Towing the Ocean Shipping Industry Out of the Tech Periphery

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    I spent the evening of Dec. 31, 1999, embedded in the data center of Hong Kong Air Cargo Terminals Ltd., the largest air cargo operation in Hong Kong. Despite the years of preparation to handle the Y2K rollover, nobody really knew what was going to happen when the clock struck 12, and the tension was written on the face of every IT pro there. Meanwhile, at the massive ocean shipping container terminals scattered across Hong Kong, it was just another night. Nobody was all that worried about Y2K, and the reason was simple: The operations weren’t technologically sophisticated enough for it to really matter.

    That’s the experience that came to mind recently when I spoke with Adam Compain, founder and CEO of ClearMetal, a predictive logistics technology provider in San Francisco. Compain had spent two months in 2014 in a Stanford Business School immersion program at OOCL, a giant ocean shipping line in Hong Kong. It was an epiphany Compain had during that experience that led to the founding of ClearMetal, and I opened the conversation by asking him to describe that experience:

    There were really two insights that I took away, that led to the founding of ClearMetal. First was that every decision that ocean carriers — and everyone else in the shipping industry — makes is based on a prediction of some sort. An ocean carrier’s decision where around the world to position a container, a freight forwarder’s decision on the rate they should offer a customer, is all based on a prediction of what will happen in the future. The second insight was that there is so much complexity and uncertainty in the shipping world, around customer behavior and operational performance, and the industry hasn’t had the technology to make sense of that complexity.

    The hypothesis when I went back to Stanford, and met my cofounders, was that if we could use the data in the shipping cycle to better predict what would happen in the future, it would give the carriers, and all the operators in the shipment cycle, a clearer picture of what will happen. And that will enable them to make better decisions and become more profitable.

    Hence, the name of the company:

    The industry, to date, has been focused on its assets — the ships and the containers. Honestly, if I owned 100 billion pounds of metal, I’d probably be focused there, too. But the hypothesis we had was if you actually look through all the metal at the underlying flow of behaviors, data, and information, you can actually make more sense of the world. It’s seeing through the metal to see the true, underlying source of uncertainty and patterns.

    I asked Compain to what he attributes the fact that the ocean shipping lines have lagged behind the times technologically. He explained it this way:

    Part of it might have to do with the structure of the industry — many large companies that are often state- or family-run. That could have something to do with it, but I think the reason technology hasn’t infiltrated the shipping industry as it has all others is because at its core, the shipping industry is an operational one — that’s the core competency. If you look at the past few decades, the way they have chosen to solve their problems is the way they know how — essentially through operational means, manual means, and creating economies of scale to drive the unit cost down. This is merging and allying, and building bigger and bigger ships.

    And I think the reason technology hasn’t entered yet is because those solutions did really bring a lot of efficiency. You build a much larger ship, it drives the unit cost of the shipment down, and you actually do gain profitability and efficiency. The problem, however, is now, that method is sort of tapped out. I’ll also say that it wasn’t possible to use this kind of sophisticated technology out of Silicon Valley before, because the data infrastructure in the industry wasn’t yet there. Only recently have large platform companies brought the industry to the 1.0 of digitization.

    Compain spent five years at Google, and I wrapped up the conversation by asking him how that experience helped prepare him for what he’s doing today. He said what he learned at Google was the true power that technology, and cloud-based software in particular, can provide:

    Used in the right way, it really does drive efficiency gains. And if you think about the way the shipping industry has used its core competency — operations and infrastructure build-outs to solve problems — it makes sense that a lot of innovation around IT would come from outside of shipping. The way ClearMetal views itself is being able to partner with these large logistics providers and really help get new technology into their hands — not to disrupt them or to replace jobs, but to provide a sharper tool. At Google, what I consistently saw is everyone — from consumers to local merchants to the largest enterprises in the world — equipped with technology, can be better.

    A contributing writer on IT management and career topics with IT Business Edge since 2009, Don Tennant began his technology journalism career in 1990 in Hong Kong, where he served as editor of the Hong Kong edition of Computerworld. After returning to the U.S. in 2000, he became Editor in Chief of the U.S. edition of Computerworld, and later assumed the editorial directorship of Computerworld and InfoWorld. Don was presented with the 2007 Timothy White Award for Editorial Integrity by American Business Media, and he is a recipient of the Jesse H. Neal National Business Journalism Award for editorial excellence in news coverage. Follow him on Twitter @dontennant.


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