OOCL sharpens IT edge
It is often said that humans use less than 10 percent of their brain power. The same could probably be said for the average software system, with users often failing to squeeze every piece of usefulness out of their platforms.
And most ocean carriers fall squarely into that hole — sometimes because they haven’t invested in the right system, or because they don’t even understand the power of the system they have. Failing to capitalize on a system creates tangible results — lost revenue and profit, and downfalls in customer service.
One carrier that has enjoyed steady profits and a lofty service reputation is Hong Kong-based OOCL, in some part because of its commitment to investing in technology, and its ability to maximize the value of the system that this investment produced.
Steve Siu, chief information officer at OOCL and chief executive officer of its technology subsidiary CargoSmart, said the concept that underlies a carrier’s IT platform has to take into account the basic operating scenario for carriers: high bunker costs on the operating side and high investment costs on the asset side.
“If you look at the balance sheet, the business administration costs for a carrier (like staff, property leases, computers, and networks) are in the range of 10 percent,” he said. “The rest is bunker, equipment costs, terminal charges, those are the major costs. The profit is the last few percentage points you utilize (on a sailing). That’s pure profit. That’s why container shipping lines get into price wars over the last few slots.”
For OOCL, that means leveraging its Integrated Regional Information System (IRIS) to optimize the use of its assets while also serving its customers better. Now in its third generation, IRIS is well regarded in an industry not exactly known for its technical innovation.
Some have speculated that part of OOCL’s strong financial performance through the years is the advantage it gleans from IRIS. OOCL has been at or near the top of American Shipper’s Who’s Making Money table throughout the last five years and has lost money only once in the last two decades.
OOCL made the decision to invest heavily in IT 20 years ago, with the IRIS project started on a conceptual level in 1992.
“It’s quite a long-term investment,” he said. “It’s around $50 million to $60 million for one generation. So it’s like buying one ship.”
The system has a holistic, shipment-level focus.
IRIS allows OOCL to view each shipment on a global platform, “so everyone has the same view,” Siu said. “The staff has confidence in the system. That’s key.”
OOCL has been operating under the third iteration of IRIS (called IRIS-3, appropriately enough) since 2009.
“IRIS-2 is a pull system,” he said. “It doesn’t push proactively to adjust a shipment requirement. IRIS-3 is event-driven. In the past, the shipment has a lot of business rules, and you use a trigger to move them. IRIS-3 gives life to the shipment. It essentially asks for help, and pushes that request to the user. That’s the proactive part. In the past, the user needed to find what they needed to do.”
For example, with IRIS-3 a piece of equipment could nominate itself for a shipment that would eventually route it to where it needed to go for return to an equipment leasing company in Taiwan.
Next up is IRIS-4, under development by CargoSmart, which is more than just an innovation lab for the carrier but a full-fledged provider in its own right. The carrier’s Website, OOCL.com, is a CargoSmart-hosted platform, implemented as a private label for OOCL.
“CargoSmart is not OOCL.com,” Siu said. “It’s not designed for the carrier. It’s really designed for the (beneficial cargo owner) and the (non-vessel-operating common carrier).”
Siu said IRIS-4 will tackle some meaty concepts, such as memory computing, analytics, and big data — all buzzwords in the IT industry that will soon become commonplace in the shipping and logistics worlds.
“Take the MacBook Air — there’s no more hard disk or memory,” Siu said. “Memory is much more affordable and runs faster. With IRIS-4, you’re talking about the hard disk becoming like the cassette tape.”
The bigger, faster memory capability of the new system isn’t just progress for progress’ sake though.
“Why do we need the space?” Siu said. “In IRIS-2, we have a very good description of the shipment. In IRIS-3, I see all the shipments of that customer. With IRIS-4, when you make one booking, I will try to see how that booking impacts my network, and then, for instance, how that impacts a transshipment hub. If there’s a choke point, your asset utilization will be affected. It’s about how one shipment will affect your network.”
OOCL, incidentally, is not the only carrier that uses the IRIS system. COSCO Container Lines uses IRIS-2, the same COSCO that has struggled mightily in the profit/loss department during the past few years. Some have suggested OOCL simply gets more out of its system than other users.
Siu is quick to point out there are no secrets to unlocking IRIS’ potential that OOCL has and other users don’t. He also dismissed the idea that IRIS, and OOCL’s proficiency at using it, is what’s behind OOCL’s consistently strong financial performance.
“It’s not really about the benefit to OOCL financially, but about pushing the industry to have better service to the customer,” he said. “We have more benefits financially, because OOCL is more organized. Any shipping line that is organized will have the benefit.
“When I walk into a carrier, the first thing I look at is its global shipment management capability,” he said. “Lots of carriers still have an agency mentality. They are very import-export separated. They make bookings, and collect money.
“Then companies go centralized, but they are still task-oriented, not reengineering the system. Then you work on equipment management and customer relationship management. But all of this is still separate. So, shipping lines have a legacy of being process-oriented. CargoSmart is trying to do things differently for the industry,” Siu said.