Entering a New Season: The Real Value of Digitalization
Covid-19’s wide-scale human quarantine and borders closure across countries has a devastating effect on the global economy and severely disrupted all international trade. In a mere quarter between OCED’s Interim Economic Outlook report for Mar and Jun 2020, their forecast of global growth was first halved to 1.5% and subsequently to -13%. In China alone, for the two months of Jan-Feb’2020, China’s Ministry of Transport reported a drop of 10.6% in container handling volume for entire China. A similar scene unfolded at Long Beach, California, with Jun 2020 registering a 10% slowdown in handled volume, and its imports coming in 14% lower. Terminal operators and shipping companies are scrambling to cope with excess idle equipment and assets, while maximizing ‘healthy’ personnel deployment to operate the limited resources to ensure that global trade continues and essential food supplies, consumables, and medical supplies can reach the masses.
Before the pandemic, the maritime sector was still reeling from the shift in the geopolitical and geo-economic status quo arising from the fallout from the Sino-US trade disputes. Manufacturing hubs relocate to alternative venues like Vietnam, and China factories search for alternative demand markets. The traditional norms of demand and supply markets were redefined. Coupled with the surge in eCommerce and the more advanced pace of digitalization in the logistics and B-to-C space has raised the expectations of consumers on shipment efficiency and visibility. Terminal operators and shipping carriers recognize more than ever the need not just for their internal digital transformation but as well for the broader digitalization of the entire supply chain. As cliché as it may sound, we are only as strong as our weakest link.
When Push Becomes a Shove to the Shipping and Terminal Sectors
With approximately 90% of world trade still handled by the maritime industry, terminal operators and shipping carriers will continue to have a critical impact on the integrated supply chain of today’s economy, which is in vital need of a digital ecosystem that facilitates seamless online transactions. In this regard, the culmination of recent events has intensified the surge in the application of technology on business collaboration, necessitating terminals to optimize allocation and utilization of facilities and assets. At the same time, carriers maximize their shipping routes and vessel deployment to best-use their capacity in tandem.
The increasing recognition of the need for connectivity within the supply chain is quickly redefining the status quo as these stakeholders attempt to build up their proprietary end-to-end connectivity to meet the expectations of consumers and cargo owners. As witnessed from the spate of mergers and acquisitions across the supply chain, for example, DP Worlds’ wave of purchasing feeder operators (Unifeeder & Feedertech) and CMA-CGM’s acquisition of CEVA Logistics, etc., highlights the growing awareness of the need for a seamless supply chain integration. So what better way than to have it all under one roof?
Besides M&A, there is also a proliferation of commercially-influenced platforms such as TradeLens, Calista, NYSHEX, etc. which extended the connectivity trend towards collaboration as supply chain stakeholders start to define and shape their interpretation of the “essential ecosystem” for the industry. A pitfall with these platforms is that they do not represent the entire community and has limited business scope, resulting in functional and procedural overlaps that fuels confusion and frustration to the stakeholders who grapple with needing to subscribe to several, if not all of these platforms.
These challenging times created the critical impetus for businesses to review their digital transformation blueprint, to reassess their adoption of technology and realign it with ensuring business resilience. It is a case of either ride the digital wave or be drowned out by it.
Is Technology the Silver Bullet?
Besides connectivity and collaboration, shipping and terminal players have also been accelerating their adoption of automation, from the deployment of autonomous vehicles to replace manual operations to robotic process automation (RPA) or chatbots to remove & reduce manual interactions with application systems.
Qingdao launched China’s first fully automated terminal operations in 2017 with a projection to handle up to 17mil TEU/year has since then registered 55% of operations efficiency and costs reduction of 48%. Singapore PSA’s upcoming Tuas Mega Port expected to handle up to 65mil TEU/year when fully operational by 2040, built with heavy reliance on autonomous equipment, robotics, and artificial intelligence (AI). With automation, operations become more resilient to disruptions arising from human-operations, circumventing labor issues, and health pandemic.
With the surge in connectivity and automation, the urgency to have industrial or global standards is paramount to ensure that the digital landscape and ecosystem are still integral and congruent. Standards and protocols enable ease of data exchange within the supply chain and align the interpretation of the data while enforcing a strict regime on security.
The recent much-publicized cases of cyber-attacks that crippled the business capacity of Maersk and MSC highlight the need for greater resilience and robust cybersecurity as we rely more on technology and digitalization.
To avoid digitalization overlaps and misalignments, national-level support and industry-led initiatives will have to converge and form the foundation of a borderless ecosystem that incorporates industrial-wide standardization of messaging, processes, authentication, etc.
Dawn of a New Workforce
If there is a benefit gained from this pandemic, it is the adoption of telecommuting and remote workforce. Businesses and enterprises which had initially doubted the suitability or practicality of it had either went belly-up during this period or survived by reinventing their business models and operational processes. The proliferation of mobile applications and vehicle-mounted terminals has displaced the need for in-person contact for task assignments and instructions.
With the advent of 5G, the boundaries and limits of telecommuting and remote workforce will be further redefined or even broken down. Organizations will have to reassess how businesses will be run henceforth. Terminals may no longer require a physical, on-site operations command center to manage each terminal. Instead of remote management via decentralized off-site command centers could oversee several terminals concurrently, which ensures greater operational resilience. Shipping carriers that traditionally require documentation offices to transact with shippers, consignees for physical BLs issuance, DO collection, payments, etc., can now transmit & transact electronically with digital security features such as encryption, digital signatures, blockchain, etc. Integrated & automated supply chain from fully-automated warehousing to drone delivery or autonomous trucks/rail/barge conveyance of cargo will encounter a reality shift to the logistics industry.
A new chapter is beginning, and terminals and shipping carriers need to capitalize on these disruptive opportunities by incorporating digital transformation into their business strategies to gain a competitive edge. A well-formulated digitalization roadmap must be infused with sound business policies and standards and aligned with their business goals and vision.
Thought Leadership Article by Wai Mung L.