Before containerization was introduced to shipping, the industry had suffered from tremendous inefficiencies – it could take up to two weeks just to load and unload a ship. The extensive use of containers has not only saved shippers a huge amount of time, but it has also had an incredible impact on our global access to affordable goods: The quantity of goods carried by containers has risen from around 102 million metric tons in 1980 to about 1.83 billion metric tons in 2017. Now, the container shipping industry yet again is facing a challenge which results in major inefficiencies, vital need for clarity and visibility – the lack of industry-wide standards.
That’s why five of the shipping industry’s biggest names, Maersk, Hapag-Lloyd, MSC, CMA CGM, and Ocean Network Express, came together to form the Digital Container Shipping Association (DCSA) in April 2019. Since its initiation, Evergreen Line, HMM, Yang Ming, and Zim have also joined, and now the DCSA represents ~70% of the container shipping industry. The main aim of the association is to create common information technology standards for digitalization and interoperability in an effort to make the industry more efficient for both customers and shipping lines.
In order to understand more about how the DCSA plans to move the shipping industry forward, Transmetrics’ Co-Founder and CCO Anna Shaposhnikova spoke with Thomas Bagge, CEO and Statutory Director of the DCSA. Thomas has spent over 12 years in various transformation activities at Maersk covering people, processes, and technology and his extensive industry expertise is a crucial aspect for leading DCSA.
For a person with such a strong industry profile, why did you decide to lead DCSA?
Thomas Bagge: First of all, I am very honored to be asked to lead the organization. We had a really exciting time establishing the association over the past year. So when I was asked by the members whether I wanted to lead it I was of course very excited about the opportunity, because it is something that I am extremely passionate about.
I’ve been a part of Maersk for a number of years and have been through a number of change programs mostly concerning the digital processes. Some of the things we were struggling with at Maersk are now being addressed by DCSA. So when I was offered to the opportunity to work on behalf of all the members, it was, of course, a motivating challenge.
The customers of the container shipping industry have been lacking the progress that we’ve seen in other industries such as banking, telecom, travel, entertainment and so on. Many industries have gone through tremendous change in the past decades, and now it is time for the shipping and logistics industry to follow suit.
Could you give us a practical example of a hurdle which the industry is facing due to lack of standardization?
Thomas Bagge: A very practical example that I usually provide is that different companies use different definitions of what it means when the vessel has “arrived”. Some say the vessel has arrived when it arrives in the berth, while others say that it has arrived when it arrives at the pilot station. There are also differences in the way the arrival notifications are set up: what data should be included in that message? What kind of date stamps or other data points should be there? All those things are far from being standardized or at least agreed upon. That makes it unnecessarily complicated for the customers of the industry.
From my understanding, the Digital Container Shipping Association is here to improve that and many other things. Could you tell us a bit more about DCSA? In some of the other interviews, you mentioned five workstreams that you are planning to focus on. Could you please describe them in more detail?
Thomas Bagge: Right now we only have two workstreams, but it is true that we initially planned five. We chose to begin with two workstreams because a lot of the problem-solving tasks generate additional work for each member and we didn’t feel that we could take up five initiatives at the same time.
The first workstream is called “Data and Interface Standards,” which are essentially shared information technology standards that relate to transmitting, receiving, and exchanging data across the industry. Today, although you have standards within EDI/API, most of the operations are performed individually with each client. The process is customized rather than standardized and it takes a long time to set up a new EDI connection with a customer. We want to be able to implement a lot faster and that can be done if we have more standards.
The second workstream is called “Industry Blueprint.” It is essentially defining the baselined process standards for Booking to Return (of an empty container) including sub-processes, milestones, events, and messages within the container shipping industry. Most customers have the need to follow some key critical events. When we know exactly what to monitor and which standards to use it would be easier for everyone. I should also mention that we dive down to the individual event and agree on the data that is sent out, for example, when the booking is confirmed with a client.
Since you mentioned the point about data, do you have any ideas on how to tackle the data quality in the industry? Introducing the standards is great, but if the attention to data quality is not there, the standards will not help.
Thomas Bagge: I view data quality as being individual to each of the carriers, but there are many ways to deal with that. I very often use the analogy of banking: Today, I can go online and make bank transfers. I don’t need to go to the bank as I did 10 years ago. However, if I input the wrong account number and the money goes somewhere else. That is not the bank’s problem, it is my problem. We need to get to a point where the people in providing the data are also accountable for the quality of the data they provide. It is a joint responsibility between the container shipping lines and their customers.
To some extent, this discipline is not common in our industry and we still receive incomplete and incorrect information because there are few consequences on the other side. The way I see this – it’s more of an education problem than anything else.
As I understand, the goal of DCSA is to attract as many players as possible. How would you approach companies from developing countries that are still used to inputting the data manually and who are still far from their momentum of dealing with the digital data?
Thomas Bagge: I don’t believe in waiting until all the countries in the world are ready to take the first steps. At some point in time, we are going to have to make the first move and then different solutions will be enabled in different countries.
I’ve been traveling a fair bit in Africa, both for personal and professional reasons. I am quite amazed at how relatively digital they are; they are just digital in another way. It is a common practice there to do things via phone and text messages. So, I am sure that there will be solutions, which won’t fit all of the parties there — but step by step, we will get to the right point.
Getting back to the second workstream – Industry Blueprint – do you see any challenges with the data protection sensitivity and the members being hesitant to share their data with you?
Thomas Bagge: The members don’t have to share their data with us. There is a lot of proprietary information in the data itself, but I don’t think that there is anything proprietary in implementing the data standards for non-compete processes. We won’t have our hands on the data, but we will construct the data architecture that the companies will be working on.
At present DCSA membership requires that you are a container shipping line. In our statutes, we have the option to extend membership to other industry stakeholders, which we will evaluate in 2020. DCSA presently welcomes any container shipping line. We think it is important for the industry to stick together. Nevertheless, I also recognize that there are a number of companies who are big players in a niche market and who might want to keep doing things their own way – this is entirely their choice.
It is like inventing a common language between everyone, like Esperanto for the shipping industry. 🙂 Talking about standardization, how do you come up with the standards? Do you look at the best industry examples? And what would be the process of implementing them?
Thomas Bagge: We have several project managers at DCSA who are setting up the sprints, just like in agile development. Each DCSA member assigns a number of experts with different knowledge in specific fields to work on the workstreams. Every second sprint a joint decision is made on how to proceed and it moves in these cycles.
Is DCSA planning to work on standardization for the data generated by IoT devices? How are you planning to tackle this?
Thomas Bagge: Yes, we do have an IoT workstream, which looks at tracking. We expect to resume working on it in 2020, but it is not an ongoing process right now.
If you look at IoT vendors today their solutions are often created in isolation. For example, if you put a device on a container today and don’t ensure it is interoperable with the carrier’s vessels, the customers will not be able to receive communication. In addition, IoT communication on land (rail and trucks) will need to be considered. These issues are not going to be solved by one IoT vendor alone. They should be solved by vendors and the carriers together to create interoperability.
The idea is to enable standard processes so that it is easier for both carriers and, for example, IoT vendors to work together, right?
Thomas Bagge: Exactly. The same goes for any operational cycle today – quoting, pricing, booking, network routing, equipment flows, etc. There are very few companies out there that have built software to handle those processes. One of the reasons is that container shipping companies have their own processes. As a vendor, you will only be able to sell it to one company and then, when you go to the next one, the processes would already be different.
This process differs from similar processes in many other industries. Let’s take a look at the hospitality. In hotels, they run Oracle, SAP or any of the host of global solutions. They have the standard operating model and what they compete on are location, price, quality of food amongst others. It is very different from the shipping industry and that’s why we, as an industry, have to get there together. What DCSA will do is enable the standards for all vendors to develop upon.
With all the members, DCSA now represents about 70% of the container shipping industry, but still remains a neutral organization. When the smaller and mid-sized container shipping lines join, how would you maintain the neutrality in the decision-making process? Is it going to be like the EU model where all the members are represented, but the biggest are still deciding?
Thomas Bagge: That is a very relevant question. Speaking of your EU example, it would be impossible for the EU to function if every country had one vote because the biggest countries wouldn’t support it. So obviously, we had to come up with a similar mechanism where participation fees and voting rights are appropriate for the size of an individual carrier. The broadest “shoulder” carries the highest cost but also the highest influence on the voting process. However, that does not mean that a smaller carrier won’t have any influence. If a small carrier contributes with expert recommendations that the general assembly approves then it is able to have an impact.
What is expected from an ocean carrier to onboard for DCSA?
Thomas Bagge: In order to join and participate in the decision-making process all members have to pay a fee and follow the bylaws. The membership provides the value of participation and contribution to the standards development. However, if some companies would not like to participate in the development, it is up to them. The process standards within the Industry Blueprint and information technology standards will be made publicly available as an open source. Everybody will have access to them – both the members and non-members.
You have quite an entrepreneurial spirit. After all, this association can be qualified as a startup, because it is still a new initiative. In DCSA, are you planning to involve any external partners like digital innovators or startups to help you implement the new standards?
Thomas Bagge: The implementation itself is not up to DCSA, it is up to the individual members of the association and how they choose to go about it. There is definitely a will for standardization in the industry and I see the DCSA being a facilitator for creating the standards, but we won’t be implementing them. However, if there are any smart startups that would like to contribute to what we do, they are more than welcome to do so.
Thinking ahead and assuming that DCSA will succeed, what is your long-term vision for the shipping industry where the standards are in place?
“I expect container shipping to be like any other digital industry – one will be able to simply go online, book, pay, track, and re-route your cargo. All of these things, and even more should be able to happen automatically. Both technology and computing power is there. It is a matter of collaboration and adoption in the ecosystems that will make it happen.”
Thomas Bagge: In my personal view, I see the container shipping industry undergoing the same development as many other industries that have come before. That also means our customers will adopt faster to the new ways of working. As a result, the increased digitization will lower the number of errors made. Thanks to Blockchain there will be a lot less paperwork while AI demand forecasting solutions will provide the shipping industry with much more efficient usage of equipment. Although not in the current remit of DCSA, I also expect pricing to change significantly – in fact we are already seeing this happen.
Having this in mind, I expect container shipping to be like any other digital industry – one will be able to simply go online, book, pay, track, and re-route your cargo. All of these things, and even more should be able to happen automatically. Both technology and computing power is there. It is a matter of collaboration and adoption in the ecosystems that will make it happen.
To conclude, what would be your message to startups, to the companies that want to bring meaningful digital innovation to the shipping industry?
Thomas Bagge: Keep asking “Why?”. In my experience, there are many things in the industry that we do in a certain way because that’s the way we’ve always done them. I think there are many technologies that make it easier to work in a connected world across the continents. I believe there are quite a lot of ambitious young people and companies who are bringing fresh perspectives, asking questions and coming up with better solutions. If something doesn’t make sense, it is OK to trust yourself – go for it, and make it better.