One of the oldest known methods of transporting supplies is by boat. Yet, the business of shipping freight around the world by sea has always been hugely complex, and the past two years – with the pandemic and its resultant disruptions – has brought the need for simplification into sharp focus.
The industry is now striving to create digital standards that will foster efficiencies, collaboration and resilience.
Here, two sea freight experts explore the importance of digital standards for global sea shipping.
Why is sea freight data standardisation important?
RP: All modes of transport are gravitating toward the standardisation of data. Both shippers and logistics providers are increasingly being called upon to be a ‘divining rod’ – guiding companies’ supply chains to desired places.
JV: While the marine freight industry has always been dynamic and volatile, the past few years have been particularly fraught. It is now harder, and commercially unwise, to make decisions based on ‘gut’ experience. Data-driven decision making is a critical part of helping shipping companies and their counterparties make better informed decisions, optimise operations and drive efficiencies.
Sub-segments of standards already exist within shipping segments – Q88 in the tanker space comes to mind. This is the platform that shipping professionals use to conduct business, and the benefits have been substantial.
Yet, in many spaces, there remains no standard way to exchange or interpret commercial information, and therefore no way to speak in a common language across the industry.
Standardising data will enable important information – such as voyage updates, real-time visibility on shipments or contract details – to be shared directly with charterers, brokers, agents, and other trusted counterparties.
What’s the biggest challenge to rolling out such a system?
RP: Harmonising data from both internal and external sources, and even within one’s own organisation, is no walk in the park. An example: since June in the US, ocean carriers have been adapting to the demurrage invoicing requirements of the newly-passed federal legislation, the Ocean Shipping Reform Act.
One newly required data element that we must report to customers when invoicing these container port storage fees is ‘freight available date’. But what is the definition of this? The ocean port, ocean carrier, rail terminal, and truckers all down the line have varying degrees of understanding in what it is.
For instance, an imported ocean container may be unloaded from the ship and the carrier says it’s available but yet there’s no chassis, which is a type of semi-trailer designed to securely carry an intermodal container. The port will say chassis availability is not its responsibility, and the result is that the lingering container will at some point become subject to port storage (demurrage).
So, in the eyes of the importer, the container wasn’t ever truly available though the port says it was. This is why a clear and succinct definition of each data element is so important.
JV: The amount of industry data generated and collected has increased exponentially over the past decade. This information spans vessel performance data to commercial data on current and future vessel location. The sheer volume of data within organisations is often overwhelming, and leaves businesses unsure of how to even begin deriving meaningful insights.
Similarly, standards can only be adopted if they are universal and yet first need to be widely accepted before they can become universal. This will require significant change management within those organisations that adopt them.
Is there any resistance to data standardisation?
RP: Think of logistics as a war to deliver freight when you need it. As with any battle, it is essential to eliminate misleading information and have a clear vision of the path to victory. Data standardisation is an essential piece to this end.
JV: Historically, there has been resistance to data sharing in the industry. Organisations have been unsure of the benefits, instead feeling that sharing will lead to loss of competitive disadvantage.
The industry is now coming to understand the benefits that data sharing can bring, yet the standardisation needed to achieve this is seen as being overly complex and time consuming. Change is therefore stifled by myriad data sources. This is changing, but progress is slow.
Will data standardisation ease supply congestion?
RP: When applied in the right context, yes. Most importantly, it will aid both logistics providers and our customers to understand past and present performance deviations, while helping to formulate innovative supply chain solutions.
JV: Optimising port arrival time is critical, as port congestion issues continue to cause increased delays and emissions. In-port congestion, for example, could be managed by methods such as slow steaming – when a ship reduces its speed to between 12-19 knots – to achieve just-in-time arrival, with an agreement to share any benefits with counterparties. Having an accurate, common view of relevant voyage data can help drive optimal decision making for multiple parties in such a scenario.
Standardisation will facilitate both the sharing and the analysis of the data that would enable cargo owners to plan further ahead, avoiding situations that might lead to long wait times.
Supply congestion is a multifaceted issue that stretches up and down the supply chain. The further we can share information up and down that chain, the better – and standardisation makes this easier to achieve.
Are governments helping to make standardisation happen?
RP: Aside from customs and security data – where governments are taking leading roles – for the most part, the global network of private enterprises engaging in supply chain is helping make it happen. Businesses that are able to model accurate data have an advantage over their competitors that don’t.
Are the shipping firms helping fund data standardisation?
RP: In a company, it is always a balancing act between returning profits to shareholders versus forward-looking R&D. Some will focus on improving their data, people, and the overall services they deliver to the customer; others will not. Apex Logistics International has opted for the former.
JV: This question, and the one about government support, are linked. Freight rates are constantly moving up and down, so to put the funding of standardisation on any one group based on near-term financial performance is a mistake. This is – and needs to be – driven by the entire industry. Owners, charterers, brokers, agents, software platforms and other vendors all have a role to play in driving development and adoption of standards in the industry.