Resilient ports in an age of disruptions
Business File, September-October 2017, No. 112
The world is changing rapidly and disruptive forces are posing new challenges. The new reality is that ports need to adapt, shift from reactive to proactive and increase their resilience in order to resonate.
Major disruptions and transitions are now impacting upon business, economies, societies and, indeed, our daily lives. We live in a digital era that is continuously becoming smarter, more autonomous and self-organising. Global connectivity is accelerating with almost half of the world’s population having access to the internet. The (almost) costless transmission of information and ideas has allowed emerging markets to rapidly catch up with the developed economies of the world in what is referred to by Harvard-economist Baldwin as the Great Convergence. Business models and established industries are becoming challenged or made obsolete by new entrants and emerging rivals that are capable to capture increasing returns on new technologies and applications. Drones, robotics, artificial intelligence and algorithms; 3D-printing, augmented reality and additive manufacturing:
Indeed, there is already evidence that some of the biggest ports of the world are being proactive and building their resilience. The trend in ports is to become smarter, not bigger
renewable energy and smart grids: these are just some of the information technology-driven examples that are currently impacting upon, for example, the logistics, energy, retail and construction sectors. However, although technology might be a much hailed driver of change, there is also a ip side of the coin. It is in fact grounded in more fundamental transitions affecting us all.
Four interrelated types of disruptions
Next to technology, I distinguish four more, interrelated types of disruptions that can be mutually reinforcing:
Environmentally, climate change, world population growth concentrated in mega-cities, food security and energy transition call for immediate actions. The urge to tackle these problems is evident since more and more countries are actively working on policies with the most signi cant action being the Paris Agreement, signed in December 2015 at the Paris Climate Conference. This is the first legally-binding global climate deal and its goal is to “combat climate change” by investing in new technologies that can lead to a sustainable future.
From an economic perspective, producers and consumers experience shifts in production, new business models and digital economies and flows. Shopping practices are shifting from physical to online and the sharing economy is minimising transaction costs. New industries arise, such as the circular and the biobased economy, which require new particular sets of skills. Emerging markets continue to increase their shares in global trade, start-ups and small companies are able to enter new markets more easily. In general, with the use of, for example, big data, digital supply chains and machine learning, digitisation is re- shaping the way global supply chains are managed and optimised.
Politically, geopolitics and regional conflicts keep influencing the global balance, in which countries more assertively pursue nationalist industry policies while engaging in resource security. China is indecisive in choosing between an opened or closed economy, European Union is swinging between regionalisation and unity within its country members and Brexit terms are being negotiated.
And lastly, socially, there is a new generation of people occupying powerful positions, different opinions are expressed, freelancing (or the gig economy) re-shapes people’s career and the perception of work, and people can have instant access to any type of information.
What does this mean for ports and how can they become more resilient and agile? Their functions and pro tability can and will be directly a ected by these disruptions. Port tra c ows are also a ected by virtual flows and consumption, 3D-printing and even Brexit. Near- and reshoring, innovation in the sectors of energy and telecommunications and Big Data are drawing a picture not necessarily compatible with traditional shipping and port-related activities. The biggest port areas in the world are not just transportation hubs but also industrial clusters that add value to global supply chains. The reality at the moment is that trends are shifting towards robotisation and away from fossil fuels, although the oil prices are low and are limiting the competitiveness of alter- native energy sources, the euro-area recovery is still progressing and the growth in China is slowing down.
Ports smarter, not bigger
These developments are not necessarily harmful. Most of the disruptive innovations presented result in less trade volumes, because of sharing or re-using products. Cargo traffic is growing at a very slow pace –and it may decrease even– and the composition of employment may change, but with the right actions taken the added value can increase. Indeed, there is already evidence that some of the biggest ports of the world are being proactive and building their resilience. The trend in ports is to become smarter, not big- ger. For example, RDM Rotterdam is facilitating knowledge-intensive and innovative maritime start-ups and the port and the city of Hamburg together with Cisco are investing into smart technology to “increase trade ows, protect resources and improve citizen experience.” Additionally, the port authority of Singapore and container carrier Maersk are collaborating with the IBM Center for Blockchain Innovation in order to use the blockchain technology in the sectors of logistics, trade and nance and PortTech Los Angeles is trying to bring together investors and entrepre- neurs to create sustainable businesses for port and transportation sector.
Yes, the world’s evolution is accelerating and as long as we acknowledge it and take action, it can only be beneficiary. In the case of ports specifically, what is needed from the parties involved (port authorities and maritime companies) is to be resilient in order to nd the way into a complex and highly volatile ecosystem. Traditionally, ports are reactive and the shipping industry conservative but in this case acting proactively is the key. Thus in the end, the question is not if the ports are changing and building resilience, but when they are going to do so.