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The Digital Imperative


The use of digital tools by container carriers is helping to improve security and operations and making the supply chain run faster and smoother for shippers

 

Maersk executive Mike White says global supply chains are some of the largest and most complex ecosystems in the business world today.

But he says historical inefficiencies continue to hinder the movement and growth of global container trade in today’s wireless, post-9/11 world.

“It’s not uncommon to see up to 30 different entities, 100 people and 200 different exchanges of information or documentation involved in a single end-to-end container journey,” said White, a licensed customs broker who has held many top management positions for Maersk and its global subsidiaries since he joined the company in 1990.

“Apart from being hugely inefficient, with people manually keying and rekeying information, a lot of that information gets trapped in silos. It’s costly and frustrating.”

That why White says he jumped at an offer 18 months ago to become CEO of TradeLens, a collaborative Maersk/IBM venture aimed at tackling those inefficiencies through the use of distributed ledger technology (DLT). “They had me at hello,” quipped White.

Tested for a year before being launched in December, TradeLens is the world’s first large-scale open platform that brings together supply chain participants and allows for the secure and transparent sharing of digital shipping data using blockchain, the best known and most widely used form of DLT.

White says the platform, which he hopes will be a viable subscription-based business by the end of 2019, is now being used by more than 100 global participants.

They include carriers like Maersk, the world’s No. 1 container shipping company, its subsidiaries and some smaller regional lines like Safmarine and Pacific International Lines.

Other TradeLens platform users include terminals, ports, inland transporters, customs authorities and freight forwarding and logistics companies.

Both the Canada Border Services Agency and the Port of Montreal—the largest container facility in Eastern Canada with five terminals that handled a record 1. 7 million TEUs in 2018, a nine per cent increase over the previous year—joined the platform late last year.

“We are convinced that joint work on a global scale is part of the key solutions to achieve a better flow of information and goods for the benefit of clients and partners,” said Port of Montreal president and CEO Sylvie Vachon in October, when the port joined. “TradeLens is fully aligned with our objectives and business strategy centred on innovation and efficient shipping.”

According to White, the TradeLens platform already handles about 20 per cent of all containerized trade traffic on the planet.

It also receives some 1.5 million updates daily—roughly 1,000 a minute—on the physical movement of containers according to more than 120 different milestone events, and provides key information on when shipping documents are required.

The platform also digitizing documents—up to 18 kinds, including sea waybills—with the goal of creating schema in support of standards organizations.

“Once in the system, that information can be digitally reapplied, eliminating the need for rekeying and improving work flow and process across the supply chain,” said White.

That could lead, he added, to an 80 per cent reduction in the need for data entry and save the industry tens of millions of dollars a year in administrative costs.

“It’s early days yet,” said White. “But if we succeed we could make global trade more fluid and bring down barriers to global trade and spur growth in global trade, which can drive global GDP.”

Shipping rivalries

Though it is the biggest and most talked about DLT initiative in the ocean shipping industry, TradeLens is far from being the only project or product aimed at harnessing the game-changing potential of both emerging and converging digital technologies for the movement, tracking and monitoring of containers and container traffic.

In early 2018, when Maersk first announced its venture with IBM, a consortium of multinational companies (AB InBev, Accenture, APL, Kuehne + Nagel) and a European customs entity carried out several container shipping tests using blockchain technology to exchange documents.

Around the same time, the Port of Rotterdam partnered with Samsung SDS and Dutch bank ABM AMRO to do test trials linking container logistics and payments using blockchain.

In November, nine companies with global shipping interests—COSCO Shipping Lines, CMA CGM, Evergreen Marine, OOCL, Yang Ming, DP World, Hutchison Ports, PSA International and Shanghai International Port—announced their intention to build a rival platform to TradesLen.

Dubbed the Global Shipping Business Network (GSBN) and designed by Hong Kong-based software company CargoSmart, the proposed DLT platform will also seek to connect container shipping stakeholders “to resolve siloed shipment management procedures and disruptive information gaps,” according to a press release announcing the nine-company agreement in Beijing on Nov. 6.

“With the vision of a truly open blockchain platform for the industry, the GSBN will be key to the success of establishing a sustainable blockchain ecosystem for all stakeholders in the supply chain,” stated Andy Tung, co-CEO of OOCL.

“OOCL is very excited to be a part of this highly collaborative environment that can facilitate the cross-pollination of ideas towards even more innovative business models and solutions for our customers.”

Officials with the companies involved in both TradeLens and GSBN say talks are needed at the highest levels within the container industry to ensure the development of a common standard for DLT platform solutions and other digital projects and trends in the Internet of things (IoT), the concept that the convergence of wireless technologies, computing devices and the Internet will drive improvements in operational and information technology in all sectors of human activity.

Floating warehouses

In many ways, blockchain and other types of DLT are already highly dependent on the reams of real-time, in-transit data being collected, analysed and generated from by RFID chips, sensors and many other new smart devices and algorithmic communication platforms that are now being put on both containers and products inside them while in transit on ships and trucks.

“A container today can communicate from anywhere in the world,” said Ontarian Don Miller, vice president global sales and marketing for Globe Tracker ApS, a Denmark-based firm that specializes in trade data sharing and autonomous asset tracking and monitoring.

The company has put thousands of IoT devices on reefer units carrying perishable products at sea.

Reefer units in the cold chain account for about two million—or seven per cent—of the roughly 28 million containers that are estimated to be involved in global trade today. The vast majority of TEUs—93 per cent—are used to carry general cargo that is not sensitive to hot or cold.

According to Miller, sensors placed inside containers—including on pallets and even individual products—can collect a wealth of data in both real and non-real time on everything from temperature and humidity to location, movement and damage.

That information can then be sent using cellular technology or collected and stored in tags that can be read at journey’s end.

“A ship is a floating warehouse and if you put a cell tower on it you can make it talk,” said Miller. “You can put a device in a 40-foot reefer container of blueberries with a ripening algorithm that can tell you which pallet you should put out on the floor first. That’s a win-win for the shipper, the retailer and the consumer because it provides superior quality of service and product.”

Miller noted that Maersk last summer became the first major ocean shipper to outfit their entire reefer fleet with telematic devices that provide customers with such real-time data.

“Obviously it offers a competitive advantage,” he said.  “But what’s needed now is data standardization so that shippers can talk to each other either through the cloud or their own systems.”

Miller predicts the digitalization of containers, together with the speculated and feared arrival of retail behemoth Amazon in the shipping business, will lead to a wave of partnerships and acquisitions by carriers eager to consolidate or increase their share of the supply chain.

Sharing economy

Another Danish company—tech start up Blockshipping—is also busy developing an innovative system called the Global Shared Container Platform (GSCP).

Billed as the world’s first blockchain-enabled container asset registry, GSCP is a neutral and independent platform designed to provide the shipping industry with a global inventory and real-time location of every container in the world.

“Global container carriers started sharing vessel and container terminal capacity years ago,” Blockshipping CEO and founder Peter Ludvigsen wrote in an email to Tantrastudio. “We believe it’s time to also start sharing container assets, thereby improving the environmental footprint of containers by minimizing empty container movements.”

In addition to providing enhanced information on the whereabouts of containers, Ludvigsen said GSCP provides indisputable title and proof of ownership of containers.

“Introducing a global blockchain container register will go a long way in eliminating fraud related to investment in containers such as the P&R Group scandal in Germany last year,” said Ludvigsen.

Top management of the Munich-based company, which was one of the world’s largest container leasers until it went bankrupt in March 2018, are accused of operating a CAD$5 billion Ponzi scheme involving the price-hiked sale, resale and rental of 1.6 million containers to 54,000 investors around the world.

According to Ludvigsen, reaction to the development of GSCP has been “very enthusiastic” in the shipping industry.

“We got mentioned by Gartner in two of their whitepapers and McKinsey called our project as one of the most promising examples of blockchain use,” he said.

“We also got a pre-commitment from a Top-10 container carrier to be the first user of the GSCP (and) many key stakeholders in the shipping industry liked our vision and see a demand for such a solution.”

Another digital product making headlines is DynamicETA, an algorithm that predicts ocean shipment arrival times in narrow time windows.

Developed by FourKites, a Chicago-based predictive platform that pinpoints freight arrival times and helps companies in all supply chain modes—truckload, LTL, ocean, rail, intermodal, last-mile and parcel—lower operating costs and improve on-time performance and end-customer relationships, the new sea-focussed app has reportedly enabled early adopters to achieve a 90-plus per cent accuracy in predicting the arrival of container shipments to within hours.

“We predict end-to-end ETA, [estimated time of arrival]” said FourKites product officer Priya Rajagopalan. “Being able to predict that requires much real-time data on each leg.”

According to Rajagopalan, “traditional models of B2B shipping suffer from a lack of visibility across modes, and frequently have high ETA variances due to factors like tides [ocean loads] or even traffic [over the road]. But most importantly, it is hard for shippers to derive a predictive ETA that is truly end-to-end across modes, and invariably these are large blind spots along the way.”

FourKites’ algorithm collects 150 data points, says Rajagopalan, and attributes and factors that can affect real-time movement of freight on shipping lanes and at transhipment points and applies machine learning to predict arrival times.

“The ramifications and benefits of knowing more precisely when freight arrives are immense and multiple for everyone throughout the supply chain,” she said. “Enhanced ETA and improved metrics help suppliers get their lines and products there first and better placement and better shelf space. It also provides better stock planning. You can truly have just in time practices.”

Reducing costs

Opher Baron agrees. A professor of operations management and statistics at the University of Toronto’s Rotman School of Management and a world-class expert in applied probability, facility location and inventory planning, says both the advent and growing use of digitalization and IT and IoT solutions by and for the movement and tracking of containers can only mean good things for the shipping industry.

“The current system has lots of uncertainties and this requires lots of safety stock inventory, which can be very expensive,” said Baron. “I think the combination of better control of where things are could have a big impact on shipping and reduce costs for shippers.”

In addition to saving time and money on everything from logistics and inventory holding to transportation, Baron believes the use of digital tools can help improve security and operations to make the supply chain run faster and smoother, reducing the sting of the bullwhip effect, the supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand further down the chain.

“There is a lot of operational friction and extra complexity that make containers difficult to model and plan well for to help the flow of materials,” said Baron. “Clearly triage and handling and waiting times will be improved if you know where containers are and what’s in them by using these new digital technologies.”


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