Container shipping laden with ‘antiquated processes’

Until container carriers can agree on a common “business language,” the electronic conveyance of important information will be lost in translation, according to Digital Container Shipping Association (DCSA) CEO Thomas Bagge.

Bagge said during a World Economic Forum webinar Monday that DCSA’s nine members — CMA CGM, Evergreen Marine, Hapag-Lloyd, HMM, Maersk, MSC, ONE, Yang Ming and ZIM — had six different definitions for what constitutes a vessel’s arrival in port.

“That’s hugely problematic. Imagine the same problem happening in the airline industry. If the airlines had different definitions of when a plane took off or arrived, it would cause havoc,” he said. 

“In the container shipping industry, it is OK. Because the physical and data definitions are individually defined, you will end up standing on your own island if you choose to go to a blockchain because vessel arrival will mean different things,” Bagge said. 

The nine companies represented by DCSA, which was founded in April 2019 to push for digitization standards, carry about 70% of the world’s containerized traffic.

“Each of them had over the years individually tried and individually failed and individually invested and failed again in terms of their digital transformation,” said Bagge, asserting that the ocean container carriers are “still lagging behind some of the more advanced industries. Without having the proper foundation, they felt that they couldn’t go any further and that’s the reason why we were created in April of last year.”

‘Unnecessarily complex’

Bagge said to make matters worse, international trade is “unnecessarily complex.”

“When we look at what technology can do for us today, we feel that we are being held back by a number of problems. First, there are many parties involved in international trade,” including shippers, consignees, freight forwarders and customs house brokers, he said. “When it comes to the exchange of information, it is of course problematic.”

Bagge said the large number of required documents, including invoices, bills of lading, letters of credit and inspection certificates, further complicates the shipping process.

Transferring the documents by airfreight is problematic from cost and efficiency standpoints, Bagge said. And during the COVID-19 pandemic, “we’ve seen a lot of airplanes not flying and for that reason not being able to carry the physical documents from Point A to Point B. What happens then is … if you do not have the physical bill of lading, you are not able to collect your cargo. Again, it puts strain on your supply chain.” 

The ocean container shipping industry “is using quite antiquated processes,” from quoting to booking to bills of lading. “It’s quite a lot of back and forth,” he said. “One of our members has estimated they have about 50 email exchanges per one booking that is made.”

Bagge said DCSA wants ocean shipping transactions to be as easy as booking an airline ticket.

“If we had a full view of all the containers that were being transported worldwide, supply chains would be significantly more effective than they are today. Today the empty positioning of the millions of containers we see out there [is] on Excel spreadsheets still,” he said. 

Critical weaknesses

Nadia Hewett, the blockchain and digital currency project lead for the World Economic Forum, said the pandemic has highlighted critical weaknesses in supply chain systems. 

“If left unchecked, these fractures will deepen. Incremental and ad hoc fixes will not suffice to prevent system fragmentation. A concerted effort must be made to build new foundations,” she said. “All stakeholders … must urgently come together to implement long-overdue interoperability.”

Hewett said the webinar was conducted in conjunction with the launch of a digital database as part of the World Economic Forum’s COVID Action Platform. The mission, according to the platform outline, is to “galvanize the global business community for collective action; protect people’s livelihoods and facilitate business continuity; [and] mobilize cooperation and business support for the COVID-19 response.”

Shagun Goyal, the digital transformation and blockchain leader for Deloitte, said the pandemic has made the need for change glaringly apparent.

“We are forced to think about what the new normal in the supply chain model should look like,” he said. “Leaders will have to move from a central command center to a central orchestration platform … to optimize performance of the total supply chain.” 

Rasmus Winther Molbjerg, Deloitte’s Danish blockchain and digital assets leader, said, “Interoperability is something that is heavily needed … to communicate digitally with other systems.”

He said 85% of the respondents in Deloitte’s 2020 global blockchain survey reported they are working with suppliers, vendors, customers or competitors in efforts to solve supply chain issues.

“What we will be witnessing in the future is not just blockchain taking over the entire supply chain. We will have blockchain to blockchain and we will have a need for exchanging information across different systems, across different industries and also different regions of the world,” Molbjerg said.

Collaboration and cooperation across the industry are essential, he said.

“No matter how technically skilled you are,” Molbjerg said, “if you are not coming to agreement on what you need to do and how you need to do it, you’ll never end up developing anything that makes sense in the practical world.”

The various stakeholders need to come together and come to agreement, he said. 

“You need to make sure that you’re not the only one defining what you think is the right data. You need everyone around you to acknowledge that they’re doing it the same way. Otherwise you’ll be sitting on your own little island and not able to communicate with anyone else. They will have a different version of the truth,” he said.

“So the ability to have that governance model, the data standardization, this also needs to happen across different legal areas around the globe. That can be the tricky part. How do you collaborate [with] competitors? All of these are things that need to be in place in order to have this run smoothly,” Molbjerg said.

Even with global collaboration, Jonas Sviestrupo Sogaard, the next-gen lead for Deloitte, cautioned, “There most likely won’t be one blockchain to rule them all.” 

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Click for more FreightWaves/American Shipper articles by Kim Link-Wills.