Huge disruption is coming the shipping industry’s way as it starts to digest multiple changes led by the ongoing rise of e-commerce, a leading industry official has said.
There is a great deal of confusion in the market about a number of trends driven by digitalization, but also about the need to be green and rapidly changing markets, Anthonie Versluis, head of the ports practice and managing partner for Malaysia for consultant Roland Berger, told Asia Cargo News.
“Shipping in containers and the trend towards large ships and the hub and spokes system, that is something very difficult to reconcile with e-commerce,” Versluis said in an interview.
A key part of Versluis’ view is that Amazon’s business model has been, or will be, adopted everywhere, bringing with it huge changes along the entire supply chain.
“If this disruption comes it will send out an enormous amount of shock waves which will go out in all ways,” Versluis told ACN. Ports and the mega-shipping lines are very much in the frame for this.
Nor is the Amazon model the only upcoming challenge, as Versluis listed what he dubbed 12 mega-challenges which he told a recent conference, “keep us up at night.” These are digitalization, the rise of short sea and ro-ro shipping, new ship types and shipping systems, green shipping requirements, port sector reform, green ports, e-commerce going global, logistics industry transformation, automation and robotics, the Belt and Road Initiative and its dry ports, demand shifts and hinterland expansion, and on-land connectivity.
E-commerce, though, is very much the key, with Alibaba and Amazon the companies to watch as they compete in reshaping the logistics industry, says Versluis.
For example, earlier this summer, Alibaba bought a 10% stake in China’s express delivery firm ZTO. In June, subsidiary Lazada opened an automated sorting centre in Hanoi. This makes Amazon beginning Cincinnati airport hub operations in October 2017 (after its first drone delivery at the end of 2016) look slouchy. Then again, just before that, in October 2016, Alibaba had set up a partnership with Maersk enabling customers to reserve space on vessels via the internet.
Such a rivalry is not going to end anytime soon. Alibaba is putting up US$15 billion with an aim toward building the most efficient logistics network in China and around the world, one which can deliver anywhere in China within 24 hours and anywhere in the World within 72 hours. Alibaba has branded their efforts as “New Retail.”
New Retail links online and offline commerce through deep consumer engagement drawn from advanced technology and data analytics, Alibaba said when they bought ZTO.
“Moving forward, New Retail will require investment in smart supply chains, retail technologies, advanced logistics and mobile payments,” their statement said.
According to Versluis, this has huge implications for shipping and ports, especially when combined with other changes in the industry, particularly as Amazon is following a similar path. The evolution of the industry could be so remarkable that for shipping, for example, adapting might mean needing to go back to the actual design of the ship.
Smaller, faster, simpler, smarter and greener ships will be required, in particular for the shipping of consumer goods, although reconfiguring a large container ship into a floating warehouse is not too difficult, Versluis said, adding “Amazon and Alibaba are thinking along these lines.”
Both of the companies could be thinking even further. The technology is there for down-the-line warehousing, but it is possible that a wish to control their own products and brands could see either company step up their involvement in the sector, along with everything that entails.
“Maybe Amazon and Alibaba will start their own shipping business the way they want it,” Versluis said.
And this could just be the beginning or the thin end of the wedge of upcoming changes.
In the maritime sector as a whole, the range of new innovations and technologies now emerging is very large, Versluis said, estimating that they number more than 100, including such things as blockchain, the “Uberization” of marine services and changes to cybersecurity.
In the world’s leading ports, investments in digitalization is growing rapidly, increasing 13.6% per year between 2017 and 2022 from €2.6 billion (US$3.03 billion) at the beginning of the period to €4.9 billion (US$5.71 billion) at its end, Versluis said. However, there are what he calls “numerous separate as well as inter-linked or intersecting digital development trends.”
In short, a lot of money is going into a lot of different programmes, which will raise issues in the future of how to harmonize and align different parts of the shipping industry.
That investment is also changing the way how ports work. In container terminals, in many places, operations are now moving towards “full” or “semi” automation, leading to no (or at least fewer) people working in the yard in the future. Versluis remains wary about this becoming the norm, acknowledging that “it will take some time because of the costs.”
Happening now, though, are the new start-ups, which are, he said, “trying to disrupt the entire system.” In 2013, US$600 million was invested in logistics, forwarding, shipping, transport, delivery and warehousing start-ups. By 2016, this had risen to US$5.6 billion. Traditional shipping is caught in a pincer movement between new ideas and multiple, resourced companies bringing them to the market.
By Michael Mackey
Correspondent | Bangkok
