LONG BEACH, California — Connected devices in container shipping need to be interoperable among the various providers of such solutions, but they also just need wider adoption from shippers and ocean carriers to bring down unit costs, a group of shippers, carriers, and sensor providers told the TPM 2019 Conference in Long Beach.
A wave of new and existing providers of such technology have cropped up in recent years with solutions to help make containers a usable part of the Internet of Things (IoT). The goal is to provide shippers with more accurate, up-to-date location data and better analytics about where — and why — cargo bottlenecks occur.
Among the providers of such solutions are Traxens, Savi, Arviem, and newer entrants such as SensorTransport, Loginno, and EyeSeal. There are multiple deployment models for sensors. Some companies sell the hardware and an analytics platform to ingest and analyze the tracking data separately, while some sell the hardware and analytics platform as a bundled service and others sell a standalone system that can process data from sensors made by other companies.
And even the lines between those types of provider aren't always crystal clear. Traxens, for example, sells its devices to container lines to be affixed to containers and sells the location data and analytics to shippers, while Savi sells the devices (which are designed to be reused) and an associated analytics platform to shippers and third-party logistics providers (3PLs). Arviem manages the devices itself and charges the shippers a bundled cost for the service. SensorTransport, meanwhile, sells third party sensors but predominantly provides what it calls a device-agnostic platform to shippers.
Mark Schmitz, digital innovation manager at BASF Corp., said his company completed a pilot with the Traxens solution for container geofencing and to enable data analytics.
“We were really impressed with the accuracy and built-in geofencing that helped us understand how containers moved and see where they dwell and get hung up,” Schmitz said on a panel at the TPM 2019 Conference in Long Beach. “How fast ships can go and squeezing out hours and days here and there, but losing five days in the port; that may not have been visible to us. These events are hidden somewhere in our data, but consolidating and getting an overview has been such a daunting task. We certainly have super highly integrated IT systems and high availability and accessibility of data, but having it in an understandable dashboard that is enhanced by reliable data has been a huge benefit.”
Schmitz urged other shippers in the audience to similarly participate, saying the economies of scale driven by more shippers using such solutions would help make the costs more manageable for all. “I would encourage an open-mindedness about the solutions,” he said.
Thus far, CMA CGM and Mediterranean Shipping Co. are both using and have invested in Traxens. “We are in deep discussions with another six of the major shipping lines,” Thomas Nouvian, deputy director, maritime business unit at the Marseilles-based company, said at TPM.
Nouvian is keenly aware that Traxens is not the only game in town and other shippers and carriers could gravitate to other options. “Because of our model, there is a fundamental challenge,” he said. “It can only work if shipping lines actually partner with me. If they don’t, why should they equip their containers? We must expand the number of lines who we work with.”
Nouvian said that, aside from equipping containers with sensors, the second fundamental challenge is getting different systems to communicate with one another.
“As soon as you have IoT [hardware] affixed on assets, you need interoperability,” he said. “We are setting standards on how to communicate between systems. You will never be truly scalable and truly adopted without interoperability.”
The relatively high price of sensors has consistently been an inhibitor to adoption in container shipping. While some cargo — high-value goods or products that must remain within a temperature or humidity threshold — are naturally better fits for such technology, to truly proliferate, the cost of the offering has to come down in a market where shippers are price-sensitive and ocean carriers struggle for profitability and are thus conservative with their capital expenditure.
Solutions providers have taken note and are adapting their models to price the hardware and data provision in a bundle, to essentially remove from shippers the upfront burden of investing in the devices. The interoperability issue is not disconnected from the cost of the devices as well. What software providers call middleware — a layer that connects different, often competing systems — could allay some of the competitive concerns that have hampered other industrywide tech initiatives, leading to more widespread adoption.
Broader adoption could, in theory, lead to lower prices for the hardware as well. While prices have come down in recent years, they really only come down significantly if there's usage, because that gives solutions providers revenue to plug back into research and development. Once there's adoption, the pressure from customers also becomes a bigger force in driving down the cost.
Traxens’ current sensors, for example, last three years depending on usage, with its next generation (available at the end of 2019) lasting five years. “At some time, the IoT will have the same lifespan as the asset,” said Nouvian. “The less intervention you do, the less cost you carry. Even if you buy as a service, it is the fundamental cost of the IoT that you will pay for.”
Nouvian said cost is an inescapable discussion point.
“This is the fundamental metric that everyone should look at,” he said. “But there is an industry bias that to consider the cost of IoT for smart containers is somehow related to freight rates. Because for a BCO [beneficial cargo owner] or NVOCC [non-vessel-operating common carrier], when you place a booking, you are also getting a smart container with the smart device.
“You will have a lot of flows and commodities and time, and just a few extra dollars will still be too much. When you consider it will be door-to-door, and add up all the different elements, what is the true cost of your cargo being moved from point A to point B; what is the true cost of your container? Then you need to add on the extra costs of using a smart container and ask what benefits it brings me. Trust me, this is not always an easy conversation.”
For Schmitz, that cost is minimal relative to the overall cost of moving goods and the potential return on investment. “Our general view is that the overall cost share of transportation cost to the value of some of our goods is comparatively minimal, so the value add has a good chance of achieving a good business case,” he said. “[By shippers] being able to manage inventory, for instance, and thereby having the benefits ... we are optimistic that the business case will hold.”
MSC, for its part, is investing in the technology as a differentiated product offering. Customers contract for a Traxens smart container at the time of booking. The container line has had 3,000 of its roughly 3 million containers globally equipped with the Traxens device, said Kathryn Delecluse, smart container commercial project leader at MSC. That number will grow to 50,000 by the end of 2020.
Asked if MSC is working with any other sensor or smart container providers, Delecluse said MSC is focusing on deployment with Traxens. “We need to concentrate with one provider first,” she said. “Interoperability is important. We are part of [the 2M Alliance with Maersk] so we need some standardization in the market.” Maersk, meanwhile, has invested in Sensor Transport through the Danish container line’s venture fund.
Delecluse said MSC’s investment in smart containers also signals an intent to build transparency into the location of containers, which shippers have long bemoaned as a problem area in their dealings with shipping lines.
“Now, we will be 100 percent transparent,” she said. “Before, the relationship was based on a phone call to the salesperson and the information they are giving. Now, you will have proof. We will have to get our act together, and we realize that we will be offering visibility to our customers they have never had before. It is putting us in a position where we are going to receive calls that we have never received before, like, ‘Hey, my container is at a standstill. What’s happening?’ We are going to have to learn to act upon that data as well. We realize we will have to be completely transparent, but so are all of the actors in the supply chain.”