streams
of carriers
Source: Drewry e-business research
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E-marketplaces in container shipping
New platforms provide instant quotes and attract small shippers
Innovations and changes include ;
• Shippers can request instant, simplified
quotes and book like an Expedia or
booking.com for freight.
• Forwarders can reach more customers in a
cost-effective manner.
• Replicating the B2C online customer
experience.
Online Sales
Platform
Fleet
Transporteca
Freightos
Searates
• e-marketplaces support a commoditised service and make pricing more
transparent.
• Aimed at small shippers and spot shipments.
• These platforms target certain markets but not the contract market.
Source: Drewry e-business research
Agree Freight
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E-marketplaces in bulk shippingNew platforms emerge for chartering and brokering to documentation
Online Sales
Platform
Fleet
Source: Various
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Impact of the digital revolution on shipping
• Transparency
• Level playing field for both big and small shippers and shipping lines
• Better price discovery
• Greater ability to manage risks ie increased Hedging, increase trade finance
• Productivity and efficiency
• Disintermediation
• Less information asymmetry and better decision making
• Better utilisation of assets: Ships, containers, trailers, warehousing etc.
• Increased reliability and better visibility of Supply Chains
More reliable Supply Chains will mean lower inventories across the system
Great efficiency and utilisation of assets will increase supply and thus reduce rates.
Disintermediation will result in redundancy of existing “channels” i.e. brokers, agents
14www.drewry.co.uk‘Impact of the Digital Revolution on Shipping’
We are in the midst of a revolution
Survival! How?
• The digital economy is not just about speeding up communication across borders or
changing the skills needed by workers; it is about changing the very nature of
consumption, competition as well as how industries work.
• Industry 4.0 is also driving a significant shift in the balance of power between
organisations and individuals.
• Capital, raw materials and human resources have at different times in history demanded
an economic ‘premium’ over the others. Going forward all three will remain
abundantly supplied and hence cheap.
• ‘Innovative human capital’ will be disproportionately rewarded given the ability to adapt
in a rapidly changing economic environment.
“It is not the strongest of the species that survives, nor the most intelligent; it is the
one most adaptable to change.”
— attributed to Charles Darwin, British naturalist.
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