Ports & Terminals: Logistics Ripe for Transformation

 

See related story, "Expanding Digital Solutions for Breakbulk"

By Felicity Landon

Earlier this year, Abu Dhabi Terminals unveiled a new AI-focused partnership with Microsoft, which promises to enhance container tracking and autonomous shuttle capabilities at Khalifa Port.

The new tech will enable the introduction of AI-based smart tracking solutions that will give 100 percent traceability of containers, and is part of a commitment to reduce carbon, costs and turnaround times at the port.

Containers are seen as the natural target for the digital transformation of ports, but they are by no means the only opportunity. Efficiency in handling breakbulk and project cargoes could also be driven forward with the right digital solutions – or, to put it the other way, a lack of tracking and visibility can create a variety of risks, says Jonathan Koh, managing director at Trade Facilitation Pte Ltd.

For an extreme example, he points to the catastrophe in Lebanon last year, when 2,750 tonnes of ammonium nitrate stored unsafely at the Port of Beirut in a warehouse for almost six years exploded.

“The cargo was left in the warehouse for years. It was destined for another place, but the authorities intervened, and the cargo was offloaded in Beirut. Because there was not a proper system, it was ‘forgotten’ until the explosion,” he said. “I think that is the story behind breakbulk – if the clearance is not done, the cargo is forgotten and can end up stored with inadequate ventilation or in other poor conditions, perhaps exposed to the weather, not under cover, difficult to trace within the port parameters and also, then, susceptible to pilferage.

“You want to minimize the time spent for such breakbulk materials to be left or forgotten in the port.”


Storage Hierarchy

In ports facing congestion issues, containers are usually top of the storage hierarchy, Koh pointed out. “Breakbulk is likely to have a more limited area – ports will put it ‘wherever’ and it can be very difficult to track down because it doesn’t have a container number.”

The reality is that breakbulk items are often not properly stored, managed or tracked in a port; they can end up in an out-of-the-way yard which even Marie Kondo couldn’t sort out, Koh said. “It happens quite a lot – you will find rolls of steel, tires, sacks of flour.”

The introduction of a Single Window system could cover breakbulk cargoes just as effectively as containers and other cargoes, he said. “In the end it is about efficiency of the port operation. But it is also about costs – a port will only give a certain number of days when there is no charge for storage, to allow for the clearance process to happen.”

If the bureaucracy is inefficient and cargoes get delayed, storage charges start to build up. “There lies the concern, because your materials may not be under the roof. And you are paying the costs.”

Koh has recently been working on a project in Saudi Arabia to increase efficiencies around the country’s industrial exemption rules. He said this project would be applicable in many other Gulf Cooperation Council countries.

“Raw materials required for production, which are typically breakbulk, cement, steel and even large machinery for production, can come in under the industrial exemption scheme, as long as the importer, manufacturer or factory owner can justify that these materials are for manufacturing or value-added activities inside the country.

“When an application for industrial exemption is confirmed, duties and taxes can be deferred indefinitely. This is a common regulation across the GCC and applies to materials for production and construction, even production of finished goods for domestic consumption – they don’t have to be re-exported. The exemption of duty together with VAT can be substantial.”

However, the system throws up bureaucratic challenges. The factory or manufacturer, who is the consignee, must deal with the government department that grants the exemption – but once the exemption is confirmed, the actual checking is done by Customs.

“It may not be necessarily seamless – there might be breaks in communication between the industry agency and Customs, and that means delays. At present, a factory will have one license number which can be used like a multi-entry visa for the stipulated breakbulk materials. However, when the products enter the country, you are facing another authority, and there lies the problem.” Sometimes the license will indicate a quote for the factory; each time the goods come in, the authorities at the border will carry out reconciliation of the quota. There can be a lot of paperwork and delays which can mean the cargo is stuck in the port.

Koh’s work involved analyzing a way to bring business and exemption application processing into a national Single Window, and so streamline the system.

“It would be resolved by a Single Window. What Customs wants is verification so when the cargo comes to the port and you produce the license number for the factory, Customs can seek verification. A Single Window would enable faster verification, reconciliation and clearance.

“At present, some people with the exemption are complaining that their cargo, although having the exemption, still has to spend a long time waiting for clearance. The reason is the break in communication and that is a typical, common occurrence.”


Why Such Slow Adoption?

Among the industries that have shown a lot of interest in digital technology, logistics is “like a stepbrother,” said Meenal Madavi, business head at Oman-based Khimji Ramdas ITC, or KITC.

“It is surprising that adoption has taken so long – logistics should have been one of the first to get on the digital technology wave,” she said. “In the end, the entire world trade depends on how good your digital platforms are for the exchange of data.”

Two years ago, KITC announced a partnership with India’s Kale Logistics Solutions to accelerate trade facilitation, developing services “to spur more value for clients in the logistics industry.”

Oman has set out its ambitions to become a key logistics hub for the Middle East region, with logistics being one of five major industries being targeted as the country diversifies its economy away from its reliance on oil (the others being fishing, mining, tourism and manufacturing). The vision is to become a global logistics hub by 2040, increasing the sector’s contribution to GDP to RO14 billion by then.

“Logistics comes very naturally to the region because of the wonderful location between East and West, with good access to Asia and even better access to the Arab world, Turkey and Europe,” Madavi said. “To optimize any industry and compete worldwide, you need investment in technology.

“With that view, KITC decided to focus on investing in each of the five sunrise industries. For logistics, Kale makes the perfect partner with its great credentials in this particular domain, especially in African and Asian countries – they understand the bureaucracy and how to work with this and still have success. Their technical and functional understanding of the industry is what really struck us. They bring the expertise from the tech/logistics standpoint and we bring our expertise from the local Oman perspective.”

Oman, with its strategic location, has plans for a semi-processing and packaging industry for insourced goods from Asia, she explained.

KITC is working with Kale on two government-related projects: creating a terminal operating system for a dryport and a digital corridor for the fishing ministry. This second project will cover the entire logistics of fishing, including equipment required for fishing ports and processing, and the processed goods coming out.

Meanwhile, the partners are working on numerous projects for private entities, around automation of warehousing and forwarding. “The need for more digitalization across all the zones of logistics is huge, whether oil and gas, fishing or manufacturing, and that includes breakbulk and project cargoes,” Madavi said. “Visibility directly translates to revenue.”

Digitalization has gained a lot of recognition now in the GCC region – both industries and consumers are waking up to it, she added. “Why should the logistics industry be left behind? Why should we get yards of paper and printouts, when it can be better managed with digital solutions?”


Regional Logistics Focus

Oman is not alone in its logistics ambitions. Saudi Arabia and the UAE are targeting the sector in their diversification strategies. Spain’s warehouse automation specialist SmartLog Group has announced it is entering these markets. Gonzalo Gomez, new markets research manager, noted that the group expects an increase in warehouse automation across the Middle East. “However, e-commerce businesses will not be the only concerned players. General retail, pharmaceutical, hospital and healthcare, and other industrial sectors will become drivers of innovation throughout the warehouse automation sector in the region,” he told local press.

Gulftainer, whose operations include Khorfakkan Container Terminal, Sharjah Container Terminal and Sharjah Inland Container Depot in the UAE as well as terminal operations in Iraq and Saudi Arabia, ran a year-long Future of Ports 2021 event, in line with its digital transformation drive. Tech startups were invited to submit disruptive ideas to transform ports and there were more than 2,000 submissions across various categories including the Internet of Things and robo-doctors, artificial intelligence and autonomous drones, big data and advanced analytics, and blockchain.

Four winners were selected to pilot their projects:

• ZaiNar, providing real-time 3D location tracking.

• eYard, using AI to analyze thousands of potential operational scenarios to make ports smarter, eliminating unproductive moves and optimizing delivery time and storage space.

• ThroughPut, using Big Data to optimize supply chains and address operational bottlenecks.

• Morpheus Networks, winner of the blockchain category, providing a SaaS platform for data sharing and visibility across the supply chain.

Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.

PHOTOS:

Photo 1: Abu Dhabi Terminals has invested in an AI-focused partnership with Microsoft. CREDIT: ABU DHABI PORTS

Photo 2: Introducing a Single Window system could cover breakbulk as effectively as containers and other cargoes. CREDIT: ABU DHABI PORTS

Photo 3: A Single Window cargo processing system would enable faster verification, reconciliation and clearance of breakbulk cargoes. CREDIT: ABU DHABI PORTS