An inherent asymmetry in global supply and demand for containerised cargoes means that empty shipping containers spend much of their time out-of-action, either collecting dust at the discharge port or terminal or sent to sit in a nearby depot. Each of these containers costs the container line in lost earnings until there is a suitable laden voyage from the same location. This can take weeks or months, and every day counts.
Alternatively, the spent container can be transported empty to a nearby port or terminal to collect a new load or can be sent directly to a customer. Repositioning these containers incurs the inland as well as international transport costs involved in moving to a point of demand. In many cases, the reallocation of these vital assets can cost almost as much to move empty as when loaded – all but eliminating the profit gained on some journeys.
Accruing unnecessary costs
The measures taken to reposition empty containers are estimated to cost the container industry between US$15-20 billion dollars a year. This is around 5-8% of total operating costs, according to the Boston Consulting Group (BSG). Yet, the problem has gone largely unaddressed. While the liner industry has adopted a wide range of digital and technological measures to improve efficiencies and reduce costs both onboard and in port, idle containers continue to burn a sizeable hole in the balance sheet of operators of all sizes.
Currently, most repositioning is calculated using a ‘rule-of-thumb’ assessment of likely supply and demand; rather than business intelligence and careful consideration of every plausible repositioning option. Carriersdo not always have specific information for future loadings available, and therefore often have to rely on guesswork. Shipping lines try to pass the additional expense on, but often have to absorb these costs themselves in order to remain competitive.
Despite being a well-established problem, it is still currently very difficult to optimise container repositioning processes with the tools available (mostly spreadsheets). This is because the number of possible repositioning permutations is so high, it is extremely difficult to identify the most cost-efficient repositioning plan. This is why there is significant opportunity for a software solution to truly revolutionise the liner industry, and to make a measurable improvement to profitability.
A ‘digital twin’
This should soon change. Softship, a leading provider of software solutions for the liner industry, as part of a newly launched research initiative by the Singapore government is now working to develop a digital solution to this costly problem. The ‘digital twin’ – a virtual simulation software that mirrors real-world scenarios – will provide real-time answers.
While the development of ‘digital twins’ has been around since the early thousands, it is only now becoming possible to apply this process within the shipping industry, now that there is enough real-time data and automated facilities across the shipping supply chain. This pairing of the virtual (or digital) and physical worlds allows analysis of data and monitoring of systems to pre-empt problems before they even occur, prevent downtime, develop new opportunities and even plan for the future by using simulations.
Making the virtual a reality
By applying exceptionally complex but reliable mathematical algorithms which configure supply and demand scenarios, this software will be able to empirically asses every available repositioning solution given the scenario parameters and calculate the most efficient repositioning route. The result will be more agile, flexible and cost-effective container shipping solutions. To develop the software solution, Softship has signed a Memorandum of Understanding (MOU) with a newly launched research institution, The Centre of Excellence in Modelling and Simulation for Next Generation Ports (C4NGP), a collaboration between the National University of Singapore (NUS) and the Singapore Maritime Institute (SMI), based at the NUS.
This container repositioning digital twin will be able to apply big data analytics to solve the real-world inefficiencies in re-locating empty shipping containers, to create cost savings for container operators and increase visibility across the supply chain.The ultimate objective is to minimise the total relevant costs such as transportation cost, handling cost, and holding cost, while giving liner operators and managers greater control over their operations.
By leveraging the virtual world, liner operators and container leasing companies will soon be able to understand and visualise exactly where empty containers are, where there is demand for containers and how to optimise the route for reallocation. Most importantly, this can be done in real time. Having a birds-eye view will make it easier to formulate the most pragmatic solutions, optimise container usage and minimise the time containers spend travelling empty. This will reduce costs, increase container turnaround and lower unnecessary waste in global containerised shipping.
This article has been written and contributed by Lars Fischer, Managing Director Softship Data Processing Ltd Singapore, exclusively for Sea News
Sea News Feature, October 7