In times like now the benefits and acceleration of the Internet of Things (IoT) are even more critical as many are working remotely across the globe. If anything, we are discovering how the power of unlimited connectivity is driving the productivity of our businesses.
If we think about how much bandwidth we are using daily observes Jackson, “We can better appreciate the connectivity needs of seafarers who are always remote – could you imagine your boss telling you can only connect for an hour a day?”
Jackson believes that previous barriers to accelerating IoT adoption have changed as, “The key barriers to overcome included the need for real time data, as ship operators were moving beyond the noon report. Connectivity alone would not be sufficient as high-speed connectivity would be required to reap the full benefits of IoT. The need to standardize with common platforms like MQTT was also important, and there was a mismatch with who is paying for IoT and who is benefiting.”
“Within a year, all of those barriers have been overcome, and specifically the decision makers now benefit from the cost savings that IoT provides.”
Jackson states that the spectrum of IoT adoption she envisaged - from simple Data Transfer and voyage planning to PNL savings – still holds true, but it has evolved slightly over time.
IoT is more than just data transfer, it’s a competitive advantage
Jackson points out that IoT is not just data transfer from ship to shore, but it is machine to machine connectivity. It’s important to note that one of the most valuable parts of IoT is in the analytics and insights which can be processed from the data.
Maritime IoT is accelerating, driven by the focus on operational efficiency and the future of connected ship. The prediction is that the connected ship market will more than double in the next 10 years to over 14 billion dollars in value – 225% growth by 2030.
“What's different in the past 12 months is not only that IoT is here and here to stay, but it is now becoming a competitive advantage,” states Jackson. “When these well-established maritime business models converge with IoT, it will serve as a gateway to business transformation and competitiveness.”
In observing four different maritime service models, Jackson explains that on a basic level, “Shipyards are in the service of System integration, equipment manufacturers are in the service of operational reliability, ship managers are in the service of vessel availability, and crewing which is the service of safety and compliance.”
The Impact of IoT on Shipyards and Shipbuilders
Jackson notes that less than 10% of shipyards and shipbuilders include service in their business contracts. Currently, their primary focus is on the cost of an asset and all the systems that need to be designed and integrated well. However, Jackson believes the focus with IoT will shift to the total cost of ownership, “Imagine a world of data where shipyards were like high-end transportation assets that included service plans.”
“We can look to the automotive industry as an example. Historically, cars had different pricing tiers and offered various feature packages and they mostly competed on price. Then OnStar disrupted the industry by offering an ongoing service plan as a key differentiator.”
“The OnStar example highlights the satellite connectivity to a call center which automatically dispatches air or land rescue assistance - you can see the direct translation of this example of IoT through the maritime industry.”
Jackson suggests the service model transformation for shipyards can be observed in two different quotes, “In 2015 a CEO stated their company prided themselves for building the most durable vessels, but they also compete on price to spec due to aggressive competition. They want high quality equipment, but their job is done when the vessel leaves the yard.”
Jackson suggests the future opportunity in this business model is subscription service revenue as five years later the same CEO said, “Our clients rely on the tonnage being operational at all times. We have an obligation to offer a full through-life support. We now monitor the systems we installed in real-time, with a predictive monitoring service agreement in place so that we can intervene before things get critical.”
Disrupting Equipment Manufactures
Equipment manufacturers are also facing a service model disruption. Jackson states that field service costs are the highest budget item, averaging $5000 per visit. She states that while today's focus is on break fix to keep the equipment functional, yet the focus in the future will be on remote troubleshooting and proactive maintenance.
“Imagine a world of data where equipment is seamlessly connected everywhere in the world. In today's situation with COVID-19 or for whatever reason, the vessel cannot arrive or be serviced in port. Maintenance could now often still occur remotely, and proactively.”
This shifts the risk-based maintenance to proactive intervention. “IoT enabled intervention can be as simple as an alert to turn pumps off or a proactive action to prevent low oil levels remotely. These actions that would have enabled the Norwegian cruise ship to avoid expensive evacuations last year,” offer Jackson.
Jackson states that a SOx scrubber Program Manager captured this well had shared that they are overwhelmed by warranty claim disputes and their service visit costs are too high, “We need data to defend ourselves, and improve our product. We budget $5000 for each service visit to a ship. These visit should be fewer, and more productive.”
She states that at the same time another manufacturer had planned get incremental revenues streams through services as the plan, “to sell a Managed Boiler Service in the next five years, and significantly increase revenues from services. Our usage recommendation reports save shipowners 5% of the annual boiler fuel cost.”
Jacksons offers that their service will save the shipowners significant money in return and they would be happy to pay for the managed service. She says that this example shows how IoT benefits two parties and both share the net profit.
Data Makes More Availability and Higher Billings for Ship Managers
As ship managers want to limit the cost for downtime, today’s the focus is cost driven and sometimes reactive due to the nature of the business.
Jackson notes that with IoT, this will shift to focus on higher billings with more days of availability.
She observes that this can only happen when, “there is a world of data where ship managers have full visibility to the performance of relevant assets on their vessel in fleet. Not only do they want to have a managed boiler service, they want every critical piece of equipment to be connected and serviceable by experts on shore.”
Jackson explains that in the airline industry, maintenance causes delays and even empty seats are perishable and lost revenue. If one observes that contracts in which maintenance is done to turn around an airplane, with that of a NASCAR pitstop - every second matters. Time in the pit is short and based on the technicians receiving sensor information before the car pulls in.
“The focus on the truly connected ship will drive equipment manufacturers to connect their equipment so the whole vessel can operate at peak performance and time in port is then minimized,” states Jackson.
“Spending more on IoT connectivity will reduce costs elsewhere and provide higher availability - in effect, maximizing their revenue. You can't grow by cutting costs, you grow by investing in new revenue streams.”
Without visibility there is understandable fear or distrust if the vessel is operating as efficiently as it should be. Jackson points out that a ship manager can still fear the lack of visibility onboard today as they need to run the vessel efficiently and as promised, “We need to have faith in all the assets on board, but sometimes we have no visibility or control over the equipment issues that can create long downtimes. It can feel like a complete leap of faith.”
Jackson offers by contrast that many ship managers are already operating connected vessels where they can track the condition of cargo and each piece of equipment to ensure optimal performance at the right temperature and correct position, amongst other things.
This would enable faster turnaround in port to maximize availability and revenue.
Crew Wellness Reduces Accidents and Operating Expenses
Crew today is considered an operating expense, and even before the COVID-19 pandemic, statistics indicated that 20% of vessels per year were diverted due to crew illness. The cost for a medical incident can be well over $100,000 per diversion.
“As the move to automation continues, the focus is on reducing the number of crew, but I believe that in the future the focus will be on the wellness of crew,” says Jackson.
“Imagine a world where crewing performance was optimized like competitive athletes. Moving beyond regulations for crew safety, the focus will be on good sleep, fitness, and wakefulness when on watch.”
Jackson says that a Port Health Authority official - prior to the COVID-19 situation - captured it well by their observation of physical and mental exhaustion of the crew, “During Ship visits, we are seeing an increasing number of crew who are physically and mentally exhausted to the point of barely being able to string a sentence together. It’s easy to see how at risk they are of making mistakes, which could have a severe impact on the efficient running of the ship.”
By contract, Jackson points out a Crewing Manager had shared how they are trialing a health tracking system to monitor from shore the vital information around heart rate and sleep patterns, “They hope this IoT enabled information will prevent fatigue, accidents, and the churn of staff.”
IoT: Service, Stakeholders, and Benefits
IoT allows businesses to observe and compare data – from vessel to vessel, asset to asset, and crew to crew. “Machine learning offers the capability to watch for errors and send alerts when something does not look right. However, the real value of IoT comes when you can act on that information,” states Jackson.
“When you can intervene to actually fix an issue remotely, and then longer term to optimize for true efficiency.”
IoT is already here, adoption is accelerating and it, “will continue to disrupt the business of maritime,” believes Jackson.
“First, data transfer was needed for regulations and then to save money, but the future is to drive new revenue streams and data gives you power to get a competitive advantage and will change the hierarchy of maritime today.”
Jackson remarks that new players offering service contracts and data analytics will be some of the new winners in the industry. With this, shipyards, ship managers, equipment manufacturers, and crewing agencies will all compete for new revenue.
“The first mover is definitely the one who wins,” says Jackson. However, “Another key lever in the IoT adoption is the alignment of stakeholders. If the payer of the IoT application does not benefit, why would they want to pay for it?”
She offers that IoT benefits all players in the value chain, and this connection of stakeholders is what is changing the rate and accelerating the adoption of IoT.
“For example, you can get lower health insurance if you work out or participate in smoking cessation classes. With wearables you can share your heart rate and activity levels directly to benefit from these savings. If you do service your automobile when the sensors indicate it is time to change the oil or rotate tires, and you use the dealer, your warranty can be extended. The market demands will sort out who gets to keep or share the profits,” says Jackson.
“If you look at P&I clubs today, there is a one size fits all service model. They don't have live data to know where their vessels are or when they are used. Today, maritime insurance policies are mostly global.”
“In the future, the regional time based or conditions based insurance could leverage IoT to provide location, speed, roll and pitch, and weather data feeds to create a more holistic picture of whether a vessel is actually used in a risky situation.”
As the data and applications become available, the P&I could increase and diversify the number of policies they offer, increasing their revenue.
IoT has the potential to enable the transformation of business models and while it will become a necessity, “adoption of IoT still fits on a spectrum,” declares Jackson.
“The maritime world has moved beyond basic regulatory requirements for data transfer. Most vessels have already moved to real time data feeds for monitoring, making real time decisions, some are simple while others are more sophisticated.”
“The next phase of IoT that is happening is the use of AI and big data to optimize performance. The future is not just P&L savings but generating new revenue streams for the future business of maritime.
In closing, the next question you should ask yourself is where your company is on the spectrum? And how can you help accelerate the IoT service model transformation that is happening right now?
Find out more about the CMA Shipping 2021 event here.