Smart Ports Point of View

Smart Ports | Contents

By Deloitte Port Services

Smart Ports | Contents

Seaports are playing catch-up with the large transport & logistics players when it comes to developing insight driven solutions and IoT applications.

Smart Ports | Contents

Contents

Introduction 3 Need for Smart Ports is driven by industry challenges 6

From digital to smart 10

Challenges ahead 16

About the authors 18

Smart Ports | Introduction

Introduction

Currently, a tidal wave of technological innovation & integration is pushing industries and businesses to transform themselves in an effort to become more data, and insight-driven. The port industry is no exception.

Being part of both larger transport projects remain isolated. At the equipment and requiring different and logistics (T&L) supply chains moment, ports in Western Europe types of products and services and in itself being a cluster of are leading the pack in these creates a complicated environment companies and businesses active in attempts. Although the Smart Port with multiple stakeholders. In the T&L sector, ports are in a and IoT initiatives are addition to heterogeneity of data, a unique position to fully grasp the commendable, there is still a long fear of transparency also remains a potential generated by these new way to go before we can truly speak major issue. Ports are typically high tech developments. of fully integrated ports that fully comprised of a cluster of competing capitalize on the potential of IoT companies. Within the wider T&L sector, and insight driven applications, in companies have begun other words true “Smart Ports”. Thus, they are often very hesitant experimenting with a range of to share information with a central connectivity and data-enabled Becoming a Smart Port means authority that has the ability to technologies. In aggregate, these developing solutions to address the aggregate and distribute the data technologies form the Internet of current and future challenges faced amongst the stakeholders involved. Things (IoT), which represents a by seaports including spatial In addition the interaction with the convergence between the physical constraints, pressure on surrounding environment, both and digital worlds, ultimately using productivity, fiscal limitations, ecological and social, adds an extra data as a source of value. These IoT safety and security risks and layer of complexity and opportunity technologies are being applied in sustainability. Today’s technological to Smart Port development. diverse settings, from last mile and business model innovations can transport optimization to warehouse be a driving force behind the Smart and transport management Port. systems. These developments have been accelerated by decentralized However, determining which networks that rely on the rapid technologies, how to implement availability and analysis of them and the way in which they can information. support the overall digital strategy of the port remains the main Seaports are playing catch-up with challenge. the large T&L players when it comes to developing insight driven It stands to reason that ports are solutions and IoT applications. The faced with a myriad of issues both current landscape offers some initial technical and strategic. The diverse attempts at enhancing value nature of a port, with a wide variety Transport management systems are propositions through technologies of companies and ecosystems, currently the number one IoT like automation but overall these operating different kinds of application in ports.

Smart Ports | Introduction

One size fits all? A fully developed smart port can use it gained insights for new business model generation. However not all ports have the potential to integrate fully with their surroundings. Some ports might lack infrastructure or physical integration with their surroundings or might simply not have the scale required to perform the necessary investments. The determination of which level of digitization that can be achieved should be performed on a case to case basis.

Smart Ports | Introduction

Smart Ports | Need for Smart Ports is driven by industry challenges

Need for Smart Ports is driven by industry challenges

Ports operate within a supply demand model which is similar to the traditional T&L industry. On the supply side the Port Authority provides land for rent, services to clients as well as a regulatory framework.

Smart Ports | Need for Smart Ports is driven by industry challenges

The demand side is comprised of “Smart ports are the both logistics supply (warehouses, NxtPort transport providers, terminal only ports that will operators) and demand (industrial survive.” The port of Antwerp focuses its sites, stowage companies, etc.) and strategy of operational is therefore vastly different from the improvement on NxtPort, an prof. dr. Olaf Merk traditional T&L setup. information sharing platform for companies such as BASF, MSC, The three challenges can be When assessing the availability of Katoen Natie, DP World and PSA. countered by a set of solutions technology in seaports, one must The objective is to become a self- focused on automation and understand the demand supply sustaining data-commercialization information services, such as IoT. balance. Seaports are often company that will gather, ‘landlords’, their business model centralize, store, analyse and Operational excellence revolves on supplying land and exchange data from a wide variety The primary challenge driving IoT in services to demand parties like of logistic actors. Other parties seaports is operational excellence. terminal operators and companies which can join the platform in due From a supply side, namely port acting in the T&L sector. Therefore, time include customs, food quality authorities, capacity, efficiency, there is an important distinction control, other governmental reliability, support and costs are key between technological innovation on agencies and IT application drivers of value proposed to the a terminal level and on a port level. developers. clients (for e.g. terminal operators). A full port based IoT implementation On the demand side port users should benefit both the port users might want extra services like as well as the port authority itself. savings in time, security, traceability, etc. Improving these There are three main challenges drivers for both sides is where the driving the need for smart ports: quick wins lie for ports. The importance of this challenge is 1. Operational excellence mirrored in the current IoT 2. Migrating activities (challenging implementations in ports. Today’s external market) digital port solutions focus on 3. New business opportunities efficiency improvements like traffic

management systems, improving These challenges stem from the flow throughout the port area, tendency to measure success based automation, reducing costs or digital on traditional parameters like size invoicing (customs) by improving and throughput. However, Western lead time. ports are no longer only competing for the number one spot in global However, the need for IoT and traffic figures. Ports in Western smart ports is not only driven from Europe are faced with a a business perspective. Today we concentration of ports in a also see other trends, which will stagnating mature market where force ports to be proactive and efficiency and protection of market shape their environment instead of share becomes central. This reacting to market fluctuations. necessitates a strategic shift, where size is no longer the primary focus, but rather efficiency and smarter operations. It is no longer the largest port that will survive but the smartest port.

Smart Ports | Need for Smart Ports is driven by industry challenges

Migrating activities Finally more indirect developments The second challenge driving IoT in drive the need for Smart ports. Portbase and seaports is migrating activities. The These include the increased focus automated need to be smart is also driven by on sustainability, generated from a challenging external market stronger interaction between port terminal environments. Focusing on Europe, and city, by regulations based on we observe a shift of spending sustainability and environmental Within the port of Rotterdam two power away from the traditional targets and by social pressure. main technological feats have Western regions, GDP growth is been accomplished, aimed at stronger in Eastern Europe while New business opportunities locking cargo streams to the port. cost of living is lower. Many of the The third challenge driving IoT in First, the nationwide Portbase EDCs, traditionally located in seaports is the development of new initiative, in existence since 2009. Northwest Europe, are moving their (data-driven) business models. IoT Portbase Port Community System activities further east. This could applications provide more added is the digital connection to smart result in a subsequent shift in local value than only updating existing Dutch ports. It is a combination of shipping networks, putting added frameworks and streamlining an application layer, platform and pressure on the ports which are established business models. In information database. The system currently market leader (Rotterdam, order to maximize potential of promises concrete savings in time Hamburg, Antwerp and insight driven solutions, port and money through bilateral Amsterdam). authorities must rethink their connections and information orthodoxies about value creation exchange. On a global scale, shifting transport and value capture. The three networks also endanger traditional strategies described by Porter, A second technical feature in the port leaders. Developments like the differentiation, cost leadership, and port of Rotterdam is the state-of- China- Africa route reducing focus are no longer mutually the-art fully automated deep sea transhipment needs in Western exclusive but rather mutually terminal with automated guided Europe, the growth of transhipment reinforcing. Next to the physical vehicles. hubs in the Middle East, the one flows more emphasis will be put on belt, one road project or even the (data-driven) models like value- Arctic route might cause cargo added services, subscriptions, apps shifts. This increases competition and anything as a service (XaaS). and renders the value propositions generated by IoT like cost reductions and increased efficiency ever more important.

Port apps

The port of Amsterdam for example, has launched multiple apps. The I Am Port app offers real time information on ships locations and itineraries in the port. In addition you can find information on arrivals and departures, size, draft and berth of each ship in the port.

A second app, the Port Data app shows the historical market shares of the throughput of cargo of eleven ports in the Le Havre – Hamburg range in order to promote the idea of data sharing. Finally a third app allows you to tour the port in a VR environment and aims to increase local support for the seaport.

Smart Ports | Need for Smart Ports is driven by industry challenges

Smart Ports | From digital to smart

From digital to smart

Ports have gone through a structural and functional evolution over the past decades.

Smart Ports | From digital to smart

Simply put, there are three Moving towards a true Smart Port, parties meet in order to create generations in port development: one which uses the full potential of value. In a platform world, this an IoT network and smart data often means that the availability of 1. The first generation port is a solutions means that a port must be supply on one side of the market loading and unloading port (until able to identify and take advantage affects the volume of transactions the 1960s) of new business models within the on the other side of the market. In 2. The second generation port is an larger ecosystem. The nature of the the context of a port, the platform industrial port (until 1980s) business makes this challenging, business performs a sidestep from 3. The third generation port is a since it requires integration between the traditional supply and demand logistics / supply chain port (post the supply and demand side from balance mentioned above, where 1980s) the T&L sector, assimilating not only the port is a landowner and service logistics firms and suppliers and provider for both incoming and Each generation comes with a new distributors but also their clients like outgoing logistics. A port platform function and focus. In the third industrial producers. model would be represented by generation traditional views held three parties: that a ports function was less Ports have already positioned service and regulator oriented and themselves in the supply chain as a 1. Supply: this side of the market more landlord and facilitator (or place for supply and demand to includes inbound logistics cluster manager) focused. What we meet. In other words, they companies, ship owners, see today with the increased need represent a physical manifestation terminal operators, maritime for digital integration is that a port of a platform business model. service providers, etc. is increasing its focus as a service 2. Platform: this is represented by provider, albeit not in physical While it is likely common to think in the platform itself. The Port services like towage and crane traditional strategic terms – those Authority provides the physical / operations but more by becoming a examples from Porter mentioned business platform for supply data service provider. This means before, the strategic application of and demand to meet. that phase three is actually followed this business model goes beyond 3. Demand: this side of the market by phase four, a digitalization of these perspectives. Ports must includes outbound logistics port activities where new services focus on the ecosystem they have companies, manufacturers both either replace or augment created, a platform - where two inside and outside the port, and traditional port services. distributors seeking to meet materials and products further down the value chain.

Smart port is the fourth generation in port development.

Smart Ports | From digital to smart

A true Smart Port will need to take While some of the same parties may advantage of its position in the remain involved on the supply and supply chain to add value with the demand side of the market, they improved use of the data generated now increasingly interact digitally. by the embedded IoT infrastructure. Furthermore, this new digital While the data in itself does not add environment creates opportunities value, aggregating different data for new, non-traditional parties (e.g. sources and setting the right technology companies, individual business rules for analysis can turn developers, etc.) to create it into real insight. At Deloitte, we applications and solutions for refer to this as the Information stakeholders targeted at improving Value Loop, which is further performance or enhancing the explained on the next page. All of business model of port stakeholders this data can be gathered in a or the port itself. digital IoT platform. It is at this point that the physical (business) We observe six distinct data driven platform and digital (IoT) platform opportunity models based on the begin to merge. level of cooperation and the type of data used.

Business model opportunity Example 1 Product innovators enhance their products and services Incorporating smart lighting networks in ports through with data using data from motion sensors 2 Systems Innovators use data to integrate multiple Creating a transport management system using diverse product types sources of data (weather sensors, motion sensors, etc.) and applying insights to multiple devices like bridges, quays, etc. 3 Data Providers gather and sell raw data without adding Data services like the Automatic identification System too much value to it linked to GPS which offers insights in multiple aspects of ship movements like origin, destination, cargo, etc. 4 Data Brokers gather and combine data from multiple Create market reports using multiple sources like order sources, create additional value with analytics and sell books and scrapping forecasts insights 5 Value Chain Integrators share data with system- Improve the internal port supply chain with data shared by integrator partners to extend product offerings or the port users reduce costs 6 Delivery Network Collaborators share data to drive Foster the marketplace and drive deal making to a new deal making, foster marketplaces and enable advertising level through novel insight driven business models

Smart Ports | From digital to smart

Information value loop The suite of technologies that enables the Internet of Things promises to turn almost any object into a source of information about that object. This creates both a new way to differentiate products and services and a new source of value that can be managed in its own right. Realizing the IoT’s full potential motivates a framework that captures the series and sequence of activities by which organizations create value from information: the Information Value Loop

For information to complete the loop and create value, it passes through the loop’s stages, each enabled by specific technologies. An act is monitored by a sensor that creates information, that information passes through a network so that it can be communicated, and standards—be they technical, legal, regulatory, or social—allow that information to be aggregated across time and space.

Augmented intelligence is a generic term meant to capture all manner of analytical support, collectively used to analyze information. The loop is completed via augmented behavior technologies that either enable automated autonomous action or shape human decisions in a manner leading to improved action.

Getting information around the Value Loop allows an organization to create value; how much value is created is a function of the value drivers, which capture the characteristics of the information that makes its way around the value loop. The drivers of information value can be captured and sorted into the three categories: magnitude, risk, and time.

Smart Ports | From digital to smart

Although most ports are aware of the need for digital integration only few have been acting IoT in ports proactively towards becoming a smart port. Even the European ports with the highest level The port of Hamburg is one of the busiest ports of Europe and a of IoT implementation today use the large driver for the regional economy with one-tenth of the total technology primarily for adaptive analytics. area of Hamburg City. Furthermore, it employs over 260 The leap towards new businesses and new thousand people and generates over € 750 million in yearly tax revenue streams remains unexplored at revenue for the city of Hamburg. The port has opted for an IoT this point. platform to counter the expected rise in traffic and increasing negative externalities (e.g. traffic congestion, pollution, and road The development of a Smart Port should be safety) caused by the seaport’s activities. The platform is based something that stems from a strategy. A port on three pillars, Smart Port infrastructure, intelligent traffic flows should have a clear business case in mind and intelligent trade flows. when planning its IoT implementation, because the applications are endless and value can be The port of Hamburg works with a variety of local, regional and created in a myriad of different improvements. national partners on the project. These partners include the city This also means that a Smart Port is not of Hamburg, which is moving to the smart city model by necessarily the final step in port development. implementing e.g. smart lighting, bridges, parking lots, etc., the Within a platform world driven by insights state of Hamburg as well as the Federal Ministry of Transport. cooperation increases the value proposition so Building and Urban Development also play a pivotal role through one could argue that the next phase would be the maintenance and expansion of inland transport a Smart Port network, where different infrastructure. On the private side Hamburg is teaming with IT platforms connect and share information solutions providers. across geographical borders.

Smart Ports | From digital to smart

Smart Ports | Challenges ahead

Challenges ahead

Even though some ports today are starting to come to terms with the importance and need for digitalization and IoT, there is still a long road ahead to get to relatively mature Smart Port concepts.

Smart Ports | Challenges ahead

First of all the real question remains The need for cooperation between what the port wants to achieve by ports, in order to truly share data becoming smart – in other words and insights is something that is what is the strategic imperative. unexplored. This third challenge, This strategic goal should go beyond driven by a certain form of mere efficiency improvements and protectionism of the port authorities focus on a holistic, long term on their own data is a major hurdle strategy, where insights are distilled in the development of a true Smart from smart applications enabling a Port strategy. transition towards an insight driven company. Finally the dichotomy between the port authority and terminal operator This challenge is amplified by the ads a level of complexity. large variety that exists between Operational implementations cannot ports for e.g. a pure bulk port be forced by the port authority on versus a container port. Defining terminal level. This could create a where the quick wins and long term port with a highly integrated added value lie must be done in infrastructure network but with cooperation with the respective lacking superstructure integration. clients. The role of the port authority within A second challenge is the increased a Smart Port strategy includes focus on cyber security. Companies development and facilitation for its active in the ports industry, are users. The final level of integration responsible not just for customer will be the result of the stakeholder data (which is already extremely management and determination valuable), but for physical goods. In shown by the port authority. The addition many of the stored goods issues drivers and challenges above can be regarded as strategic help port authorities to determine stockpiles for the countries and where to play and find the right regions increasing the need for a strategy to win. It is our strong robust security system. Right now belief that becoming a Smart Port, port security is limited to the global driven by smart technology like IoT ISPS code, which focusses on is a fundamental part of every physical threats. Port authority seaport game plan. ecosystems must be aware that the digital threat is just as important, certainly if ports continue on their path towards further digitalization.

Smart Ports | About the authors

About the authors

Sjors Berns is a senior manager at Rob Dickson is a Senior Consultant Deloitte Financial Advisory Services in Deloitte Consulting’s Technology in the Netherlands and works in the practice and part of the Dutch High service line Real Estate & Tech Competence Center (HTCC). Partnerships. He primarily works in Rob focuses primarily on product the corporate real estate industry development, Internet of Things and Sjors leads the Deloitte Port (IoT) and Industry 4.0, data- Services group in the Netherlands. enabled business models and Sjors is an experienced consultant business platforms. for port operators and authorities.

Indra Vonck is a consultant at Jochem Dragt is a director at Deloitte Financial Advisory Services Monitor Deloitte Consulting and in the Netherlands and works in the works in the Strategy service line of service line Real Estate Advisory. He Deloitte's Strategy and Operations primarily works in the corporate real practice in the Netherlands. He is estate industry with a specific focus part of Deloitte’s Maritime Cluster on seaport and maritime and has worked extensively for development. Indra recently various shipping and ports clients, completed his PhD on Port next to clients in consumer Resilience and Port Development. business.

Smart Ports | About the authors

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