Jan 05 | 2022
Digital Transformation is No Dark Art
Preview story from Breakbulk magazine's January-February 2022 Issue, available Friday, Jan 21
By Lars Greiner
Despite how far I have wandered from it, I still regard myself as an old-school shipbroker with “my word is my bond” engraved on my heart. With all the changes in the supply chain industry, logistics and shipping, I cannot help but investigate what is meant by the buzzwords of digitalization and digital transformation.
The terms are thrown around with happy abandon and can mean anything from the development of electronically transferred documents all the way through to the automation of handling equipment, often including, bizarrely, the move to new ecologically friendlier fuels. Similarly, the term PCS (port community system) often has many interpretations, sometimes referring to physical port movements and at other times to data transfer. One can easily be confused by these, so we need to be clear in what we mean when we use these terms.
Let us take a brief look at the development of commercial shipping and the rise of the freight forwarder. From the early 19th century, the traditional shipbroker was responsible for goods carried on vessels outbound from their ports. They took an active hand in managing all business matters on behalf of the owners for whom they worked, ensuring vessels were booked and customs clearances and insurances were placed and in order, even going as far as to collect freight on behalf of the owner. They were the official go-between for ship and cargo owners and were paid a fee for this.
Evolution of Roles
Over time, they split into specialisms with brokers for types of cargoes, vessels, and even services – such as sale and purchase. Groups split off to offer additional services, in the form of ships’ agencies, and freight forwarders, who handled the overview of the cargo, often door to door. Perhaps the key term in these developments is simple: value-add. These services followed the growth in international trade, filling gaps on behalf of the ship and cargo owners. As trade grew, so did the complexity and role of these intermediaries into a major global industry, underlining globalization and modern development.
This is where data interchange enters. A catalyst for trade and, initially at least, for the complexity of the information flows within the trade. The role of the intermediary became one of untangling and overseeing the required flow of data and ensuring that anyone with something to transport was able to do it. Efficiencies were not considered; the only consideration was ensuring that complete transport requirements were undertaken correctly. The unanticipated result was a rise in unscrupulous parties who were able to exploit the inefficiencies and complexities created by the rapid rise in volumes and documentation requirements, and an explosion of service providers across the supply chain.
The success of the large modern shipping and logistics companies lies very firmly in their strength historically in managing these flows, often through solid processes and increasingly with a base of solid systems.
For a long time, many have described the industry – be it shipping, forwarding, or the supply chain is general – as broken. Why? Because of high levels of inefficiencies and illogical developments that continue to take place in the industry. The digital entrepreneurs have noticed this, and they have come flooding into this industry, eager to improve the industry by simplifying it using digital tools.
Over time this has led to transformation of business models, as witnessed by the supply chain integration taking place in the container industry, with Maersk and DP World, among others, seeking to develop end-to-end solutions. Integration is already starting to occur in other transport industries – and it will happen through digital transformation. It is a logical development towards efficiencies through an increase in systemizing processes. No matter the buzzword used, the result is the same: getting cargo from one place to the next as cost effectively and as efficiently as possible, for the benefit of the third party that is the ultimate cargo owner: the customer.
Lars Martin Greiner is associate partner Middle East and Africa for HPC Hamburg Port Consulting.
