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Wholesale Banking

Sensor ships: why smart containers are the future of shipping

The transportation of cargo around the world is routine business for the shipping industry, but delivering about 11 billion tons of goods a year is a process that is fraught with risk.(1)

Container ship

In November 2020, the ONE Apus container ship travelling from southern China to the US lost more than 1,800 containers due to severe weather in what is thought to be the second-largest loss of cargo in history.(2) And in January 2021, shipping giant Maersk lost 750 containers while on a similar course,(3)and then lost a further 260 containers a month later.(4)

Lost containers are not the only challenge of cargo transportation. Often, goods arrive damaged or spoiled at their destination because of poor conditions – unpredictable weather can be disastrous for food transit, for instance. It can lead to millions of dollars in losses,(5) but also raises questions about the sustainability of the way goods are shipped.

How can the industry fix these problems?

Make containers smarter

Smart containers are one way to create a more efficient, safer and more sustainable shipping supply chain. These are much like regular containers, but are pre-installed with sensors.

“A smart container is just a regular container, but you put a little chip in it that has a connection with a network,” explains Jules Kollmann, managing director, Containers and Logistics, ING.

The idea behind equipping containers with an array of sensors is that they can collect real-time data about everything from the temperature inside a container to its exact location – thanks to GPS tracking.

This big data approach promises a lot, so what exactly are the advantages of collecting all that data?

Big data means more efficient, more sustainable outcomes

Collecting such data can help to optimise the supply chain. Sensor data provides hyper-accurate information about the location of a container, allowing for optimised fleet management that results in less repositioning and more efficient use of fuel. Often, energy is wasted as a result of the shipping and repositioning of empty containers: estimates suggest up to $20 billion a year is spent on this activity that leads to unnecessary fuel consumption.(6) Research from the Boston Consulting Group has previously estimated that avoiding empty container shipping “for carrier-specific reasons” could allow the industry to reduce carbon emissions by six million tons per year.(7)

This can also ensure fleets avoid potentially hazardous patches of weather that could result in cargo being thrown off board or damaged, an issue that can cause significant environmental damages.

A report published in 2019 described, for instance, how container losses can represent “a highly diverse source of pollution”, posing a hazardous threat to ecological life and habitats if goods spill into the sea.(8) Such was the case that year when a near-28,000 tonne container vessel sank while carrying around 720 tonnes of highly corrosive and toxic material.(9)

The existing manual method of tracking the progress of containers means information shared with customers or port operators is usually outdated, which makes it difficult to predict when ships might arrive at their destination. This can lead to disruptive bottlenecks in the supply chain that can cause unnecessary delays and congestion during the unloading process. This can result in a significant shortage challenge, which countries are increasingly having to face as a reality.(10) Critically, these issues can be avoided in part if data is fed into digital shipment records on time.

“Smart containers create a lot of data, which can ultimately optimise the supply chain,” says Kollmann. “Estimates suggest that there can be a $7 billion cost-saving by creating a more optimised process.”

The sustainability advantages go further. Sensors can also analyse and regulate conditions within the containers. This can ensure that cargo sensitive to temperature, for instance – like food – is not spoiled during the journey.

In the future, you will have a supply chain that is completely digitalised

Containers

Logistics must become digital

Smart containers are not the norm yet, but a number of companies are ramping up production. In April 2020, for instance, Swiss start-up SkyCell raised $62 million to build smart containers specifically for pharmaceutical goods.

But success will depend on more than start-ups. According to Kollmann, it will require the rest of the transport and logistics industry to undergo a digitalisation process that will allow data to be shared effectively between all parts of the supply chain. In practice, this means the shipping industry needs to overcome some ongoing barriers to digitalisation; experts point to limited bandwidth, a lack of standardisation of infrastructure and an overly protective culture around data sharing.(11)

Fortunately, there are measures being taken at a regulatory level to make this process easier and support sustainability in the process.

In 2020, the European Union approved new regulation on electronic freight transport information, in a bid to support the digitalisation of the industry, with a view to enhancing sustainability by reducing paper usage, and bolstering the energy efficiency of operations by ensuring all stakeholders have access to the most relevant data.(12) Meanwhile non-governmental organisations such as the Digital Container Shipping Association are aiming to establish “standards for a common technology foundation” with open protocols. (13)

Digitalisation and big data will be increasingly important in a post-pandemic world in which the industry’s customers are focusing on the sustainability and efficiency of each part of their supply chain. Much of shipping’s sustainability will come down to its willingness to reduce carbon emissions, of course, but digitalisation of the entire logistics network will also play a vital role.

Kollmann is optimistic. “In the future, you will have a supply chain that is completely digitalised,” he says. “Where all communication is between smart assets.”

Sources:

  1. ics-shipping.org
  2. Youtube
  3. bloomberg.com
  4. maritime-executive.com
  5. connerindustries.com
  6. bcg.com
  7. bcg.com
  8. surfrider.eu
  9. nautilusint.org
  10. bbc.co.uk
  11. dualog.com
  12. european-accriditation.org
  13. dcsa.org

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