Representatives of three shipping lines highlighted the need for an increased use of technology by the industry during a session at the 50th Georgia Foreign Trade Conference. The conference, organized by the Georgia Ports Authority, annually brings together shippers and logistics professionals from around the southeastern United States.
“We are starting to look at digital strategies to help take some of the friction out of the network,” said Gregory Tuthill, COO of CMA CGM (Americas). The line, Tuthill says, has embarked on a major investment in technology.
“Capacity-matching is a big challenge right now. The time horizon that the vessel operators have to build new ships is relatively short, about a 2½ year time horizon from financing to delivery, and that’s getting shorter,” Tuthill said. “The terminals and the operators in the ports have responded favourably. They’ve made a lot of investment, including the Georgia Ports Authority, and we appreciate that. That time horizon extends out five to 10 years, especially if you look at a dredging project. What’s most concerning is when we start to go to inland areas, we have some concerns as to how we match capacity on the last mile and also at the inland depot side of the equation.”
Technology, he said, should be used to minimize the impact of that capacity mismatch.
“When we look at digital strategies and how we can be better at making sure our delivery network is not impacted by this capacity mismatch, we really need to look at the origin side of vessel loading. We have the data, the have the forecast, we have the stow location. We need to be better at making sure we have visibility and transparency and also early-warning diagnostics to make sure we don’t have choke points in the networks.”
Matching capacity to expected demand is critical, said Michael White, head of global trade digitization at A.P. Moller-Maersk. “It’s an asset-intensive industry.”
It is no accident that Maersk has found itself on the leading edge of technology use. In January, Maersk and IBM announced their intent to form a joint venture company to help accelerate the digitization of global trade, using technologies such as blockchain and other technologies to bring about a more efficient and transparent end-to-end transportation pipeline.
“It is something that has never been done before, a tech giant and a shipping leader coming together to form a neutral, open platform industry solution to help form a solution to digitize end-to-end trade,” White said. White clarified during the following question-and-answer session that Maersk intends to create a completely open platform, rather than a solution only for Maersk.
“We’ve done a lot of things the same way for the same time. In my view, we’ve done for decades a good job of making a complex business complicated. This move towards digitization is something that can help us with that,” he told the audience.
Due to the size of its two parents, the joint venture company is subject to regulatory approval, White noted, saying that such approval is expected “before the end of spring” in the northern hemisphere.
In the meantime, White said, Maersk is working on two projects which have “validated that many of the challenges and inefficiencies in end-to-end logistics are related to a lack of transparency and an inequitable sharing of information between origin and destination, and a challenge of not having the right information and documentation where it’s needed to ensure efficient supply chains.”
One of the projects Maersk is testing is a shipment information pipeline, which White says will provide a “robust, real-time view of information, end-to-end of the shipping cycle, and is meant to provide information for everybody who is in the ecosystem. That means ports and terminals, shippers and freight forwarders, customs entities and also the inland providers. Everybody will have better access to the information for the transactions they are involved. Instead of providing information one-to-one-to-one-to-one, which is what we do today, it will be connecting one-to-many.”
The second product is paperless trade. “For years we’ve been reutilizing the same information in a paper-based process,” he said. As evidence of the inefficiency of paper-based trade, White cited an example of a shipment of one refrigerated container of avocados from Mombasa to Rotterdam. “There were more than 30 different entities [and] 100 people involved in the transaction and over 200 individual exchanges of information and documentation, all of it done paper-based, creating challenges that can be solved by digitization. Technology is changing the world we live in. It’s time to let it help us change our business for the better.”
George Goldman, president of Zim American Integrated Shipping Services, said that sustainable profitability and attracting new talent are other issues the industry must address.
“Our industry doesn’t truly follow the principles of economics. We’ve had a very difficult time as an industry showing our customers our true cost to serve. Our inability to reflect our true cost to serve is a problem, and this will become more apparent as we go into 2018.”
Goldman says this is something unique to the industry. “We don’t operate like the trucking industry with a cost-plus model – and if we did, you all would run for the hills. The ability to kill our competition and put carriers out of business, though it is [trending] in that direction, has not necessarily resulted in sustainable profitability for carriers. The question of being big or small is still debatable.”
Goldman also worries about where the industry will attract its future leaders. “Our inability to attract talent is paramount. I have two sons in their early 20s. They graduated from college, and the first thing that they want to do is go to the San Francisco Bay Area. Why? It’s a hotbed of anything new in this economy. They want to be the next Facebook, dot-com-this-or-that. How do we attract them in the ocean liner business? It’s a challenge that all of us face going forward. [If we don’t change,] who’s going to take our jobs when we retire? I can tell you right now, my kids said, ‘Dad, no way.’”
By Gregory Glass
Asia Cargo News | Saint Simons Island, Georgia