Advantages and risks of digitization in the maritime industry

For the past couple of decades, industries across the globe have been adapting and adjusting to the latest automatization and digitization trends, and the maritime shipping sector is well on its way. More companies within the industry are already looking to digitize their businesses in order to stay competitive and be a part of the digital integrated ecosystem. Before we move to explore the motives for digitization, as well as its advantages and risks; let us briefly define the term for the sake of clarity. Digitization refers to the conversion of non-digital information into digital one to be used by computers in order to automate processes or workflows.

Motives for digitization

The first step to digitization is locking down the objective of transforming the data to its digital format because the collection, verification and analysis of data will depend on what the data will be used for, be it to acquire new customers and grow the business, improve the quality of the services the business offers and increase cost-efficiency, or contributing to sustainability and environmental protection. For example, adopting computerized systems aboard vessels can support navigation by detecting and maneuvering obstacles or other ships, and deciding on the best voyage routes. Some systems also allow for remote control, tracking and monitoring of the cargo on and off board. Not only that but digitization will also help in tackling some of the challenges that the maritime shipping industry is facing, especially when it comes to the increasing administrative and regulatory demands. This has already come to life and been implemented on the Norwegian Yara Birkeland, the world’s first autonomous and fully electric vessel. The ship is an open top container ship with the capacity of 120 Twenty-foot Equivalent Units, fully battery powered, making it the first-ever autonomous, zero-emission ship. The systems installed can actually make decisions on changes in control configuration without any human intervention.

Advantages of digitization

According to the International Association of Ports and Harbors (IAPH), 11 billion tons of cargo per year are carried by the maritime industry, and digitizing the maritime supply chain will have significant advantages affecting not only the maritime sector but also every other part of the global trade chain. Makhtar Diop, Vice President for Infrastructure at the Wold Bank, states that “beyond immediate benefits to the maritime sector, digitalization will help countries participate more fully in the global economy, and will lead to better development outcomes”. In fact, there are currently 30 ports worldwide that have already started exchanging key data electronically. And the advantages of that are multidimensional: organizationally, operationally and environmentally.
On an organizational level, digitization will help in getting and analyzing real-time information on voyage routes and cargo conditions, amongst other things. This will lead to higher cost-efficiency and increase the profit margins of the industry. Moreover, it will help reduce errors related to document management and help in optimizing digital information sharing that will result in better understanding customers’ needs and expectations.
On an operational level, digitization would help in standardizing existing port and custom processes, lower transit time and the waiting time at the destination port because the crew will be able to manage the estimated time of arrival based on the berthing availability at the port, seeing that this kind of data will be electronically shared. Another important benefit of digitization is forecasting and predicting equipment performance and maintenance, reducing the risk of surprise technical failures on board.
When it comes to the environmental dimension, digitization will help monitor environmental performance in order to reduce emissions and protect natural maritime ecosystems. Based on a report by the United Nations Conference on Trade and Development, the optimization of transport operations has been shown to lead to a decline in accidents at ports and at sea, reduce pollution and emissions and generally help minimize negative externalities and streamline the transport of international trade.
However, there are two sides to the coin and digitization has its risks and challenges.

Risks and challenges of digitization

With digitization changing the way the shipping industry functions operationally and organizationally, crew members will have re-skill and up-skill and get the proper training because according to the World’s Maritime University roles and responsibilities will change from operating at sea to monitoring, managing and supervising systems from ashore. But before the industry even deals with that challenge, it must first address how it should go about dealing with the current infrastructure. Old vessels will need to ensure that they could obtain the required sensors, retrofit them and allow for appropriate transition time, which might affect their businesses. We have already mentioned that digital technologies and digitization will create new business opportunities and enhance competitiveness, but with that comes the risk of having monopolies in the industry, especially that sometimes digitizing business standards might exclude some small companies from developing countries.
On another note, moving towards a digital environment is perceived as expensive and risky. In a sector where profit margins are low and the general mindset is focused on cost-saving, installing new and expensive digital solutions is rolled out very slowly.
Moreover, a major worry that shipping companies deal with is data sharing. Companies generally focus on protecting their data instead of sharing it with the maritime sector and that in itself is a barrier to creating a wide data network and standardized digital solutions that everyone could benefit from. This is mainly the case because with digitization the risk of cyberattacks increases, and companies have to adopt and install expensive cybersecurity systems onboard and within their organization in order to ensure the protection and safety of their ships and cargo.

In short, the digital revolution is not one that the industry can do without. And being a major link of the global trade chain, governments should support and encourage the maritime sector with the shift from traditional to digital solutions in order to reap the many benefits that digitization has to offer, all while acknowledging and being aware of the risks and challenging and addressing them accordingly.