Data monetisation 'is logistics contracts oversight' - HFW

The ability of cargo handlers to monetise customer data -- and stipulations around how they store it -- are too often ignored in logistics contracts, a leading shipping lawyer says.

Matthew Wilmshurst is a Partner with HFW, a global industries law firm that specialises in aerospace, commodities, construction, energy, insurance, and shipping – the sector that is Wilmshurst's speciality.

“Logistics technology can be a source of disputes,” he tells Supply Chain Digital. He adds that as well as opportunities, fast-paced technological change has also brought "challenges and untested risks", and that these “are not factored into the majority of logistics contracts”.

Wilmshurst says it is “vital” that logistics service providers and cargo owners are “alive to these issues when renewing contracts”.

He adds: “Logistics is no longer just a matter of moving cargo from A to B. Technological change means logistics service providers are likely to be very different businesses by the end of the next decade.” 

He points out how advances in technology is enabling logistics services providers to accomplish “near-complete integration into their customers’ supply chains, systems and processes”. 

This, he says, allows them to increase the scope of services they are able to offer – including data-driven efficiencies that arise from minimising delays through route optimisation.

Value of data must be reflected in logistics contracts

But Wilmshurst says the biggest potential problem area when it comes to the true value of data is how logistics providers use it to generate greatly improved demand forecasts. 

“This can in turn reduces inventory and costs,” says Wilmshurst. “Consequently, being able to access data generated across a supply chain – and integrate it into their own systems – is of great importance to cargo owners,” he says.

Wilmshurst continues: “Huge amounts of data are generated through supply chains, including data pertaining to both cargo owners and their end customers. 

“The value of this data is not typically accounted for in logistics contracts. Contracts should, but too often don’t, account for the extent to which data is being used and, crucially, monetised.”

Wilmshurst also stresses that contracts should stipulate not only how data is used, but how it is stored.

“The public, regulatory bodies and businesses are mindful of the importance of data protection, and the risks to reputation and balance sheets posed by data loss are growing in tandem. 

Data storage 'should be covered by logistics contracts'

“To contend with this, logistics service providers and cargo owners should ensure that data is stored safely and securely and that contracts address how data is handled, including how any data incidents are dealt with.”

He adds: “Traditionally, liability provisions in both standard terms and conditions and bespoke contacts focus chiefly on issues arising from physical loss or damage to cargo. 

“While this is important, such damage or loss is likely to be limited to one or two containers in most cases. This does not reflect the likely losses that cargo owners will suffer in the event of either a data breach or an IT-system failure." 

He says that merely increasing liability limits won’t solve the problem "because higher liability limits also require a higher margin", adding: “Cargo owners should therefore ensure that their contracts cover any new business critical service offered by the logistics service provider, including clauses to cover the next steps should anything go wrong.

"For their part, logistics service providers would do well to ensure that the extent of their obligations are clearly defined in the contract.”