When people talk about the internet in shipping, the word ‘revolutionise’ tends to be used quite frequently. The concept of a revolution is understandably unsettling to those in the industry who have been plying their trade for years, whether in chartering, broking or procurement. However, those for whom the prospect of a web-based working environment inspires fear should take heart; the process will be an evolution which benefits the entire industry at large and will make people’s jobs easier, rather than a revolution which sees heads rolling across the floor of the exchange.

The biggest fear that the rise of the internet in shipping has inspired in shipbrokers is, of course, disintermediation. If the internet will enable shipowners and trading houses to make matches between their ships and cargo, then what happens to the broker? It is true that there would be no place for a broker if internet services aimed to replace the broker; however, there are two major reasons why this will not take occur. Firstly, the word ‘broker’ does not fully describe the function of a shipbroker. It is a convenient handle, of course, because the broker is in fact the go-between for a shipowner and a person who wants to move cargo. As David Cherrett of Clarksons points out, the shipbroker actually fulfils multiple roles, including consultant, agent, transaction facilitator and contract manager, as well as broker. As a result, disintermediation in the traditional sense does not apply to shipbrokers.

Secondly, the majority of dot.coms in the shipbroking space are not in fact looking to replace the broker. They are instead working to provide valuable administrative and communications tools to be used by shipbrokers, which will make their jobs easier. The theory is that by streamlining the entire business process, brokers will have more free time to generate value for their principals. The internet will, therefore, not disintermediate the broker; it will make him more valuable to his clients, for he will be able to take on the more specialised role of a consultant or a project developer.

In addition to the significant saving in time, the internet can also provide cost savings to brokers. If files are stored electronically, cavernous warehouses need not be rented for the purpose of storing paper archives. With the advent of e-mail, communications costs are a fraction of what they used to be and communication is instantaneous.

But all these gains are still theoretical. It remains to be seen how dot.coms will actually deliver these benefits to the shipping industry. In order to illustrate in practical terms how these benefits can be achieved, and for the purposes of demonstrating how the internet can be used to enhance (and not eliminate) the roles of traditional players in the maritime industry, I am going to discuss the various routes that have been taken, starting with the London-based ShipDesk, which addresses shipbrokers. Next I will discuss the benefits for shipmanagers, using Wallem Shipmanagement as an example. And finally I will briefly discuss bunker procurement.

THE SHIPBROKING SPACE

ShipDesk was founded by Dirk Langeveld, ex-CEO of Tufton Oceanic, and James Lucas, an e-commerce entrepreneur with experience in shipping as an owner, charterer, broker and agent. The company is using the Netshipbrokers.com service as a starting point for developing the ShipDesk service. Netshipbrokers, which is still up and running, with 2600 users, hosting 3000 vessel positions and 4000 new cargoes per month, is regarded as a first generation site; it does not currently support transactions of any kind. It simply provides users with a comprehensive database of relevant information and a space in which to post enquiries. Any business which may be generated is conducted offline, once the parties involved have sounded out the possibilities online. While the capability which Netshipbrokers provides is useful, it doesn’t go far enough; real efficiency will only be achieved once the entire process is streamlined electronically.

ShipDesk will attempt to provide this. Within ShipDesk’s office, there is no talk of disintermediating anybody; all of the discussion and technological development is geared towards providing shipbrokers with the best possible tools to conduct their businesses. At the heart of ShipDesk’s service will be a sophisticated matching tool which will be an adapted version of the matching technology used in the money market, a tool which is being developed in association with OptiMark Inc, a US-based company which has provided trading solutions for the Nasdaq Stock Market, the Pacific Exchange and the Toronto Stock Exchange. The OptiMark system is specifically designed to allow users a high level of control, making it possible for participants to conceal their trading positions until they are ready to reveal themselves. In addition, the system allows the user to enter up to 90 different criteria based on how and when he wants to conduct the exchange. It is this system which ShipDesk is looking to apply to shipbroking and chartering.

I would suggest that this is the right model to look at for online chartering. There is obviously a great concern about maintaining confidentiality, and the use of a system which has been proven in the highly competitive and secretive world of equities trading should inspire confidence in those who are still sceptical about the security of online chartering. The system will also aid brokers in finding better matches in less time. Rather than having to spend hours on the phone trying to find exactly the right cargo or a ship of the right capacity in the right place, brokers can simply post their requirements and the system will search through its database and return a set of matches in minutes. And electronic means of communication, such as e-mail, allow brokers to instantaneously contact the various parties involved in the transaction, expediting the process even further.

According to Peter Andersen, vice president of marketing for ShipDesk, the service allows brokers to concentrate on value generation because mundane tasks will be expedited and there will be reduced errors. "There are so many mundane details that should be done electronically," he says. And having more time will free brokers to concentrate on value generation and project development, including the development of new trade routes, which means new business for everyone involved. In addition, he points out that with the increased usage of electronic chartering, it will be possible to generate useful databases with relative ease. And the presence of comprehensive databases will provide useful risk management and trend analysis tools, as well as doing away with the need to store away stacks of paper in warehouses.

ShipDesk is also looking to provide value to ship agents, by giving them a communications tool. Agents will be able to input port details into the system, log progress reports about the docking of ships, loading status and details of the loading process.

So in essence, the role of the shipbroker will be changed, not eliminated. At bottom, shipowners do not want to take on the responsibility of fixing cargo for themselves. They are not looking at shipbroking portals as a way of getting rid of their brokers. Instead, they are asking their brokers to look into and evaluate the various portals on the market on their behalf, which is perhaps the newest addition to the broker’s duties. And as Andersen points out, the role of the broker has continuously evolved over the years as new communications technologies have come into being. From the coffeehouse, to the telegram to the Boe Code to phone, fax, networks and finally the internet. This is simply the latest stage in the evolution of the shipbroker.

THE SHIPMANGEMENT SPACE

All of these principles — efficiency, cost savings and effective, timely communications — apply to other forms of e-commerce in shipping as well, such as procurement for both ship supplies and bunkers. For shipmanagers, there is no real fear of disintermediation. And as a result, shipmanagers have been among the first to appreciate the benefits of conducting their procurement online. An outstanding example of a shipmanagement company grasping the initiative is Wallem Shipmanagement, which has been doing all of its procurement online for the past year. The system encompasses 200 suppliers in 24 countries and was developed in association with the Hong Kong-based e-procurement enabler Arena.

According to Patrick Slesinger, chief information officer, Wallem had to ensure that its system was completely unbiased — in other words, it couldn’t give discounts to buyers at the expense of suppliers, but on the other hand, it had to minimise the work — in terms of data entry, etc. — on the part of the buyer. The system is therefore a means of electronic communication which streamlines the entire process for everybody involved. RFQs can be generated from on board the ships, and the data is automatically fed into Wallem’s ERP system. The vessel receives a confirmation of receipt and the shore-based procurement officer administrates the RFQ, deciding which items should go out for quote and to which suppliers.

Arena sits in between Wallem and Wallem’s network of suppliers. At this point, it is important to note that data entry takes place once and only once — on board the ship where the original RFQ is generated. Communications costs are kept to a minimum because most of it is conducted via the internet. The only potentially costly portion of the chain is the cost of getting the data from the ship to the shore via satellite, but even this can be minimised by batching correspondence. In addition, the room for error is reduced because data is entered only once.  

The benefits of using this system have been experienced by all of those involved. Wallem itself, for instance, has doubled the efficiency of its procurement system, which means that each procurement officer can handle double the number of ships and the cost associated with the procurement process has been reduced by 20%.

The shipowner benefits because the system clearly shows which items have been bought and how much they cost, making the whole process more transparent. As a result, the shipowner knows exactly how much he is spending and where his money is going. The suppliers involved in Wallem’s network have also benefited through this transparency, and stand to benefit even more as electronic procurement becomes more widespread. The holy grails of reduced inventory and minimal warehousing costs will become a reality as online procurement becomes the standard.

However, Wallem is a very special case. Not every shipmanagement company needs or wants to set up its own procurement system, and indeed, may not be interested in making the investment, what with the many procurement portals to choose from at the moment — OneSea, PrimeSupplier, Setfair, ShipServ, ShipVertical, MaritimeDirect and e4marine, to name just a few. Each of these is touting the same benefits — electronic streamlining, increased choice and time savings.

BUNKER PROCUREMENT

These benefits are perhaps more easily achieved in the procurement space, which is why it has managed to take off before online shipbroking. But nowhere has online procurement been more readily accepted than in the bunker industry. There are currently three websites in this space: Bunkerworld.com, with its Bunkerstem procurement service, Oceanconnect.com and Smartbunkers.com, and the competition is fierce. Because the bunker market consists of approximately 90% spot purchases, it has adapted quite readily to the online environment - this is opposed to the 60-70% of ship supply procurement which is contract based. The transition from offline to online has therefore been relatively straight-forward.

But of course, the question of what will happen to the bunker broker has been raised. And again, each of these sites has a concerted interest in keeping the broker happy. OceanConnect operates several ‘advisory boards’, one of which consists entirely of brokers. The aim is to ensure that brokers’ needs are taken on board and catered for. Bunkerworld is in the process of constructing a module which will enable brokers to get more involved in online trading and Smartbunkers allows brokers to log on to the site, and from their own personal page, to buy on behalf of their principals and to manage their accounts.

CONCLUSION

In conclusion, I will simply state the obvious: people fear change. And that is easy to understand, given the amount of hype the internet has generated in shipping. It can be easy to get confused by all of the dot.coms flooding the marketplace, some of them making especially extravagant claims. However, there already exist several examples of how the internet can be used to great advantage in shipping, and it is a surety that more will follow.