SeaCube CEO Robert Sappio discusses tech trends in the reefer business.

Robert “Bob” Sappio, chief executive officer of SeaCube Container Leasing, has seen a lot of change in his long career in logistics, which among other stops includes nearly a 30-year stint at APL. In short, Sappio knows the inside and outside of the box business and has witnessed first-hand the challenges and innovations that have shaped contemporary containerized shipping.

SeaCube, one of the world’s largest lessors (and purchasers) of refrigerated containers, better known as reefers, is lodged in the middle of the supply chain or cold chain, as the business of moving perishables is sometimes dubbed. Clients include shipping lines, trucking companies, BCOs along with service providers, manufacturers and others engaged in the complex business of moving perishables. For an operator like SeaCube, staying ahead of the technological curve is an essential business practice and although Sappio is quick to confess that “I’m not a technical guy,” his position at the helm of SeaCube offers a unique vantage point to view industry trends.

Robert “Bob” Sappio, CEO, SeaCube Container Leasing

Telematics and AI

One emerging technology that stands poised to reshape the supply chain (and everything else) is Artificial Intelligence or AI. While there are other notable supply chain challenges such as the decarbonization drive and the goal of net zero for greenhouse emissions or addressing cyber-security risks, in this era of Big Data, AI touches everything.

AI is now ubiquitous. Literally AI is all things to all people — and all industries as well — which will have far reaching impacts on the supply chain.

And while understanding the potential effects the technology will have on the supply chain, especially the cold chain, is at this stage still difficult to calculate — nonetheless AI is coming and coming fast. A recent supply chain survey by MIH and Deloitte reported that 84% of respondents plan to invest in AI technology within the next five years.

Still, it is important to understand that AI isn’t an app but rather a massive leap in the assembly and use of data, and that data has to start somewhere. And in the reefer business, that primal node is telematics.

Under Sappio, SeaCube was an early adopter of telematics. In layman’s terms, telematics refers to devices that transmit long-distance computerized information. And the importance of telematics to AI is as Sappio points out, “Somewhere in all that data that is going to come from telematics devices is an opportunity for artificial intelligence (AI) to help people make smarter and faster decisions.”

In short, telematics is the initial data input, from which all else flows.

But as with any historic leap in technology, there is a period of adjustment. It is sometimes daunting at first blush. As Sappio explains of understanding what to do with this immediate flood of new data available can be overwhelming to customers. “I ask them how their life will change with this information available to them, the first response is a deer in the headlights look.”

Despite the ‘data shock’ that comes with the vast amounts of information now available, Sappio sees a path forward for the industry, “I think what the industry has to figure out is, as technology is making more information available to us, what do we do with it and how does it change the way we do our job every day? And I still think as an industry, we’re feeling our way through that. If you look at the Drewry data and the Drewry reports as a source, the adaption rate of telematics on refrigerated containers is enormous. It’s rapidly getting to the point where there won’t be a reefer container manufactured that doesn’t have some type of a telematic device. And I would argue that gensets are probably very close behind.”

But Sappio also sees a potential pothole in the road to AI adoption, not just for the reefer sector but for the entire supply chain. And it is framed by a deceptively simple but an enormously complex question: ‘Who owns the data?’

As Sappio posits, “... who owns the data? Who has access to what data? I still think that’s something that is trying to be worked out. And then ultimately, will the beneficial cargo owners (BCO) pay for this service? Will the shipping lines be able to charge beneficial cargo owners for information or not? So, I think there’s some fundamental questions that we’re all working through both the carrier side and the equipment provider side as well with the manufacturers. But in all of that, I have to imagine some people …are going to figure out once we have that data, how does AI or how does an algorithmic environment provide us patterns, tendencies that can help us make better decisions?”

NextGen and Gensets

The gensets that Sappio refers to provide the power for the refrigeration units — largely portable units — that keep the reefer boxes cold. Gensets like other parts of the transportation segment of the supply chain are undergoing a transformation to adapt to environmental concerns to reduce emissions of greenhouse gasses (GhG). One potential solution, Sappio explained, is deploying electric gensets. “We’re working with two of our suppliers on piloting electric gensets. Now they’re obviously not going to be able to use for long haul, they’re going to need to be used for close in to port facilities. But nonetheless, that would be significant if we could pilot electric gensets.”

And gensets are also worthy candidates for advanced telematics, as Sappio explains.

“The other thing is putting telematic devices on gensets to find out their location to “geo-fence” them, if you will. To track fuel. We all know that a big headache for the [truckers] carriers is the theft of fuel — the chassis with the genset on it goes out the gate with a full tank of fuel and it comes back after only a few hours and there’s no fuel left. So, I think tracking fuel use, energy consumption, geo-fencing or GPS positioning are all good reasons to have telematic devices on gensets. And then the next big step would be: Can our suppliers [builders of the gensets] …deliver to the market electric gensets that stop that diesel emission because these are all filled with diesel?”

Another trend tracking in the perishables business is advancing the use of environmentally friendly refrigerants in reefer containers and gensets as part of the global goal of addressing global warming. As the largest buyer of reefers and gensets, SeaCube, as it has done with telematics, is trying to stay ahead of the curve. As Sappio explains, “SeaCube is a little unique. We have $4 billion in assets under management. And by value, 70% of that $4 billion are in refrigerated containers and gensets. SeaCube has been the number one investor in refrigerated equipment over the last five or six years. We’ve put over 300,000 new reefers to work, and probably 5,000 gensets 6,000 gensets in that period of time. We’ve done a number of things. About five years ago, we made a decision, that any reefer we [SeaCube] buy, in particular our carrier reefers, would have the ability to take the next generation refrigerant. Today, the refrigerant that is used mostly around the globe is R134a, but SeaCube’s containers can take with some minor adjustments, R513a which is the next generation of refrigerant.”

Cyber Security — The Omniscient Threat to the Supply Chain

Another risk that is inherent to the immense flow of data is security. Cyber security is a challenge throughout each link in the supply chain. In an article in the AJOT, Port of Los Angeles Executive Director Eugene “Gene” Seroka called President Joe Biden’s cybersecurity initiative a “wake up call” for US ports. (see article by Stas Margaronis Cybersecurity initiative a “wake up call” for US ports on pg 22).

Like other industry leaders, Sappio agrees with the assessment and says, I think cyber security is everyone’s challenge. Whether you’re an ocean carrier, whether you’re a port, whether you’re a BCO, an NVO or an equipment provider, a depot operator, cyber security is everyone’s challenge.” Adding, “…from SeaCube’s perspective, we spend a great deal of money, time, and effort to make sure that the data we use is as protected as can be.”

The frightening quality of data protection is how one little mistake can unravel an entire network. From Sappio’s perspective it’s like, “Pulling on a thread. Somebody gets a hold of that thread, and they keep pulling it. And it’s frightening, and I think it’s going to be top of mind for everyone in the industry, how we protect our data, our customer’s data, our internal propriety data from bad actors around the world.”

One of the knotty questions broached by the Administration and Seroka is potential intelligence gathering capabilities by Chinese manufactured gantry cranes. Much of this information is transactional — typical of the international movement of goods, but the data demands are increasing and thus is the risk.

And the data stream is widening every day. As Sappio observes, “When we do have a pool of information available from reefer containers, where they go, how they perform and so forth, that data is going to have to be protected. So, it’s a challenge for all of us, it’s a challenge the industry is going to be wrestling with for some time to come.