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The 80/20 rule of smart digital shipping

My former boss, shipping guru Dr. Martin Stopford, first introduced me to the “80/20 rule”. Being a Clarkson Research analyst with a freshly minted PhD at the time, I suppose I was about to dig myself deep into some complex time-consuming analysis, as one does. Martin pointed out that 80% of the output can be achieved with 20% of the inputs (work, time, data etc.). This came from someone who has made a name from simple but elegant analysis, so I tried to take it to heart.

If I only had more data…

Today’s discussion and salesmanship surrounding all things “smart” and “digital” in shipping is pretty much the opposite to the 80/20 rule. The more data you have and the more sensors you install on your vessel, the better off you will be. It’s a paradigm shift!

It’s great salesmanship, and well suited to scare the C-suite into paying for an expensive piece of consulting advice, an expensive sensor kit, or hiring that Chief Digital Officer.

If you stop to think for a moment and look at reality, though, data and algorithms cannot actually change all that much. Ships are still subject to the same physical laws in what is arguably the most complex operating environment that exists, ship operation is still subject to the same contractual constraints, AIS data still have the same flaws and geographical “blind spots”, the rate of hull fouling does not change, mechanical equipment will still break down, etc.

A good example is the “noon report” data that most shipowners now collect and process in some way or another. Yes, they’re slightly flawed, inaccurate and don’t measure anything at high frequency, but you know what? It’s the 20% of the data that will give you 80% of the answers, maybe a lot more.

In recent research with my colleagues, Professors Pierre Cariou and Francois-Charles Wolff, we took a closer look at what drives the daily fuel consumption of a fleet of mid-size crude tankers in global operation, using “noon reports”. The result is shown in the pie chart below.

Which if these factors are actually under the control of the owner/operator?

Speed: Partly, but it is largely decided by external factors (C/P speed, meeting laycan etc.)
Weather: Save for allowing minor deviations for weather routing, weather and wave conditions certainly are exogenous.
Draft/trim: Trim can be adjusted, though there is little agreement on what is optimal. Draft is either a commercial issue (laden) or stability issue (ballast).
Hull fouling: Can be partly controlled through the quality of the antifouling paint and frequency of hull cleaning, but even so the rate of marine growth is exogenous.

Having “big data”, continuous monitoring and the latest sensors does not change any of this. Indeed, there is academic research showing that all you achieve is converging to the same results with less data (reducing uncertainty).

Until digitalization finds a way to banish the laws of physics I dare say the 80/20 rule still holds.
Source: Roar Adland (Ph.D., MICS), Shipping chair professor at Norwegian School of Economics (NHH)

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