Episode 68 - Smart Containers, Slow Adoption: Why the Industry Isn't Moving Faster

Speaker A: Foreign.

Speaker B: Hello, I'm Martijn Grant and this is Does Logistics Matter? A podcast about trends and innovations in supply chain and logistics. Answering yes to the question today is Dr. Mariana Leftoff, PhD, researcher and regulatory affairs specialist in supply chain and IoT. In this episode we talk about smart containers and the digitalization of global shipping, China's technology ambitions and what they mean for the industry, and why data governance alignment between the EU and China is the missing piece. Please enjoy my conversation with Mariana left off.

Speaker C: Hi, Mariana, welcome to the show.

Speaker A: Hi Martijn, Great to see you again.

Speaker C: Yes. And, uh, you say again now, listeners, uh, of the Does Logistics Matter? Podcast are going like, again, you, you know, Mariana has not been on the show, and that's absolutely true, but we have been on multiple podcast episodes. But that wasn't on my podcast, that was on yours. Um, yeah. Tell the people about your podcast.

Speaker A: So actually, you, Martin and myself, we started a podcast calling Picking up Where We Left Off. So where we left off is a podcast about technology and supply chain, also a little bit psychology, corporate psychology, everything that a leader, um, or a manager within a startup field needs to know about supply chain logistics and the latest trend in business and operations.

Speaker C: Yeah, definitely. So a, uh, definite recommend. Go, go check it out wherever you get your podcast and listen to these episodes because both Mariana and her guests, uh, share very, very, very interesting, uh, knowledge. I, I hadn't heard about industrial diplomacy, uh, and now, and now I know what it is. So that's just, just, just one of the things that's, uh, that's, uh, that's in there. And now let's, uh, start my podcast. Uh, Mariana. And the first question of my podcast is always the same question. I'm going to ask you the question as well. And that is, does logistics matter?

Speaker A: Of course. It's our life, if you think about it.

Speaker C: Yeah, that's a short and sweet answer and I couldn't agree more. Uh, so you yourself work in the supply chain and logistics industry. How did you end up there? I mean, I'm guessing you haven't had the desire to work in supply chain since you were a little girl.

Speaker A: No, not from the beginning. I wanted to be a teacher. And each time when I speak too long, you need to remind me. I wanted to be a teacher. And maybe it's a bad habit. Um, I was thinking that I will be, um, a diplomat. And I started diplomatic career. And, uh, within diplomacy, um, my career changed a little bit due to family situation. Uh, and I found myself, um, discovering new opportunities and I was Very happy to figure out that I can do diplomacy also within the industry. And this is how I became a specialist in regulatory affairs within the supply chain. Ah.

Speaker C: Uh, and when you uh, are talking about regulations, um, and I get you know, standards is something that comes around, you know, comes uh, uh, rushing around the corner then as well then boy do you need a lot of diplomacy because you need to get everybody on the same page.

Speaker A: Right. I mean if you look at standards from the standard making point of view, you need a lot of agreement in the room but beforehand you need a lot of discussions. Uh, imagine that you have a table that has um, authorities, competitors, potential clients all sitting together, having an agenda, wanting to reach a certain level of consensus. Otherwise you can't move forward. People bring to the table a lot of fears, but a lot of know how. And the major trick is to listen carefully and try to steer it in the right direction. And of course it's important to remember that we serve one goal and it's the goal of industry. And it's not, not an easy task when you represent uh, a corporate in parallel.

Speaker C: Definitely. So, so this is where you uh, really uh, could bring everything that you learned from, from being a diplomat and you could bring it into the supply chain domain.

Speaker A: I think so. Because uh, in diplomacy the long term results are really the important ones. Of course the short term wins are also critical. But how to play it correctly and to remember that if we have a more sustainable supply chain we also will benefit more. We can compete on quality and not um, on the cheap price and bad quality for our services. It's an important thing. And therefore this groundwork when creating a regulation or standard needs to be done um, in a good way that will also um, withstand different type of um, time challenges and should uh, be future proof. And of course for those who know standard only from the reader side, it's always unpleasant to figure out something and uh, afterwards when you need to redo things or um, adjust yourself to an existing paper. Standards. Right. And this is the opportunity to call everyone to get um, involved and do the standards by themselves.

Speaker C: Yeah. And um, so uh, I know from making a podcast with you that you are very active in the supply chain. You're very active in the technology field. Um, you, you are, are one of the experts when it comes to IoT. For example in, in supply chain, um, you help a lot of uh, uh startups ah, that are working with uh, technology. Now this is, this is a, this is, this is a very busy uh, situation. Right. So you, you have uh, so, so you have your own, uh, you have your own company. Um, you also have a son. So you're, so you're an entrepreneur, you're a mother. I mean you make a podcast. Uh, right. So there's so many things that you do. And on top of all that you've also been able to get your PhD.

Speaker A: Yes. This was, yes. Dream of mine. Yes.

Speaker C: Yes. So, so the first thing I need to do is congratulate you. I know, I know how tough it is to uh, to uh, to study, uh, you know, next to uh, to a full time uh, job and being a parent, it's almost impossible. And the uh, study that I was doing is, you know, just a regular study. It wasn't a PhD. Right. Because that's, that's, you know, that's one up. So can, can you tell me uh, what was your, what was your um, research, uh, about?

Speaker A: My research was about smart containers and in particular how it's made in China. So we know that more than 90% of containers in the world are ah, produced in China. And definitely there are technology companies in China that can digitize these containers. We heard in the recent years a big boom of smart containers with the origin from Europe and United States. And was interesting for me to see how China that has also um, internal uh, motivation to become a leader in digitalization responds to this market trend. And um, what's the process and how they do it? Do they buy from other providers and trying to create technology by themselves? What is their strategy, the view, ah, do they want to catch um, up with uh, for example Hapa, Lloyd and other um, competitors of their own in the market or they choose their own path? All these questions have been bothering me also during my career and working with a lot of respected uh, Chinese colleagues and friends, uh, I could learn from them, but it's a different level than when you for example go into this field, uh, with interview and you promise people that their names and companies will be never shared, that they can open up and share with you their personal opinions on how this business is moving and what is the future of the smart uh, container.

Speaker C: Yeah. So when you're talking about digitizing containers, what does that mean?

Speaker A: We are in the run after high uh, quality data today and you can visualize your supply chain by multiple ways. You can track different types of assets. Maybe the simplest one is uh, when you track a big asset. So for example you track a vessel and according to the vessel, when you know that these containers with these goods should be on this vessel, you can estimate the time of arrival. It's the basic use case. If you say it's not enough visibility for me, you start tracking uh, the truck and then connecting the dots on the map, you can estimate it better. And you know there are many companies uh, in the world on the software level that offer already the automation and even AI services based on tracking the truck and tracking the vessel together. So the modes of transportation, uh, there is a more granular level when you track the container, because container makes all this way, uh, from the moment it was loaded with goods till it was unloaded. And it has even further travel, for example being returned empty to the depot. And if you think about the first mile, someone needs to bring the empty container to be filled in. So it has a new business case where it shows the utilization of containers at assets by its own if it's used enough or it can be used more. And today with the green agenda, um, growing it, you can also see if you use it correctly. Maybe you are allocating containers from m too far away to clients. When you have a pool of containers cloth and it was not available for you because they are out of sight to make these movements visible even on the dashboard. Like a m map. Right. It's a basic service of the IoT. Um, more deeper you can add different types of sensors. You can look into the cargo quality. For example, we knew this, the importance of these uh, services during pandemic when you need to guarantee that the sensitive goods, for example the vaccines are arriving in good temperature in those containers that were equipped with sensors. Um, um, checking the temperature could tell you real time how, what's the status. And also having the traceability there, you know, if a uh, container is passing by customs or stuck somewhere, maybe the truck is in the jam. If you have it all intact and all visible, it's easier for you to manage supply chain. And in particular in pandemic or any crisis situation, it's really a helpful tool. But beyond crisis, you have the regular supply chain that demands optimization. You of course could say that there is a more granular level and you could track a pallet or a small box where your shoes are. You remember in one of our episodes we discussed about shoes transport, this is also possible, but smaller, the unit is smaller. The asset is that you are tracking smaller, smaller the technology should be and more primitive. Because if we are still relying on energy coming out of a battery, right, we still need some kind of surface and we need to have a uh, design that enables us to put something longer living. Of course we have today 3D printers and you have all the solutions but in supply chain, in logistics in particular, we are thinking about more sustainable solution to avoid reverse logistics. To avoid um, to have a need to often to recycle because it adds us costs and we know that in the moment we touch for example containers and asset, it generates your costs. In the moment you don't touch the asset, it also generates your cost. So it's all about the money and how do we save the money, make it all more optimized and cheap for the end user in the end of the day.

Speaker C: Yeah. And you don't want your container to be stuck because you need to charge some sensor. Right.

Speaker A: Uh, and you will never do it. Yes, no, no. From, so from from um, priority point of view the transportation and prior to any technology needs of course. And um, if you already invest into technology, you need to invest into a technology that has zero maintenance that you don't need to think how you recharge your batteries or replace something. This is literally working against you. So it's a better investment in this sense.

Speaker C: Um, so what was your approach uh, in researching this uh problem?

Speaker A: When I was looking into geography like China, I wanted first to understand what is the ambition of China as the state and this matter of digitalization, uh, of logistics and what I figured out. It's a very promising thing. And I was looking at this for the last decade from 2015 there is a policy called Made in China 2025 that is following the inspiration of Industry 4.0 that promises that China becomes a technology leader when it has its 100 years Jubilee of the Communist um party. So we expect it towards um uh 2049. It's very ambitious if you think about 2015 to go through different stages first as a follower and then jumping into the leadership position. And also if you look into the industry logistics of course not the only industry. You have different other segments however to be in equally same speed, um, um in all these vectors. It's really a big challenge that demands support, especially financial support. So if you go from this stage into the next expectation you would expect some fund subsidies or any kind of governmental push that will help um, technology that deals with digitalization to be there faster. Um, it was interesting for me I will running to the end of my results that this was not the case, at least not in the container digitalization. So the container as a matter was not really in the focus of all these efforts or at least less than anything else. And then the last one is the excellence in technological development and Design. And here there are multiple options. You can make everything in China or you can uh, take something from the market that already have proven the concept. You can blend these options because we know from the history uh, of Chinese growth, you know this raising dragon in the beginning of uh 2000s. We know how they collected their experience right from late 70s in order to succeed by themselves. And if you look into the software space of China for example, example in some um, sectors they are doing enormous progress. And this is absolutely fascinating, right? And surprisingly and with full respect to all the companies um, that are dealing with this um, challenge of container digitalization, um what was on the surface, um showed that um there is a technology and technology is good, but it's not this good, good as it could be with all the support and factors. And this was uh, the research um, and the main focus. So how to explain it? What are the hurdles? What are the challenges? And once the challenges would be, um, somehow if we overcome the challenges, um, what it will be for us if we will have the Chinese smart container in the volumes that it can be on the market. Um, this is probably the most challenging part because we are going to move from physical design of a hardware into the data space. Implementation of a smart container or any smart asset, even smart car that has software as a brain, uh opens up the question of data and data sharing, data governance in general. And here uh, I needed to look into the national Chinese legislations around the cyber security and data handling and data protection laws, um where a few elements have been a little bit warning for us as um, having right now in particular in eu we have the Data act, right. We have a lot of movement around the data government story. And I could tell you that we see through this research that definitely a harmonization between two sides is necessary because the uh direction it is developing right now in China and direction we are developing here, um, they can't live in parallel. If you want to work together, if you want to have this international um symbiosis you must align also on the data governance between the two geographical entities like EU and China. And further of course, right, we are talking not only about the trade from China to Euro, the whole world. It's, it's a hard work and um, I think that in this sense the research will never end. It just in the beginning now, now

Speaker C: there's been some uh, uh news about uh Chinese companies and the technology that they produce. Uh, for example with network uh equipment right where they were, uh, where they're.

Speaker A: The.

Speaker C: The fear was that because it's network equipment and it's installed in European and US Networks that the Chinese might get uh, to whatever goes on on the networks. Did you, did you see as a similar or find a similar hesitance or a similar fear when it comes to maybe companies in the US And Europe or let's say non Chinese companies, uh, in maybe adopting a system where there are Chinese trackers on containers, I will

Speaker A: tell something that maybe, maybe you don't expect me to say. But if you compare the texts of um, data protection law in China, you compare it with Data act and you look into the American uh, cybersecurity laws for example. And um, I started to look on the first Trump administration and you can look further, um, in general terms saying uh, the principle that in the case of national security the data should be shared with the authorities, right? Your data becomes transparent in different shapes and forms. This is how it's phrased. The difference is the definition of this incident or definition of this security matter. We know that in some countries this definition can be more vague or include more um, situations that could be considered as normal operational. And in some it can be really cases of close to tragedies of um, 9, 11, 7 of October and pandemic and similar. Right. Now who interprets it in this moment and how the decision is done is definitely not in the hands of the technology providers. It would be in the hands of the government. And we are coming from the realm of technology into the realm of governmental affairs and um, governmental systems and what they allow themselves and don't allow themselves to do in case of um, technology and um, geopolitical interests. Let's call it this way in supply chain. It's the most interesting because supply chain by default. If it's an international supply chain and not a local one, it's a geopolitical issue. Right? You are changing geographies you're producing where it's usually cheaper and it would be one uh, um, area of interest and you will deliver it to another area of interest, right? And we heard a lot about um, um, containers and goods coming out of China and being rejected in the United States and so on and so forth. We heard about exactly in the ports of United States, the software that was made in China, that was rejected for the cranes. We have many of these incidents and we don't have a full resolution that would satisfy all the parties. And the challenge is that um, in our industry to adopt technology is a long process. Just to agree to take a new technology to go through this digitalization process is A process, it takes a generation. And if you have also regulatory uncertainties, um, uh, geopolitical uncertainties, it can uh, make the process slower and maybe the last thing that we can add, um, if it's so hard to get uh, to the good information or it's so hard to combine information from this source and that source, but the need to be on top of the wave in the trend, and the trend is today AI, um, maybe I can have a shortcut, maybe I get whatever I have and input it into my AI agent, for example. And you know, I will get an output and only, only afterwards in some cases you will know that the output was really worth that you expected. Right. So garbage in means garbage out. It's a, it's a phrase that everyone is saying for many years and it stays true. You must be loyal and you need to be religiously uh, devoted to the fact what you're putting, putting into your algorithm in order to get ah, an excellent output. Yeah, um, you see, I wanted to be a teacher. Right. I give you writing the full lecture. Yeah.

Speaker C: Which, well, and I, and I'm guessing you know, you, you, you were talking about wanting to be a teacher and I, I guess you know, in a, in a supply chain technology sense you are.

Speaker A: Yes, right.

Speaker C: Uh, it's the same when you were uh, trying to um, get standards implemented. There is also, I mean you can call it diplomacy, but there's also a lot of teaching going on there because it's, you know, people don't often don't know why they, they don't realize that they need a standard or maybe why a standard should be in a certain way. You might call that teaching as well. Because you have to explain and really um, uh, bring people uh, along with you and take them with you on this, in this, in this story so that the end they say ah, ah, now, now I understand.

Speaker A: I fully agree, I fully agree. It depends on your interpretation of course.

Speaker C: Um, so you uh, you just now said something about uh, challenges.

Speaker A: Mhm.

Speaker C: So what, what are, what are some of the biggest challenges that you found?

Speaker A: The biggest challenges is to find enough into interviewees that understand in this topic and are willing to talk, especially in China. And you um, also need to understand from where these people are coming and what is their agenda. Uh, if someone is completely in love with pellet tracker or electronic seal and you ask him about how I digitize container, um, put a device that will live on this container forever, it's completely different case study and it's probably against his interest. You need to understand that the answers will be perceived through the lens of bias.

Speaker C: Yes.

Speaker A: Another lens of bias is of course the position of this person, uh, within the organization, his affiliation with the party or not, or if he is also affiliated with the Ministry of Transportation or not. I'm not judging it for bad or for good. It's a fact that needs to be taken into analysis when you do it. And then of course, those who are ready to talk to someone from outside are exposed to the outside. They're exposed to international travels or they know someone who knows something. So it's a painful process to get to the right people that not just want to talk about something, but really know what they say, they understand what's the strategy of a company, uh, and so on, so forth. And therefore, um, it's not a, um, quantitative analysis when you can have hundreds of um, interviewees. Right? It's, it's a deep quality talk. It's an interview. It's like we do in podcast. It's a discussion when you need to leave a person also space to tell what he wants. And then out of this you need to make your conclusions.

Speaker C: So, so it's been, so it's, it's been a challenge getting the right people to participate in your, in your research. But you managed to overcome this, this uh, challenge now overcoming. So you overcame that challenge. But I'm guessing that you found challenges as well, like, and I mean challenges in digitizing, uh, containers because they're not digitized yet.

Speaker A: This is exactly the point. Um, I am biased in this sense because I was lucky, um, and I was uh, honored to be part of the Hapa Cloid digitalization decision and the beginning of the process. And back then the belief was, and I think not only my belief, many shared this belief that here it comes and now everyone will jump in because it's a company with a big reputation, it's a top five, and it will happen. And we see that things are happening, but they are moving very slow. And in this sense it was very interesting to see and it was challenging also to explain how China responds to um. The European decision was hard to understand what is really behind their answers because some said what politically, correctly to say, saying that yes, it's really happening. So Hapa Cloid showed the precedent and this is what will going to happen. Others were saying, honestly, look, we tested technology that have been in our possession and the quality of hardware was not sufficient enough to make the full decision. This is a very good answer. It's very honest answer, right? And based on some KPIs and criteria. So how you bind these two into one um, answer or parameter in order to make your judgment or prediction of the future. So this is not a simple case. Another thing was uh, to understand what's really happening with financial subsidies. Because from the answers, no, no, we don't know what it is and we never have seen it to the answers that you know, sometimes in some peripheral uh, uh sports where um, companies of high tech companies don't exist and the government does have some budget to support and if this or that company can claim digitalization, there is maybe a tax waiver or you can set it up as R and D project and so on. We are not better than this if you think about it. We also participate in different types of fundraising that is connected to governmental money. Would it be Horizon, would it be any other calls for proposals? Right. We also doing the same.

Speaker C: So if you, if you look at your research and everything that you, that you learned. So I'm, I'm guessing that for this to be uh eventually become a success and become a reality. A, A you know, a, A A fully trackable uh container supply chain. I'm, I'm guessing there's you know some things that need to happen on the Chinese side, but there's things uh, that need to happen on the non Chinese side. So the, so in the EU and in the US as uh, as just as examples as large um uh geopolitical and economical forces that need to need uh. There needs to things need to happen there as well. So what are the, what are the main hurdles that need to be overcome on both sides?

Speaker A: So shock, content, everything that I learned doesn't exist anymore. Technology um, grows and develops. It never stands in the same place. And if you do a research you need to put a finger through the time and say it is relevant to this moment in time. Uh, so it is relevant to this moment in time. And therefore I can conclude. But it doesn't mean that tomorrow the conclusion will stay the same. So what I'm only learning is how to research it. Right. And I get certain answer that might be not true tomorrow. I also learn to recognize the pattern and the pattern that exists in my research and probably exists today and will exist tomorrow is that um, standardization process on the national level and international level um is not aligned due to different groups of interests and different um uh goals. What is happening on the domestic level is not the same what's happening in international, even international organizations for standards. And it's a huge challenge because the idea is this kind of utopic idea of standardization body is that on international level we all agree, disagree and fight, but once we came to consensus, you take this decision home to the domestic level and follow this standard because you need to be compliant that we can enable this international logistics working. And this is not necessarily the case. It's not the case on the level of the hardware, but it's definitely not the case on the level of software and data. So how do we bring it together without creating an incident in the industry that will force two parties to align? By educating, by explaining, by trying to find uh, middle ground, by sometimes, by not being ready to take this technology uh, to our home because we are not trusting it enough. So putting a certain pressure, and this probably, probably is the way now for us, for Europeans, for the Western world. Look, Western world is a cliche, but for those who are using the ah, um, Chinese services, meaning whether it be container coming out of China, goods that are shipped from China, you don't know how they are shipped today and most probably they are shipped already in the container that is tracked because slowly and steadily these containers are getting digitized. So what is your claim towards this container? Without your goods, this data wouldn't be generated. Do you want to have this data shared with you? If yes, it's a contractual agreement. If we are talking about B2B business, you in the sensor business have a right to ask for this data, uh, and negotiate under which conditions or price this will be shared with you. And within the contractual agreement agreement with this party, you are also uh, capable to set up limits and ask the questions with whom this data can be shared, with whom this data will be shared without your knowledge, and so on, so forth. I think we are coming to the important point. There is no reason to be afraid of this, but you need to be aware of this and you need to be able to communicate on your limits if something is not working as you like it to be. Right. Okay. Because the focus of this technology is not espionage. It's absolutely not. The purpose, the purpose is traceability. The purpose is to make business, to make more money, to bring some um, utilization improvement to the industry. And this is what it should be. But whoever is using it needs to know the challenge and needs to be able to ah, make a decision based on full information that's on the table.

Speaker C: So what, what has changed for you personally now that you've uh, finished this study? So what, what does this study mean for how you move uh, forward from, well from today on in the industry?

Speaker A: It's again a reminder that before I am consuming anything and buying anything, even if I can do it in two clicks, I need to ask myself where it's coming from, where is my data going to and what are the implications? If I am representing the business side, um, it's telling me that there are multiple factors beyond price that I need to take into consideration. It's a longevity of the solution, it's overall return of investment and overall cost for the implementation. Because as you rightfully said, if you're choosing something by default, cheap. But I need to replace a battery, for example, every two, three years and the end. This solution will be very expensive for me if I'm part of logistic chain. Right?

Speaker B: Yeah.

Speaker A: So it's, it's. I need to pause and I need to think what I'm really doing. And I'm afraid that in the um, world of today, with new tools coming up and with the constant AI integration into our life, this is an exercise that we need to do constantly and not only when we're in logistics.

Speaker C: Do, do you have a, do you have a, um, do you have a, uh, final thought, an appeal to the industry? Uh, um, do you have a dream? Do you have something that you want to tell the industry? Um, uh, about digitizing containers?

Speaker A: Any technology you choose shouldn't endanger people's lives, environment or goods, right? This is the number one. There is no excuse for this. So safety first or security in the case of data security. And once we sorted this question, then you need to understand what you are doing it for. What's your goal? And if this product serves your goal, this is how you can get to the optimal price. This is how you can get to your use cases. And this is how you can move your teams to use the technology and not just buy it because it's a trend. Because technology can help us to simplify life, make us more efficient, make us faster and free more time for other activities. And we need to make this use. But those principles of safety like in construction sites, right? Safety first.

Speaker C: Um, M. Mariana, um, yes, again, uh, congratulations on the, on the, on the great feat of, of you know, uh, uh, being able to complete a PhD, uh, under your circumstances. I'm impressed. Um, thank you for coming on the show and telling uh, our audience, uh, more about the results. And um, I have not yet been to China, but I've uh, spoken to people that have been there and uh, they are all. They say it's amazing and definitely worth a visit. So I hope very much that you're invited back very soon. Uh, and that you can visit it again.

Speaker A: Yes, I hope to. And hopefully still this year, you know.

Speaker C: And uh, everybody Where We Left off definitely check out Mariana's podcast as well.

Speaker A: Thank you. Thank you, Martijn, and thank you to your audience for your time.

Speaker B: This episode was powered by Mariana Left Off. Mariana Left off is a supply chain and technology expert and a leadership coach. She is the host of the Where We Left off podcast and co founder of Precepts, an executive advisory firm that helps leadership teams navigate growth, complexity, and organizational change. For. For more information, visit Precepts. Ch that's P R A E C E P S Ch thank you for listening to Does Logistics Matter? For more on trends and innovation in supply chain and logistics, visit our UH blog at logisticsmatter.com if you want to be a guest on this podcast, please send an email to podcastlogisticsmatter.com this podcast was produced by Dimitri Vloegel. The music is based on a sample by Ruggerman and produced by Michael Spangler. Follow the podcast in your favorite podcast app so you don't miss new episodes.