In global supply chains a significant amount of money is still being lost on inefficiencies that are often just the result of a lack of communication. Simon Sundboell, founder of market intelligence company eeSea talks about how schedule reliability data can be used to improve end-to-end efficiency
What is the idea behind eeSea, why did you start?
Simon Sundboell: We have been excellent[ds_preview] at building longer ships and bigger cranes, but the adoption of technology and software and also the relationship with start-ups and innovation has never been the big force of container shipping – up until about 5-7 years ago. Before that, start-up venture capital was not even interested in container shipping. But then, a lot of IT solutions were developed in the big companies internally. But also more and more outside companies were developing IT solutions for shipping. For the first time typical Silicon Valley-style venture capital discovered that there is an industry that is interesting.
And it is interesting for a number of reasons, because container shipping has low single digit margins. Looking at it with venture capital eyes, you see an enormous CAPEX and a fragile earning side, rates going up and down, very low margins. So anything you can squeeze out of these margins suddenly becomes interesting. If you can find digital solutions that improve your bunker consumption by 1%, it becomes interesting for a venture capitalist.
So, what is eeSea’s role?
Sundboell: There is so much data out there in the industry but it wasn’t properly used in the past. Data was delivered in PDF format or in reports by consultants. The basic idea behind eeSea was mapping the global data layers of liner shipping – about 13,000 »bus lines« worldwide. We launched in 2017 with a global mapping of all the global ports and terminals and liner services.
What is interesting right now for us, is that on top of that data set you can make a whole host of things. I can, for example, look at a single weekly liner service, see the ports and which ships is deployed in which week and I know where each vessel is supposed to be on a particular day. Now we have a skeleton for where the vessels are supposed to be and can put a focus on schedule reliability. We can predict if a ship is able to make it on time to Hamburg, even if it leaves three days late from Singapore. That is something the port of Hamburg is interested in for their berth planning, but that is also something that the customers, the cargo owners, are interested in knowing. If they know that a vessel is late three weeks in advance, then it is ok. If they know its late three days in advance it is too late to rearrange supplies or reschedule trucks.
And this is not already being done?
Sundboell: This mechanism is broken in container shipping. In 2019, less than 50% of container vessels on the big three main trades – Far East-Europe, Europe-North America and Far East-North America – were arriving on time (which we have even defined as being within eight ours around the scheduled arrival). But even so, only 47% of all ships were on time – that is scary. The whole global supply chain is so interlinked. If the vessel is late, then all the cranes are late and the next vessel will be late and so on. All the trucks that would transport the cargo further inland, the customs clearance, all of that is delayed. That has a huge cost. If things just happened on time all the time, then you could build it almost like a »conveyor belt« that goes through from production in Bangladesh to consumption in Germany. But the moment one thing is late, the whole idea of »just in time« is out the window.
Nobody else has mapped the base data the way we have. What I would really like is a discussion around the question »are we good enough as an industry?« Do customers like Karstadt or Lidl think that it’s good enough? Does the port of Hamburg think it’s good enough? We have to have a conversation around what does it mean to be on time and how much it costs for all the players in the supply chain if you are not.
That is all based on historical data and schedules, but we are also talking about knowing something in advance…
Sundboell: We also have forecasting components. At the end of the day, the decision to tell the captain to speed up to make a certain window in Hamburg is up to Maersk. Then they could communicate that to the port and the customers. In very many cases, carriers are not very good at that. So the question is: Are you late and how good are you at communicating that you are late. Being late is still bad but at least you are proactive about it. It is even worse if you are two days late, all your customers think that you arrive on time and you inform them just two days in advance. Now your customer, e.g. Lidl, has already done their customs clearance, 20 trucks are waiting outside the terminal gates – all of that has to be redone.
With our forecasting system we want everyone to see the same data. The predictions are not always 100% correct – a carrier could decide to speed up or slow down – but at least we invite carriers, ports and cargo owners to have a discussion. I am not the one who is going to solve the problem. If a vessel is late, it is the carrier’s decision – together, hopefully, with the port and the customer. I would like to be the one facilitating that discussion and to be proactive, warning about it.
Will customers be willing to pay extra for that?
Sundboell: Every year during tendering season, big cargo owners go out with a tender for the coming year’s contracts. They ask carriers for rates, transit times etc. A customer like Walmart, today, has no idea – other than looking at their own statistics – if the carriers’ offers are actually realistic. We can provide data to see how they performed in the past, and then they can have a conversation, e.g. on which routes do have a priority in terms of schedule reliability. The carrier could then try to offer even better reliability and see if the customer is willing to pay more for that.
It is worth a lot of money for a company like Walmart. It is not a matter of negotiating 20$ extra of the rate – of course that matters as well – what really matters is to get reliability and stability into that process. Because the indirect costs – overtime, storage, not making a certain feeder service etc. – may be manageable for the carrier but can be enormous for the customer. I cannot claim to provide end-to-end visibility in the supply chain, but I can at least put something in the discussion around ocean reliability.
Interview: Felix Selzer
