How does a traditional shipping company innovate with AI and ecommerce?

When I could still fly freely before the pandemic, one view that always caught my eyes (and yours as well I am sure) whenever I was about to land in Singapore is the army (or shall I say navy) of container ships lining off shore of the densely populated city state. 

Maritime is one of the oldest industries in the world. We tend to take them for granted, but (fun fact), it still carries 90% of world trade.  In fact, according to the International Chamber of Shipping, around 11 billion tons of goods are transported annually by ship. That’s roughly 1.5 tons per person based on the current global population. 

So it’s not an exaggeration to say that the maritime industry is the backbone of our global modern life. And it is no surprise that any shipping price movement will grab the attention of the whole world. 

Coincidentally, last month, we had a chance to visit the China Merchants Energy Shipping Singapore (CMESS) office in Singapore, a subsidiary of China Merchants Group (CMG). 

Who is CMG? 

Many people might not be aware, but CMG is a 150 year-old SOE to support marine trade. With US$1.6 trillion in assets and US$126 billion operation revenue in 2020, it is one of the largest SOEs in China. 

The company also has a pretty interesting history, with “First”s in China, witnessing the entire modern history of the country and its relations with the world. 

Tan Youquan, Managing Director of CMESS, hosted us. With pride, he generously shared with us CMG’s history. 

Founded in 1872, CMG started expanding outside China in 1873 to support merchants servicing international trade routes. The Singapore operations, through CMES, was set up in 1995. 

What is an International Shipping Agency company? 

Mr Tan shared that a modern ship is itself a self-contained ecosystem. There will usually be around 30 crew members, who live, and work on the sea, but make frequent calls to various ports. 

When a crew starts on a route, they may normally take 3 months from start to end of the journey. “Some people don’t realise that every ship is a society”, Tan said.

As a moving society on the sea, the crew need not only food and drinks, daily use products, but also office stationary, maintenance store, equipment and spare parts to keep the voyage and operation safely.

When the ship calls each port, they will also need to get the clearance from the port authority, immigration, crew change and cash to master, and many other logistic support. Based on each ship’s particular conditions and life-cycle, they’ll also need repair and inspection, store and provision, and bonded stores. 

An ecosystem of agencies exists at each major port to help facilitate all these for the ship. 

The pain points 

Most of these agencies function in a very traditional way. Communications are often conducted via emails, where documents are scanned, attached, sent, downloaded, processed, scanned again, attached and sent. 

As there are many documents that need to be exchanged, with various standards, a lot of manpower is needed to process. Such processing is slow, onerous and prone to errors. 

In extreme cases, extraction of data and the processing back and forth could take one month. Anticipating this, the ships also need to send information to their agencies way in advance, which is both demanding and inflexible. 

Over the years, there have been multiple attempts to revamp or fully digitize the process – but we all know old habits die hard. 

How to improve

CMESS would know this better than any other agencies – as CMG itself operates 350 ships. For Singapore as a whole, during peak time more than 150,000 ships will call a visit annually. 

CMESS also understands that changing user habits of a very traditional industry overnight is all but doomed. The key to improve the efficiency is actually at the backend processing – and CMESS turned its attention to AI. 

In a recent agreement signed between CMESS and Singapore AI startup 6Estates as well as ERP provider Yonyou, the parties agreed to launch a 3-pronged Marine Platform-AI-ERP solution. 

The thesis is actually quite simple to understand. 6Estates, which has been quite strong in Natural Language Processing technology, will build an AI solution to extract and analyse key information from scanned shipping documents and email attachments. (We wrote about 6Estates a while ago). The information is then automatically captured into an ERP system built by Yonyou.

CMESS, with its more than 25 years operating one-stop marine service out of Singapore, hopes to gradually digitise the information, analyse it, and improve the efficiency of the whole chain. 

Information such as crew’s average age, food consumption patterns, fuel usage etc. will also be used to build a profile for each ship, allowing not only Singapore but also other ports in future to serve these ships more efficiently. 

How about ecommerce? 

The innovation does not stop at the back end. In fact, CMESS also launched an ecommerce platform called Marine Alliance in October 2020. 

“What an odd name,” you might think. The name shows its roots in maritime industry. 

In fact, CMESS’s ecommerce attempt is two-pronged. A B2B platform will allow ships to order service and supply online before making a port call, or while stationed off the coast. A B2C platform leverages the certified maritime supplier base to offer convenience and good quality daily necessities and appliances to residents of the port city. 

The B2B part is closely related to the above-mentioned ship profile. In fact, it is quite difficult for a major ecommerce platform such as Shopee or Lazada to serve the B2B needs – as ships are not residents of the city, while delivering to ships off shore requires special logistics and clearance. 

The B2C platform also allows ship chandlers to optimise their inventory, in addition to offering convenience to port residents. 

Why and How? 

Tan shared that this is a natural progression for CMESS. Since CMESS has tested servicing the contained shipping ecosystem: they have their own 350 ships as basic customers, an all-in platform of integrated marine services, vast network of service providers and suppliers, and a fully-controlled route and operational chain, why not also expand it to the wider community? 

And because of this advantage of sitting on an integrated higher ground, they can lower the cost, and deliver faster to customers.

It’s quite an eye-opening case study to all traditional players who want to buckle up in the digital era, and transform their competitive advantages in the offline business into the online space.  

But its impact extends far beyond that – their innovation also calls for a standardised port operation system where franchise partners around the globe can join, and eventually making it an all-in-one ecosystem globally for maritime industry.

It’s still early days, and MA is still under stealth mode. But we do know that something is brewing in 2H 2021. We are looking forward to it.