The Digital Imperative in Container Shipping

The container shipping & transportation industry historically has involved a significant amount of paperwork. INTTRA is a company operating a global network that is eliminating paper and faxes from key aspects of the chain, including booking a space on a container ship. IDM spoke with INTTRA President and COO Inna Kuznetsova to learn how this has been achieved.

INTTRA is claimed to be the world’s leading digital shipping platform, with more than 800,000 containers processed through INTTRA every week. 1 out of every 4 containers shipped globally are booked through INTTRA. Every shipment brings new contracts, cargo manifests, export paperwork, and receipts, and many routes involve multiple orders with separate documentation.

IDM: Inna, what are the main challenges in digital transformation in the ocean freight industry?

IK: The shipping industry is extremely fragmented. A single box can pass through six or seven different companies on its way from manufacturing to the shelves of the store. Some of those companies may be very technologically advanced, and track everything, producing the required documentation, while others are manual and, in many cases, struggling with even the basic elements of electronic transactions. Yet, as always, your chain is only as strong as your weakest link.

So, one of the biggest challenges in digitalising the shipping process in general is fragmentation, and the growing digital divide. By that, I’m referring to the divide in different companies to embrace IT as a source of innovation and start changing their models, and companies who work in a more traditional way.

The second very big part of the challenge is that the traditional logistics companies, freight forwarders and carriers, operate on slim margins. Those margins have further decreased over the last few years by the growing capacity of the new mega-ships coming online, the various carriers’ consolidations and the related changes in the market. So, the margins are low, and the consolidations create additional pressure on IT resources, which are meagre in a smaller margin industry.

This makes digitalisation even more complex. At the same time those processes also push digitalisation forward, because when your margins start falling, when the world changes, when the landscape of shipping changes, companies worldwide start looking for better value. That often involves elimination of manual labour to reduce costs and adopting data-driven decisions to improve efficiency on the side of freight forwarders. In addition to it, there is a growing pressure from the cargo owners to shipping companies to provide in electronic format for better visibility and analysis. 

IDM: Paper is traditionally required to move data between business systems, so INTTRA presents an EDI platform to provide the link between exporters, shipping and logistics companies and importers. Is that a correct interpretation?

IK: One of the primary business lines of INTTRA is data exchange between shipping lines, the cargo owners and freight forwarders. This exchange is focused on the one simple process--booking a container on a ship.

When you buy a ticket on a train, you need to go through some motions to reserve a seat and maybe get special equipment. Containers need many forms filled out and submitted for them to actually get on a ship. The location and equipment have to be reserved; certain arrangements have to be made for regulatory compliance, etc.

And then once the container is packed and comes to the ship, the information that goes into the bill of lading has to be provided, which is called shipping instructions. There is also an exchange of the information about the container’s weight, which is required by global safety regulations of Safety of Life at Sea (SOLAS), the international convention that was created in 1914 after Titanic sank. All of those forms flow through INTTRA electronically .

IDM: EDI has traditionally been a challenge for all but the largest of companies due to the cost and complexity of integration and bringing companies on board. Is that a problem for shipping, or are companies all of a scale that they can take advantage of the EDI?

IK: EDI is a relatively old protocol, but it is embraced as a de facto standard by a lot of shipping companies for information exchange. We provide multiple means to connect to the INTTRA network, which means you are then able to transact with multiple trading partners. So, by doing this, we actually avoid the costs of creating EDI connections one on one with 25 of your carriers, or 1,000 of your freight forwarders. You only have one connection, and through that connection all the information flows in a standardised manner, saving carriers and freight forwarders alike a lot of money.

However, that connection can be EDI or via a web portal with a fluid interface that can be even used on mobile devices. Today over 90% of our customers, typically the smaller customers, are using the web.

IDM: You recently surveyed your users and found that supply chain visibility was a significant concern among shippers and forwarders. How is INTTRA addressing this in terms of making visibility better?

IK: As a part of our service, INTTRA provides every company who books on INTTRA the free container signals. There are certain standard events in the journey of a container when a container is accepted to the terminal, loaded on board, offloaded, gets out of the terminal, and the empty container is returned. We receive those signals from the carriers, we provide them as a free service to all our forwarders and shippers, so that they can plan for the next steps. Furthermore, it is a very well-known fact that those tracking signals vary in quality and timeliness between carriers, between terminals, between different countries. So, we partner with our shippers and carriers alike to improve the quality of the tracking data. We provide certain dashboards that allow freight forwarders to monitor the quality and address it. We provide data to the carriers that allows them to look at their different branches and agencies and ports and address the worst violators in data input quality. We think that’s the first step towards better visibility.

IDM: Shipping giant Maersk and IBM have announced a new platform called TradeLens that uses IBM Blockchain technology to offer secure digitization and transmission of supply chain documents. How does this affect INTTRA?

IK: It’s addressing customs and other documentation rather than the process of booking containers, so it’s a separate area. It’s a new pilot, so I think we still need to see how close it comes to broad commercial implementation. Blockchain is obviously a very interesting new technology, but it has certain limitations when introduced to the shipping world. One of these limitations is that it’s necessary to know if you’re a customer. When we use blockchain for digital currency, you and I can exchange cash without knowing each other, and I can just add your name to the chain and pay you with the digital currency. In shipping, regulations require us to check for critical information including denied parties and companies under sanctions. That means that there should be a certain authority on every network that allows or disallows a company to participate. In this case, when the network is formed by a carrier, that means your carrier efficiently becomes the authority, allowing to participate.

So, there are lots of concerns from other members of the industry about making their customers available to this authority, or maybe competing with them. There is a lot of concern about the small shippers who would see this leading to multiple networks created by various different carriers, and then them having to do the changes, make changes to their existing system many times to join multiple networks. And on a big scale, the concern about whether the system would truly deliver beyond the pilot because it’s complex work to get the blockchain operational, and to get all those IT-poor agencies and shippers to join.

To be efficient, it has to include the whole chain, and it will be a while before the process really works. Also, from our own proof of concepts that we did using blockchain in order to understand the new technology, we found the technology to be rather slow. With a growing number of transactions, the speed of processing of blockchain is still under question.

IDM: Are container terminals around the world identical in their ability to work with digital networks such as INTTRA?

IK: Terminals across the world are all very different, due to their geographical location, historical trends, communities, the nature of cargo that they ship, their possibilities to connect to railways, the availability of roads and so on.

The levels of digitalisation vary significantly, from fully automated terminals in Rotterdam and now in Australia, to those that require much more manual work, and more human involvement. With time we will see more and more of automation coming to terminals, because whatever can be standardised can be automated. Yet it will always depend on the number of exceptions any particular terminal can handle, because human beings are much better than artificial intelligence in handling exceptions, while artificial intelligence is better in standard situations. In certain ports and terminals the number of exceptions is huge, and that would be always an impediment to first automation.

Today we see digitalisation passing over the tipping point, yet there is a lot of inequality and differences between countries and companies in embracing digital for their processes.

Once most of your processes are digitalised, you face the next step, and that next step is connecting multiple data sources. Traditionally in the shipping industry, operational data, such as container movements, and financial data, such as invoicing and contracts and rates, have been kept separately, in separate applications, separate servers with several different systems handling those. In the world of the cloud IT today, where you can put everything on the same cloud, or at least create easy bridges and connections, it becomes very interesting when you can get access to multiple sources of data, because then you can apply business analytics and start moving towards the intelligent supply chain.

So, INTTRA works with customers at all different stages of the process. What we observe is that the divide between those who embrace digitalisation and move forward, and those who still retain manual processes, is growing. We see much more mature handling of financials and better efficiencies once a company gets their data and processes under control. We are looking forward to working with all of our customers to help them move along the chain. It’s an exciting time to be in logistics, because those processes are developing and changing very rapidly.

Inna Kuznetsova is the President and Chief Operating Officer of INTTRA (US), a SaaS portal for ocean shipping, processing over a quarter of all containers in global trade.  In her last role she in IBM was the global VP, Marketing & Sales, IBM Systems Software. Mrs. Kuznetsova completed her Masters and Ph. D. at Moscow State University and later earned an Executive MBA from Columbia Business School.

 

 

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