Every month we select one logistics startup which represents a positive example of innovation in Logistics and Supply Chain and has the potential to alter the way the industry operates. This month, Transmetrics selected Nautilus Labs, an innovative AI-powered solution for ocean commerce, as the “Logistics Startup of the Month” for its remarkable achievements in minimizing fuel consumption, maximizing operational efficiency, and optimizing the fleet performance of shipping companies.
In order to learn more about the startup and what it does, we have talked with Nautilus Labs CEO Matt Heider about the business and how Artificial Intelligence can improve the efficiency of ocean operations and logistics.
First of all, congratulations on becoming the Logistics Startup of the Month! Could you briefly introduce our readers to Nautilus Labs?
Nautilus is building artificial intelligence to advance the efficiency of ocean commerce. We deliver technology to help shipping companies minimize fuel consumption, maximize operational efficiency, and optimize fleet performance. We’re on a mission to reduce greenhouse gas emissions and make global trade more sustainable.
We started by tackling the inefficiencies of maritime shipping. Today, maritime commerce is the third largest emitter of greenhouse gas (GHG) emissions, and it will account for 20% of GHG emissions by 2050 if left unchecked. However, nearly 30% of the $100B of fuel that ocean shipping vessels consume every year is wasted.
This inefficiency is in part due to the industry’s reliance on manually collected and analyzed data, which is error prone and often inaccurate. By unifying data in a single analytics platform, Nautilus provides continuous and predictive insight into vessel performance. This drives increased revenues via improved vessel remarketing and TCE rates, as well as reduced operational and fuel costs over the course of each voyage.
Leveraging machine learning and artificial intelligence, our software enables our clients to monitor, understand, and optimize vessel performance across their fleets to maximize ROI. Long-term, this will help drive awareness and reduction of fuel consumption across the industry, and in turn make ocean shipping more sustainable.
Can you please tell us more about how you leverage AI in your operations? Is this your unique selling point for the ocean shipping industry?
When thinking of Artificial Intelligence, it’s helpful to talk first about what AI actually is, rather than what we’ve been told it is in movies and television. Specifically, we are talking about software that is able to take a large data set and learn how to answer strategic questions over time. Two great examples we’ve seen in the past couple decades were Watson winning Jeopardy and Deep Blue beating Garry Kasparov at chess.
In both scenarios, the idea was quite simple – that given enough processing power and data, a computer is able to answer a structured question better than a human. To the technology teams building these systems, they needed a lot of data to train the system with, and the software needed to be designed to learn over time. Then by running through question-and-answer scenarios thousands and millions of times, the system is able to make better answers that lead to better outcomes each iteration. The ultimate result is a software product that becomes quite intelligent – indeed more intelligent than it’s human competitors.
At Nautilus, our software is built on the same foundation – a lot of data combined with software that is designed to learn. The most basic example of this is our ability to predict a vessel’s speed and consumption. Our system is able to do this by learning from an aggregated dataset that includes the historical consumption of a range of different ships operating in different draft conditions along different routes in different weather patterns. We then ask it a simple question: how much fuel will any given ship consume in a certain voyage condition? And it’s been proven to be much more accurate at answering that question repeatably than a human with a spreadsheet.
The application of this type of insight to more advanced algorithms becomes all the more interesting as we get into things like a TCE-maximizing speed instruction. But I’d hesitate to say that this is our only USP. Certainly, it’s important to our clients that we have unique technology, along with an engineering and data science organization uniquely positioned to build increasingly compelling software. More than anything, though, it’s been our laser focus on client experience and success that has differentiated us in our relationships. Great technology is awesome, but without a great client experience, it may not be effective. Our commitment to client experience has been a big part of our success.
In your opinion, what are the other areas of logistics and supply chain where AI and Predictive Analytics can bring the most significant impact?
Just the other day, I was having a conversation with another entrepreneur in the ocean commerce space, and we got into a mildly heated debate. He was arguing that there is hundreds of billions of dollars of inefficiency across all the myriad linkage points in global trade, while I’m pretty certain that it’s over a trillion dollars of waste each year. The scary thing – and the exciting thing – is that regardless of which one of us is right, the magnitude of the opportunity for software to change the way global trade works is enormous.
And this is because the global system by which goods make their way across borders is still so fragmented and antiquated. At Nautilus, we’re looking at one specific component of that, because we believe the $100 billion ships spend on fuel every year can be improved massively and it will lead to great outcomes for our clients economically and for the world environmentally. But beyond fleet optimization, the opportunities for improvement are really boundless.
From a physical perspective, it’s all of the work that goes into ports, cargo transfers, and predictive maintenance of the physical systems that do the work. From a market perspective, it’s the buying and selling of all the commodities that are transited, the goods and services that make the blue economy run, and the infrastructure on which it runs. From a human perspective, it’s making everyone’s lives safer, happier, and easier if they are on a ship, in a port, or part of the land-based chain that connects goods to their final destination.
So my answer ultimately isn’t what other specific parts of the supply chain can be improved with artificial intelligence or machine learning. It’s a question: what can’t be improved with it?
What is the most exciting customer success story of Nautilus Labs that you can share with us?
Our most exciting recent success story involves the impact we can have on optimizing voyage performance for clients. Recently, we’ve been doing some work to assess precisely how effective we’ve become at predictive analysis, to help us quantify the impact of our software on our clients’ businesses. In one specific case, we looked at a voyage where we used our TCE-based speed optimization to predict the financial outcome of a leg. Upon finishing the analysis, our platform was almost 70% more accurate at predicting the financial results from the voyage than their existing tools.
That’s a dramatic number. And given the skepticism that we sometimes hear when we talk about the total potential for fuel optimization to be in the 20% – 30% range, it’s data points like this that help to bring those numbers into starker relief. If existing systems, tools, and processes can all be improved by not 1%, 5% or 10% – but by 70% or more – then obviously the optimization potential and ability to carve out increased profitability for our clients is huge. These are our favorite types of success stories, too, because they involve us partnering closely with clients and clearly quantifying the type of benefit they can get from our tool.
Why do you think the technological developments in the maritime sector accelerated in recent years? What are the tech trends that you notice at the moment?
Technological developments have accelerated in maritime for three major reasons, from my perspective. First, the pervasive nature of technological change happening in everyone’s lives. So many people – regardless of their industry – is a part of digital social networks, have smartphones, and use software applications that its natural for them to begin to see more challenges that can be solved through the lens of technology. Second, it’s the increased attention from entrepreneurs and investors to solve challenges in our industry specifically. The fact that big-name investors are placing bets on companies in the maritime space is super helpful, and they wouldn’t do it if more and more established entrepreneurs weren’t focusing on building relevant solutions too. Third, and perhaps most importantly for our clients, it changes in regulatory and market environments that are forcing behavioral change, with IMO 2020 being a prime example for us. All three of these come together to create a virtuous circle for technology development and adoption.
The most important tech trends at the moment all seem to revolve around breaking down the barriers between human and artificial intelligence. For Nautilus’ teams and our clients’ teams, this becomes relevant in the context of process automation. What formerly took a person a lot of time and attention to do repetitively, the software is now able to execute repeatedly at scale. Depending on function and job role, this can do a lot to liberate people from time-wasting tasks so they can create more value for their teams. As these types of software become more accountable for these activities, they actually build the capability to do things people hadn’t tried before or didn’t have the time and resources to do. And then as more organizations rely on artificial intelligence to execute at that level of complexity, it will increase people’s day-to-day interactions that are powered by AI across all parts of life, professional and personal. Ultimately this leads to some interesting and consequential questions for us all, such as: what is the future of work-life; how do societal norms transform over time; and what is the optimal way to extract the most value from AI for our communities? These are super important questions with answers that aren’t totally clear yet, and we’re excited to see this dialogue happening everywhere.
Being a logistics startup ourselves, at Transmetrics, we know how difficult sometimes it is to find the right investors and the right advisors. You have quite notable names supporting Nautilus Labs. How did you manage to bring such forward-looking people on board with you?
“Bluetech” (tech in maritime) hasn’t received sufficient attention from traditional tech investors to date, but that’s changing. As more maritime tech companies launch to solve real challenges in the industry, VCs are beginning to take notice. We’ve all seen the impact that technology has had on transportation industries in the last decade. It’s increasingly obvious that ocean commerce is the next frontier for entrepreneurs and venture capitalists alike.
Nautilus is compelling to the venture community because of our ability to both build a sustainable business and drive positive change in the industry. While we’ve been very fortunate to get so many smart and well-intentioned people involved in our mission, it hasn’t been due to any special magic. Any dispassionate observer can see that over 90% of the world’s trade is carried by sea and that tens of billions of dollars worth of fuel is wasted by ocean shipping every year. And then when you look at what we’ve accomplished in a short period of time by partnering closely with our clients, you can see an industry that is seeking to change and adopt new technology like ours.
Ultimately, as we help to lead a wave of new entrepreneurs and investors into space, it’s because maritime has all the hallmarks of the other places that have seen similar innovation. Simply put a huge opportunity to solve problems, make the world a better place, and deliver value to players in the industry. If anything, we’ve just been very clear on our message about what we’re doing and why, and unwavering in our commitment to drive change, and that’s helped us great some great people on board with the ship!
What was the biggest learning point for you throughout the development of Nautilus Labs? If you had a chance to do it all over again, is there something you would do differently?
Biggest takeaway thus far: vulnerability is our friend. We came into this challenge as individuals from Google, Amazon, IBM, and such, who were looking to collaborate and solve challenges with our clients. If we had come in saying we had all the answers, saying we were right because we understand technology, saying that we could lead the industry in the right direction because of who we were and where we came from, we would have failed. Being vulnerable, being humble, and admitting that we don’t have all the answers, but that we want to work in the direction of change has made all the difference for us.
The biggest thing I would do differently: be laser-focused on ROI from day one. When we started, it felt like the focus was on interesting tech, and on sourcing data just for data’s sake. We’ve been most successful by digging into the use cases, understanding the pain points, and identifying clear areas where we could make a difference in our client’s businesses as a result of investing with us. We moved in this direction early enough and steadily enough so that our business has ended up being a successful one. That said, if we had really understood the ways in which we could create demonstrable business value sooner, we might have gotten here even faster.
What are the next big goals of Nautilus Labs for 2019?
Mostly we’re focused on delivering client value by growing the team, growing the product, and growing our impact. From a team perspective, we’re expecting to roughly triple in size year over year, and establish distributed teams on three different continents. From a product perspective, we’re investing heavily in data science and engineering to accelerate product development and deepen the strength of our predictive insights. For our clients and for us though, it’s all about impact: helping companies make decisions – better and more quickly – that cut their fuel spend, improve profitability, and make ocean shipping more sustainable.