Can shipping meet the big data challenge?
It is almost impossible to attend a shipping conference or read an article at present without reference to Big Data. But rather like Voltaire’s remark that ‘common sense is not common enough’, many of those on the receiving end are struggling to understand what it means to them.
We are commonly told that shipping could profit from looking outside the industry for answers to such questions, but could it also be the case that one discipline can learn from another? Specifically, could a finance or operations department benefit from understanding the techniques that data management has brought to the marketing of goods and services?
Adam Jenkins thinks they could and for good reason. His work with big brand companies globally collecting, analysing and applying data to marketing objectives is responsible for dramatic savings as well as increased efficiencies. Jenkins’ company Digital IQ helps companies harvest, analyse and act on customer data and for these B2C and B2B-focussed companies this is no fluffy add-on, it’s closer to win or lose.
“It’s never been easier to get the right message in front of the right person at the right time. With a digital view we are able to see much more of picture or digital signatures in the behaviour,” he explains. “The conversion aspects are the same, what’s changing is the underlying technology.”
For Jenkins that means enabling a client to collect and make decisions around data so it can present a product to the customer with as low latency as possible. Powered by metadata, smarter applications are increasingly using algorithms to tell the client what content and message to put in front of the buyer and when. Software companies like Adobe, Oracle and Salesforce are building the tools to make sense of ever increasingly complex volumes of data.
Just because these techniques are used to sell phones, cruises, hotels and flights doesn’t mean they can’t be applied to B2B markets and Jenkins praises the efforts the industry has made in tracking cargo and achieve increased visibility of assets and freight.
“The industry doesn’t lose a lot of stuff compared to the 1970s,” he quips. “There are plenty of examples of operators moving data proactively and when you look at individual ships and systems they can be wired up really well. What is missing is the integration. In terms of data management of logistics, I’d say shipping is about five years behind what’s happening in marketing.”
He notes the strides made into logistics by several large software vendors but says a silo mentality means there is not enough thinking ‘in one central brain’. The marketing cloud approach of companies like Adobe and SAP where very large volumes of data are applied to solve problems has tremendous overlap with shipping.
“If you swap out the idea of customer with a ship it’s similar. There are multiple purchases, different cargo aspects, multiple timings, high cardinality [the number of elements in a set or grouping] of metadata.” The implications he says, go far beyond achieving more efficient shipping and could ultimately affect the financial bottom line of the carriers, in the process benefiting the consumer.
“To take a simplistic example, many rural African farmers are perfectly able to grow food. What they lack is the technology to get the produce to market before it rots. If data can be leveraged to solve that inefficiency, costs could be reduced with a significant shift in market upside, potentially opening up an emerging middle class, credit worthy and ready to play on a bigger stage. But until the technology arrives, they are left with rotting crops.”
The problem for container lines in particular is that they appear to lack flexibility that would allow them to solve such problems. Some of this is endemic but some is a result of an ethos that despite its competitive nature, often fails to put the customer first.
Whether this is top-down or bottom-up Jenkins argues doesn’t matter. The issue is whether you get your goods to port and what you do to mitigate that if you cannot. If more lines had a customer-first attitude, fewer consumers would be disrupted. Just ask anyone with boxes on a Hanjin ship.
He agrees it’s a slow process of change from shipping’s traditional gut feel and predicts it will take place at same rate at which workers who have never lived without a personal computer replace people who remember how business was done before the PC.
“There is a tremendous opportunity to leverage more data if people focus on the customer as well as on efficiency. Right now it seems to be most about the bottom line of the companies that are moving the freight rather than the outcome on the consumer of the decisions they make,” he adds.
In his experience, Jenkins says improvements can be made by understanding which are the most efficient channels for customer communications and he says huge cost savings are possible as a result.
“A ship is no different to a hotel. It’s all about inventory control, so if the ship is half full, the per unit costs of moving goods has to go up to balance the operating cost to protect margins,” he explains. The demand-based need between those with cargo requiring space from those with ships is still based on perception of a value proposition.
“How those customer relationships change as pressure increases is reminiscent of the media industry in the 2000s and the North American economy in general; it continues to require fat and happy companies to do more with less. They need to figure out how to take out 50 people and get more out of five and make a dollar shrink to 50 cents.”
That will sound familiar to a generation of shipowners but isn’t the problem that owners continue to think they know their business better than anyone else – let alone a tech-savvy data analyst? Jenkins says the first requirement is simply to bring in other perspectives that aren’t traditionally considered. This doesn’t assume that a company is going to blindly change the way it operates and assume things will be better.
“I feel like the way business is done today cannot be sustained. It has to be moved into a lower latency, more comprehensive understanding of multiple moving parts of markets and ideas. I don’t know of a way to do that without taking large quantities of previously disparate data and bringing them together to expose the inefficiencies.”
As a place to start he suggests that there are customer service data points in shipping companies that are just as important as the CRM data which feeds into the finance department. Understanding those relationships is critical but he suggests that if he had to place a bet he suspects, ‘that’s not happening in most shipping companies’.
Isn’t that because too many think if they keep their heads down and don’t move, they will come out of this OK?
“If so they are dead wrong. Staying the course and battening down the hatches is the wrong way to go. There has never been a more important time to invest in the technology that will make shipping run more efficiently. If that thinking is applied they could start to save the hundreds of millions of dollars bleeding off their P&L that they can’t control.”