On good days, the workhorse of global supply chains runs as planned just 70% of the time.
That is a problem. It is time for plan B...
Imagine booking your dream six-week vacation to Europe and Africa. You spend a year designing the perfect itinerary mixing in hotels, attractions, tours, and dining experiences across 8 countries and two continents. Your trip will involve international air travel, domestic trains, taxis and an occasional bus. Sounds kind of fantastic, right?
How would you plan that trip if there was a 1 in 3 chance one of your international flights will be delayed, changed, or canceled by the airline just days before departure? The words helpless, frustrated and expensive come to mind for me. In this scenario, that dream vacation could easily turn into a nightmare.
If you work for a company that runs a global supply chain, this scenario is not a nightmare, but rather the accepted way things get done when containerized ocean freight is part of the itinerary. In 2022, more than 140 million TEUs (Twenty Foot Equivalent Units - AKA containers) were shuttled across oceans, connecting supply chain operations that are scattered across different continents.
Ocean freight is where most of the vast, decentralized global supply chains all converge. It is also the place where changes and delays are common, impacting tens of thousands of importers and exporters on a daily basis.
Widening the Neck of the Global Supply Chain Hourglass
Consider the shape of an hourglass. The granules of sand in the upper bulb represent all of the factories, logistics networks and ports at the origin side of a global supply chain. The lower half represents an equally vast array of ports, customs services, warehouses, and distribution networks that bring goods to their final destinations at stores, factories and consumer doorsteps. Containerized ocean freight represents the neck of that hourglass in terms of sheer volume.
Each year, more than $14 trillion in goods are shipped around the world and a lot of it winds up in one of those colorful ocean containers. The value of each container’s contents can vary greatly. A single container full of sports shoes can be worth $2.5 million. Conversely, a container full of brake pads might only be worth $50,000.
Whether it’s several pallets of $250 Nike shoes, or $20 brake pads, the goods inside each container are very important to someone, somewhere. Retailers need the right inventory, at the right time to hit various seasonal merchandising events effectively. A tier-1 automotive supplier needs to make sure they have ample supply of inventory on hand to keep their customer’s vehicle assembly line running.
Commodities of all types spend roughly a month in the custody of a relatively small group of ocean logistics providers. Now imagine the impact when 30% of this vital inventory is tied up, delayed, rescheduled and in a constant state of flux. Yes, it will arrive at its destination eventually, but the systems and processes are so outdated, they can’t keep up with the non-stop operational change which is typically communicated via email.
The neck of the supply chain hourglass is literally sputtering all the time.
Ocean Freight Digitization was only Partially Solved Decades Ago
As the internet matured and gradually established itself as a viable platform for businesses, there was an explosion of activity in the late 1990s. Marketplaces emerged, e-commerce began to take hold and entire industries were trying to figure out how to leverage the new, connected world.
The ocean freight industry did something incredibly innovative for its time. While Expedia was a fine inspiration, the reality of a major shipper logging into 15 different carrier websites to manage tens of thousands of containers was not realistic.
So, in 2002, the top ocean lines got together and formed digital alliances to launch industry portals - led by Inttra and GT Nexus. Fierce competitors who were not known for advanced innovation saw the future and knew they had to provide a way for their biggest, most important customers with a single digital gateway to all carriers. The Sabre for ocean freight was born.
Technology has come a long way since 2002, but the portals are still in place today, providing digital access for bookings, shipping instructions, bills of lading and shipment status updates for thousands of companies. Most people assumed the manual aspects of ocean freight orchestration had been solved and turned their attention to other areas of the supply chain.
There’s Still a lot of vital information flying around in emails
Fast forward 20 years and it turns out that the ocean freight booking process is still heavily reliant on email and PDF attachments. While the booking portals efficiently collect and acknowledge the transactions they were designed to support, there can be anywhere from 5 to 15 updates that take place between carriers and their customers between the booking until the container is loaded and the ship sets sail. Those updates are delivered via email.
The range of information being communicated via email are important in terms of making sure goods are moving as planned.
Here is one real example of an email communications thread related to a single booking, over a 30-day period:
- ETA Change
- Waybill available
- Container Loaded
- Empty Container to shipper
- Booking confirmation
- Container to consignee
- Container discharged at PoD
This is vital information. And it’s happening tens of thousands of times every day. If there were enough people scanning email boxes and rekeying updates into a different system with precision, it might be possible to keep up, but that is not close to happening.
Large forwarders or shippers that move thousands of TEUs receive email updates that can number in the millions! The updates also all have different information standards which are usually delivered in static PDF attachments. The impacts of not staying on top of the various updates in a timely fashion results in missed sailings, delays, added costs, and disruptions that cascade all the way to the final destination. This is a big problem that few are aware of.
Logistics Technology has Matured Significantly
The early shipping portals ran below the waterline supported by a complex array of EDI connections between the technology companies and the back office operational systems of the carriers. But EDI is expensive, brittle, and hard to maintain at any level of scale.
At the same time, there is a lot of different supply chain tech deployed around the world, serving as vital operational systems in the various corners of the partner ecosystem. New innovation and change management is a daunting hurdle. This is why email hangs on as a primary means of electronic communication across so much of the supply chain. Everyone has email and everyone uses it.
However, the capability now exists to digitally read and contextualize unstructured data such as email and PDF attachments without human intervention. Through advances in Artificial Intelligence (AI), large language models, and machine learning, systems can process unlimited amounts of unstructured data across any medium - even email and PDFs. So rather than trying to force more change on beleaguered partners, simply allow them to keep communicating the way they do today and the technology will connect the dots.
The industry needs to turn its innovation attention back to ocean shipping. The immense investments in planning systems and elaborate last-mile distribution networks are not being realized if the vital “middle leg” of logistics is performing at 70%, or worse.
It’s an unacceptable concept to think of starting the dream vacation being stranded at Heathrow for 20 hours, while trying to rebook a connecting flight to Geneva so you don’t lose the deposit at Four Seasons Hotel des Bergues. Importers should feel exactly the same way when they are forced to write off inventory that was too late because nobody at origin saw the emails from the carriers.