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July 18, 2018

Voyager News

Shipping from inside and out

In a recent blog we examined the differences and similarities in training and operations between shipping and aviation – and found there was as much that divided as united these often-compared industries.

But can similar learning be obtained from a comparison of shipping’s real sister industry, insurance or its bigger brother, defence? If the answer is a predictable yes and no, then there are still important takeaways for shipping: don’t ignore the world outside the porthole and understand where to focus for real efficiencies. The chances are that more improvements lie more at the back end of the process than the front and progress is likely to be limited without collaboration on data standards.

Lloyd’s of London is the world’s biggest hull insurance market with an estimated 17.3% global share when reinsurance is included, but as Andrew Webster, partner at risk solutions provider JLT told the recent DigitalShip London CIO Forum, he could be working a hundred years ago.

“Every day I go to work at Lloyds carrying a leather slipcase full of paper. I sit on a stool across from an underwriter, talk to them and write it down in pencil but working this way has advantages. I can place a billion dollars of risk in a day that I could not do using email or web-based systems.”

Despite the efficiency gain in talking to people, it is lost in the documentation process. “That is the piece that needs to be done quickly and efficiently; that’s where the money is wasted and neither is it reflected correctly in what we deliver to clients.”

Why does it matter? Webster believes that if clients can’t get the service they want they will go elsewhere – or even consider doing it themselves. “We have to make sure our clients are served in future but we’re going from horse and cart to the helicopter missing out the car entirely, that’s what digitalisation means.”

The defence perspective came from Sandy Boxall, Business Development Director, Defence, BAE Systems Applied Intelligence, whose 15 years of national security and defence experience show a very similar conversation taking place.

“Some of what we do is cutting edge technology, some is picking up boxes and moving them around,” he said. “We have parallel problems in terms of collaboration, sharing with partners, getting SMEs involved.” The defence challenge is that all this is happening with the additional risk that people might be shooting at you, and Boxall noted an added urgency and greater resilience needed in case things go wrong.

“The current agenda is information superiority, to understand the battlefield. Napoleon said, he who understands the fog of war will win the battle and it’s still true. There is a lot more data and information on who and where people and assets are,” he added.

The third participant on the London panel was André Simha, Global Chief Information Officer of container line MSC, from a sector that is often held up as the paradigm for the rest of shipping to follow. The detail it seems is rather less black and white. Thirty years of customer driven work to improve internal processes have a common stumbling block, he said. “Whatever we think is a good idea, when it hits the outside world, we meet the paper lovers, the Excel lovers that is our biggest problem and we are not always in a position to negotiate.”

A container line can work with hundreds of different port information systems and Simha advocates for more dialogue between the lines on data standards and processes that can be expanded to third parties including ports, road and rail, regulators and customs.

“In some respects the board level is driving this, it has changed and there is more support from the top. People have smartphones so they understand it better, but they think it’s really easy to achieve this kind of change. For others, If they have Excel they are happy.”

MSC created its first electronic manifest in 1991 and its digital strategy is bearing fruit slowly but even so the biggest effects can be felt inside the business he says. “If we look at the past 20 years of evolution  it has not been that fast or that great. There has been some progress on standardising transactions but some people still want mail and fax. Even so, if we had not changed, we would be much larger in terms of head count as an organisation.”

It’s a problem familiar to Boxall. Despite initiatives such as using augmented reality on the Type 45 destroyers, Top Brass talks a good game on digital but don’t always have ability to express effectively what that change means. “The defence procurement cycle is so long that it almost ensures its obsolescence but there are clever, small innovative projects too. What we are starting to see is technology such as wearables for servicemen moving from the outside in, where the cycles are shorter and technology moves faster.”

For an intermediary like JLT, the risks of disruption are clear but Webster thinks the challenge has to be faced head-on.  “We have to digitalise. We have an edict from Lloyd’s of London that we have to use a certain system in a certain timeframe though I’m not sure that’s the right thing to do. It could cause disruption and lead to better outcomes, but the danger is that we replicate the paper-based system into digital, to no benefit.”

It’s also possible that the market could end up asking whether they could work better and use it as a catalyst for change, making better use of capital by understanding more about where it is deployed to give faster turnaround of claims.

“People are naturally sceptical of change and it needs to be looked at carefully. The risk is I’m talking myself out of a job. But if I’m told by clients they can use Blockchain instead of brokers then we could focus on being the creators of better products and systems.”

Like shipping, the opportunity has to focus on commercial return with a proven business case, not just a doomsday analysis that the industry is vulnerable to start-ups, he concluded.

“There are commercial opportunities in making insurance more efficient, so that we can tell more accurately who is doing what and as a result there is better pricing of risk. We offer a better product and owners get a better deal. The blockages will disappear in the next five years, the industry has to move forward.”

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