Paris Innovation Review —What are the challenges faced by ports today?
Yann Alix — They fall into three categories. First, the issue of naval gigantism, particularly concerning containers but also bulk commodities (transport of raw materials) and cruises. Ships are becoming ever larger. To provide an idea of scale, the largest container ships are nearly 1300 ft long: the equivalent of four football pitches! If you turned one of these container ships on its end, it would be taller than the Eiffel Tower. As for cruise ships, the latest MSC Meraviglia, built in the Saint-Nazaire shipyards, is 1033 ft long, has nearly 1000 miles of cables, required 6 million hours of work and carries 7200 people permanently on board. Finally, in the bulk industry, the biggest cargo ships are Chinamax (or Valemax) class, with a deadweight tonnage as high as 300,000 tonnes. They travel on the very long Brazil-China route. The longer the route, the more sense it makes to have large vessels in order to reduce fixed and variable costs. Nobody knows where this race towards ever-bigger ships will end: there are plans for container ships able to carry 25,000 TEU (twenty-foot equivalent) and for cruise ships carrying 10,000 passengers and crew.
Ports will need to adapt their infrastructures to these gigantic ships, but this cannot be changed with a wave of magic wand. They need to plan ahead and anticipate. Hence, there is a second challenge, both economic and financial. Port authorities depend on governments: they do not necessarily have to make money, but at any rate, they should not lose any. However, economic models resulting from gigantism pose growing economic and financial risks to port authorities. These authorities need to find responses that are attractive, competitive and profitable. Becoming “smart” is one of the solutions to these challenges.
Finally, the third challenge is security. Keeping infrastructures safe costs money. A port is a major geostrategic tool and the high concentration of oil or chemical storage might make it a prime target. The ISPS code of the International Maritime Organization (IMO) was put in place following the September 11 attacks to secure international port areas.
I would like to mention a fourth challenge: ports have become subject to rigorous scrutiny, not only in terms of economic, financial and logistical performance, but also in terms of citizen and societal indicators. How do they integrate citizens, inhabitants and the city into their activities? This is their fourth challenge. It might seem like a background challenge when compared to others, but it is nonetheless important, since most advanced ports use this lever to become smart.
How do these challenges push ports to become “smart”?
For a port, becoming “smart” means becoming more attractive and competitive. It means doing more with less. This calls for both audacity and creativity. In crude terms, one cannot build docks and wait for ships to arrive. For a very long time, it was thought that building a port territory was enough to attract ships. Today, a port without intelligence regarding the market and its players, without a defined and anticipated strategy, cannot survive the intensity of international competition.
Artificial intelligence, the Internet of Things, Big Data and other technological solutions all allow ports to become more intelligent in terms of flow, situation or customer management. Monitoring, data capture and anticipation are used to make the best decisions, improve processes, and make them more efficient or cleaner. However, these transformations are still in their infancy. For now, a port is mainly a playground for technological innovation applied to logistics. The logistics of warehouses, flows and inventories management have already implemented artificial intelligence and the Internet of Things to a great extent, in order to optimize connectivity. There is a transfer of skills and knowledge from these branches of logistics towards ports, but ports still need to undergo their own digital revolution.
On the other hand, a smart port should not be considered a mere application of digital technology. The intelligence of a port is also based on its ability to develop a collaborative approach. Geographical constraints make ports compulsory gateways: it is impossible to send a flow from Europe to America without going via a port – unless using air transport, which is far more expensive. A port authority must therefore act as a conductor whose musicians are shipping companies, flow makers and logistic integrators. The port authority must both coproduce and comanage technical and technological issues. The challenge is to create ecosystems, communities of interest and practices that make the port smarter, and therefore more attractive.
Port authorities often tend to remain in their ivory tower. Today, if they fail to anticipate the needs of their customers, whether maritime or land-based, they face great difficulties. This is crucial for flow producers or shippers. For example, Walmart is one of the biggest flow producers between China and the distribution centers it controls across the US. It represents several hundreds of thousands of containers every year. Each of its decisions can therefore significantly impact on the volume of a terminal in Los Angeles compared with another in Oakland, Seattle or Vancouver. In France, a company such as Michelin has always favored the ports of Le Havre and Marseille to ship its flows all over the world. However, Western European port competition is steadily intensifying, while inland trading zones are overlapping with one another. Customer loyalty requires “tailor-made” services and port authorities must offer integrated logistics packages that channel these massive volumes towards their facilities.
What about the balance of power with shipowners?
It has changed, partly because of the volatility of freight rates. The larger a ship, the more likely it is to generate economies of scale. A larger vessel should, in principle, be more competitive. But the market is already suffering from overcapacity and the arrival of increasingly large vessels only worsens this problem. There are those who cannot keep up, either technically or financially, and this can cause bankruptcies such as that of the South Korean company, Hanjin Shipping, in 2016. Shipping is a perfect showcase of contemporary economic liberalism. To maintain a dominant position, one solution is to control the busiest shipping routes through strategic alliances. Hence, port authorities depend on alliance strategies. In Western European ports, for example, the effect of alliances on the organization of ports reshuffles the cards when it comes to seaports’ attractiveness versus their immediate competitors. The Port of Le Havre (Grand Port Maritime du Havre, GMPH) remains a preferred stopover for major ship-owning alliances, thanks to the scale of containerized installations in Port 2000, which required 1 billion euros worth of investments. The port selection process is constantly shifting through mergers, acquisitions and strategic alliances.
What are the main smart port models around the world?
There are numerous and diverse examples, found almost everywhere in the developed world. Let us examine two cases: Hamburg and Amsterdam. With the help of Cisco, Hamburg has implemented sensors, camera systems and smart lights on roads in order to monitor traffic, anticipate the lifting of a bridge or clear a road after an accident, facilitate the movement of barges when the traffic is saturated, etc. This type of “smart” innovation is particularly relevant because it addresses all aspects: it allows the improvement of the overall productivity of terminals and port complexes, mitigates the effects of pre- and post-routing movements on the population while reducing contamination, and even decreases the number of accidents. This is a remarkable smart port project.
Another example is Amsterdam. With help from citizens, this port developed unique expertise in circular economy in the field of waste treatment. In just a few years, Amsterdam has become a pioneering platform that receives waste from the Greater London area. While it may not seem very “sexy” to receive waste from others, this activity generates a lot of research and development projects with local universities and engineering schools. It is also a remarkable, tangible project, which in the space of few years has brought true economic, financial and technological benefits.
Are ports that are very close to their cities at the forefront of this transformation?
Yes, indeed. Ports such as Rotterdam, for example, have been able to integrate inhabitants and citizens as a force rather than a constraint. They have created extensive research and development expertise and applied it directly to port problems. Becoming a smart port involves maintaining an entire reflective ecosystem to think about the port, next to, around and within it. This is a crucial aspect and most ports fail to implement this kind of ecosystem
Meanwhile, a few others have been using such ecosystems for a long time. In the early 1980s, Californian university researchers identified a so-called “diesel zone effect” over Los Angeles. According to them, it was caused by port activity and the density of trucks entering and leaving container terminals within the ports of Los Angeles and Long Beach. On the basis of this research and in order to put an end to the permanent congestion caused by traffic, both port authorities created the Alameda corridor, an automated 20-mile freight rail expressway with block trains and dedicated roads. This project considerably reduced the air pollution affecting populations living near container terminals and around major arteries leading to the port. This offers a fantastic example of a smart port and also of a pioneering form of collective and collaborative intelligence, which allowed the Los Angeles and Long Beach ports to improve their multimodal competitiveness. This example is quite old and proves that ports did not need artificial intelligence and the Internet of Things to start thinking smart!
Agreed! But in the age of the digital revolution, how do ports spur technological innovation?
A port authority does not have all the necessary means to develop technological innovation and R&D by itself. In Le Havre, the S-WING software was developed by the GPMH’s information systems department, to optimize the integral management of a ship’s port of call. But the GPMH works within a complete ecosystem, including private companies such as SOGET, the ISEL (the first logistics engineering school in France), and the UMEP (Union Maritime et Portuaire de la Place Havraise).
The port authority must therefore coordinate initiatives that will allow the development of this type of intelligence, whether through a research and development network, or via hackathons or meetups – i.e. events bringing together specialists in computer programming. Singapore was the first to organize hackathons. The port needs orders specific to its own world and asks researchers, start-ups and young entrepreneurs to imagine new solutions. This is a form of intellectual subcontracting. Singapore has even moved to hackathon 2.0: instead of putting specialists in the same room for 24 or 48 hours, they work together for a period of six months. This is called the smart port challenge.
There is always a form of symbiosis between a dynamic and visionary port, such as Singapore or Rotterdam, and a powerful R&D cluster. At the moment, the big rising cluster is Shanghai. They are consolidating their maritime and port expertise by attracting the best researchers from around the world, with considerable resources. They proceed exactly like Silicon Valley, by fostering competition among them.
How do you expect ports will evolve in the future?
I believe that the ports of the future will be based on three pillars. First, they will adopt strategic planning. In France, for example, the ports are subject to an extremely centralist – Jacobin – public authority. They only acquired strategic autonomy a few years ago, following the port reform of 2008. Being a strategist means knowing how to take risks and succeed in adopting long-term prospective trajectories. The Rotterdam community, for example, makes projections supported by highly visual documents, looking to 2030 and even beyond, by trying to guess what the world of ports will look like in 2100!
In order to implement long-term strategies, the ports of the future will also need investments: their second pillar. They should have financial autonomy and the ability to take risks. This implies freeing themselves from government control. In most West African countries, for example, the State only controls one port. It therefore seems impossible not to control it politically, or even to transfer investment power to private actors without maintaining some kind of control through PPPs, concessions, etc. The port of the future that wishes to invest will therefore free itself from public control, unless its managers have strong skills as investors.
Finally, the port of the future will be even more developmental than it already is. It will create environments in which citizens and inhabitants, but also artists, entrepreneurs, etc., will find a place of expression, debate and animation. It will be a port where people will love to live. Today, port terminals tend to be relocated outside cities, for land ownership, real estate or security reasons. I believe that this is a big mistake and that the ports of the future will be very well embedded in their territories, based on a highly inclusive approach that will give ports back to citizens. For example, it will be possible to attend concerts in attractive port areas or to develop environmental innovations based on a circular economy, as in most major Scandinavian commercial ports or, most notably, Quebec. As nodes of globalization, the port and the port city are at the forefront of many innovative experiments in terms of green economy. Port managers, strategists and investors will know how to use all the forces within these territories to make them as attractive as possible.