Embrace the data

Losses: McKinsey has identified $17bn of annual waste in ocean container supply chain process. Credit: Port of Gothenburg.
Losses: McKinsey has identified $17bn of annual waste in ocean container supply chain process. Credit: Port of Gothenburg.
"Listening to the key stakeholders, I’m under the impression that our industry has reached a tipping point," Benoit de la Tour, Navis
Double helpings: collaboration is just one means of clawing back some of the $17bn loss. Data ‘alchemy’ is another. Credit: Maersk
Double helpings: collaboration is just one means of clawing back some of the $17bn loss. Data ‘alchemy’ is another. Credit: Maersk
Price tag: the number two inefficiency in the container supply chain is arguably a lack of dynamic pricing. Credit: Aarhus Container Terminal
Price tag: the number two inefficiency in the container supply chain is arguably a lack of dynamic pricing. Credit: Aarhus Container Terminal
"Within shipping, containers and vessels have more or less been using the same process for 10, 15, 20 years so we know it works, but the question is does it work well enough," Robert Inchausti, XVELA
"it’s not the underlying hardware that is changing how freight will operate in the next five years," Eytan Buchman, Freightos

Ports need to take the leap into the unknown to capitalise on data-related gains, finds Carly Fields.

The port and terminal industry is not known for its dynamism. We know and for the large part accept that this is a sector that doesn’t just look, but cross examines and over-analyses before it leaps.

One analyst, at the request of software specialist Navis, has quantified the impact of this reluctance to change. McKinsey in unique research identified $17bn of annual waste in ocean container supply chain process.

That represents an astonishingly high amount of inefficiencies and disconnected thinking. Ten billion of this is directly attributable to inefficient storage plans, poor vessel berth performance, vessel voyage performance and, overall, a fundamental lack of co-ordination from the key stakeholders.

Collaboration is needed, argues Robert Inchausti, chief technical officer of XVELA. He draws analogies with Formula 1 racing to illustrate the point: “The key to consistently winning the race is the pitstop. No matter the speed of the car or the skill of the driver, without a fast pitstop you will lose the race. The pitstop in our world is the terminal call. Without an efficient way of handling we are lost. Other industries have significantly changed how they do that pitstop.”

He adds that the data handling process hasn't materially changed in a quarter of a century, with Electronic Data Interchange messages still the core format for messaging.

“Once terminal operations start for the most part it's a black hole, all the constituents around do not know what's going on. What this means is that we have a problem with the quality and the timeliness of the data.”

He believes a more collaborative approach, particularly around the stowage plan, would improve the situation. “There's a tremendous amount of opportunity lost and inefficiencies abound. We could work towards a more collaborative stowage plan and instead of waiting to report on what's going on at the terminal, report on real time to all stakeholders.”

This would allow for better early visibility of prior terminal planning, and shared knowledge of unexpected issues and delays at the prior terminal.

But significant challenges to collaboration remain. XVELA’s Mr Inchausti sums them up as general industry distrust; zero sum gain mentality; data ‘ownership’ concerns; and restrictive corporate IT policies.

 

Data alchemy

Collaboration is just one means of clawing back some of the $17bn loss. Data ‘alchemy’ is another – taking the increasing information flow and turning it into something useful and useable. Navis’ Oscar Pernia explains that terminals need to be sensitive and connected assets and they need to balance flexibility and efficiency. “The demand for information will be stronger in the coming years than it has been for the past years,” he says.

As Eytan Buchman, head of marketing and research at online freight marketplace Freightos, pointed out at a session in TOC Europe in Hamburg, 50% of the workforce will be millennials by the year 2020. This ‘digital native’ generation will demand better technological innovation and connectivity – that data alchemy that the industry sorely needs.

Shippers are already demanding better IT – 86% of logistics providers polled in a Freightos survey said that technology is the No. 1 way to increase business because it helps with margins and helps to fight the new emerging players on their battlefield.

“We hear, on a daily basis, about drones and 3D printing, and those all sound really nice,” said Mr Buchman, “but when we asked those logistics providers whether they felt that those would lead to a profound shift in the industry in the next five years, they were not convinced. Only 50% felt 3D printers would shift the industry profoundly in the near future, and only about 30% felt drones and unmanned trucks would really change it.

“So if it’s not the underlying hardware that is changing how freight will operate in the next five years, what is it? It’s not about moving freight better; in 20 years from now, we’ll still be using containers. What will change is the data; the way that we move the data; the way that we consume the data; the way we share data between companies; and the way we share data with our different service providers and customers.”

 

Visibility improvements

Benoit de la Tour, Navis president and the head of software business in Kalmar, believes the biggest frustration for shippers is the lack of visibility on the container flow, which stems back to the data issue.

While this has been a problem that has been simmering for many years, the double digit traffic growth that the industry enjoyed swept inefficiencies and issues under the carpet. With double digit growth a distant memory, those same issues are now bubbling over.

“That changes things for the key stakeholders in terms of how they should operate,” he says. “Listening to the key stakeholders, I’m under the impression that our industry has reached a tipping point. There’s a large understanding that they have to transform and I believe that technology can provide a lot of the transformations that the industry is expecting.”

Returning to the McKinsey report, Mr de la Tour highlights that the number two inefficiency in the container supply chain is a lack of dynamic pricing. “It’s interesting that our industry is not allowing dynamic pricing where many other industries have, but I don’t think the foundation is there yet to provide this.”

But there are five other areas where the industry can make marked improvements moving forward: standardisation; customer experience; business processing; business intelligence; and collaboration.

 

XVELA pilots press ahead

XVELA, the cloud-based collaboration platform for ocean carriers and terminal operators, is gathering traction with five major terminal operators and five international shipping lines taking part in pilots.

Through a secure platform, these parties are able to use a consistent set of measures as all parties are working with the same set of data, and enjoy greater visibility and real-time collaboration.

“We’ve seen collaboration success stories from ocean carriers and terminal operators in the same location. What we’re proposing is the same sort of thing,” says Mr Inchausti. “Rather than have the ocean carrier dictate to the terminal operator what they should do, they can work together and have a platform where they can fine tune the plans or the realities of the terminal both in terms of exceptions and taking up opportunities that present themselves, whether it’s an extra crane or an extra bit of labour.”

Instead of waiting to report on what is happening at the terminal after the fact, terminals can work collaboratively and report in real time what’s really happening and then share that with all stakeholders.

But it’s not without its issues. “Challenges certainly exist in the sense of an overall general industry distrust and a bit of a zero game mentality, meaning that if I win the other party is going to lose and vice versa. But we know that there’s a tremendous amount of value that can be exploited out there today if we simply work together in a more collaboratively way.”

The biggest challenge as he sees it is change management: “Within shipping, containers and vessels have more or less been using the same process for 10, 15, 20 years so we know it works, but the question is does it work well enough? And I think across the industry, we’re saying no, it doesn’t; there’s room for improvement.”

 

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