Like the ebb and flow of a tide, the waves of the maritime industry see its share of changing winds and weathers. However, to the prudent and percipient, the compass of progress will always point north.
Glen Hilton, CEO and Managing Director of Asia Pacific at DP World, speaks with Maritime Fairtrade on how the company goes with the flow without submerging under but sailing above and ahead.
The global maritime industry is paying the price for an investment crunch, which has constrained the industry’s ability to transition to low-carbon energy, meet sustainability demands and undertake innovation and disruption.
Which investment areas do you feel are fundamental for progress and competitive sustainability?
What has driven the need to even expand investment is the future of trade and maritime logistics requires developing seamless, sustainable end-to-end solutions to tackle critical industry challenges. Within Asia Pacific (APAC) specifically, growth is exponential and accelerating in speed. With 200 million TEU (twenty-foot equivalent unit) of containers moving in and out of APAC, the region makes up 20 percent of global trade. Asia is also the world’s leading maritime cargo handling center, accounting for 42 percent of exports and 64 percent of imports.
Thus, to pump finances into different areas, a multitude of options can be thoughtfully weighed before making final investment decisions. Some critical areas for investment include:
- Greening the shipping industry
International shipping accounts for about 3% of greenhouse gases worldwide, and decarbonizing it requires lower carbon fuels, such as biofuels, ammonia and hydrogen, to be more commercially available. More viable financing options need to be provided too. To finance shipbuilding, the vessels themselves are often used as collateral, akin to property mortgage.Therefore when decarbonizing existing fleets, investors often have limited financing options since vessels may already be pledged to lenders who previously financed their acquisition.
- Accelerating digitization and technology adoption
In a competitive environment, digital technologies can help maritime logistics companies boost efficiency and performance across their operations. However, only half of logistics companies in APAC use shipment monitoring software and tracking tools that do not require any manual inputs. The reason being the complexity of solutions integration, high implementation costs and the need for talent to manage these solutions have been cited by companies as the barriers to adoption.
- Improving end-to-end supply chain visibility
Managing supply chains demands advanced daily planning. Logistics decision makers often face thousands of ‘micro-disruptions’, such as missed connections, tampering and counterfeiting – the cumulative effect of which reduces resiliency and agility.
Additionally, supply chains are also becoming less linear and more integrated which involves hundreds or thousands of players – complicating flow and management. In this regard, increasing supply chain visibility is critical.
However, improving visibility requires significant investment, including reviewing entire IT architectures at the enterprise level and ensuring interoperability of various technologies. Some of these may even need to be newly procured.
DP World foresaw this shifting industry landscape and invested in growing our range of products and services covering every link of the integrated supply chain, which includes marine services and maritime ports alongside landside logistics, warehousing, freight forwarding and industrial parks.
For example, since 2012, DP World has invested more than US$10 billion in the global logistics sector, making us one of the top five investors around the world. Despite strong cargo demand outstripping vessel supply, we enjoyed strong pricing power in some locations, with Group revenues growing in excess of container throughput. As a result, DP World witnessed a 1.4% year-on-year growth on a reported basis.
According to UNCTAD’s Review of Maritime Transport 2022 report, the past two years showed a mismatch between demand and supply of maritime logistics capacity. This has led to a supply chain crisis, including surges in freight rates, congestion, and critical interruptions to global value chains.
What strategies has DP World implemented to protect against imminent issues, especially given volatile politics and economic recessions?
In recent years, we have seen how inefficacies and disruptions to global supply chains affect us all – increasing the price of goods and destabilizing society. Our Trade in Transition Report 2023 shows that nearshoring and regionalization has increased by eight percent and reshoring by 10 percent since we did the survey in 2021. There are multiple reasons for this shift, but diversification is still the primary strategy for overall cost reduction and increased resilience.
Supply chain disruptions have thus resulted in greater demand from cargo owners for customized solutions and improved transport connectivity. DP World has been proactively managing the flow of goods at its facilities and working closely with customers to better plan and manage berth hours and container exchange. This has led to limited disruption at our terminals and allowed cargo to move efficiently.
The second impact of the supply chain crisis is the worsening of carrier schedule reliability. As carriers moved away from congested hubs, a strong connectivity of ports and terminals to key inland markets is instrumental to carving a competitive edge. For DP World, it was strengthened when ZIM Integrated Shipping Services selected DP World’s terminal in Fremantle to inaugurate a new service connecting Western Australia to Southeast Asia in January 2023.
We are helping businesses and their customers in APAC and around the world to streamline operations, lower costs and reduce environmental impact. We achieve this by improving safety and efficiency at our ports while unlocking multimodal, end-to-end transport options, bringing flexibility, agility and resilience to global trade. This includes:
- remaining focused on origin and destination cargo, which is less susceptible to economic instability;
- developing end-to-end logistics solutions that integrate road, rail, and non-vessel owning common carriers, and managing businesses and systems to deliver customer-focused solutions;
- pioneering port-centric logistics solutions by adding landside value to our customers;
- and investing in digital assets that will deliver our vision to become a trade enabler by taking our customers’ operations online and reducing paper-based complexities involved in existing processes.
Share how investments in technology advancement have helped DP World prepare for pain points, pre-empt negative repercussions and sustain customer development in Southeast Asia.
We need to digitization global supply chains so that everyone – end-to-end – has complete, real-time transparency of what is happening when and where. Then, we can spot problems early, and respond early. More than 11 billion tons of goods are carried on ships every year, but the global logistics industry has no standards for documentation, such as bill of lading or customs paperwork, which is a pressing issue.
As a business, our aim is to help the industry transform, particularly through technological adoption. One of the ways we are implementing data insights and AI today is through the analysis of data on cargo movement across our operations, to create new ways to enable trade and increase transparency, efficiency, and control for our customers.
A main example of such innovation is BOXBAY, an automated and renewably powered container storage system, which was developed by DP World in joint venture with Germany-based SMS Group. The storage system will automate the container stacking process and removes the need for re-shuffling, saving 350,000 unproductive moves every year and improving overall truck servicing time by 20 percent.
Given the ever-changing schedules of vessels, we are also piloting the use of machine learning to detect the most optimal decking position for yards as it is more adaptive to changing parameters such as vessel schedules. This could in turn reduce re-shuffling of containers and bottlenecks from congestion, translating into further cost savings.
Another crucial purpose of technology is helping ports and terminals remain a safe workplace. Throughout our network of ports and terminals, including 18 in APAC, we are implementing technological solutions that can potentially save lives. Just within our Pusan Newport Company terminal in South Korea, for example, we have the following:
- Seeing Machine which detects symptoms of fatigue in drivers and triggers an alert.
- Installation of a system in which the GPS blocks screens of truck drivers once they are driving to minimize distractions.
- An unpinned cone detection system which detects unremoved cones, which pose hazards, from the bottom of containers more accurately than the human eye.
Photo credit: DP World