Trade has been around for more than 1,50,000 years and unlike earlier times the use of barter services for goods has evolved into monetary exchange for goods. Trade has a major role in developing global economies as it has helped balance the need of goods and resources for all the countries in the world. The US military used containerised ships to deliver mass supplies to a war-zone in South East Asia, during the Vietnam War in the mid 1960’s and thereafter container shipping turned into the most efficient option for cargo movement. From then on,the industry began to grow and it quickly became the backbone of worldwide trade. Throughout the 1970’s and 1980’s, containerised shipping grew exponentially and trade routes between Asia, Africa, Europe, Oceania and USA were developed. The rising needs of rapidly growing populations could be met by transporting goods and resources between countries, and the container shipping industry has made this process more efficient.
The reality which haunts us is that global trade, which is one of the biggest and oldest industries in the world, still operates in old fashioned methods. Only in the last decade, specifically the year 2017 was a turning point for the global shippingindustry, as the introduction of mega ships by liners, consolidations to create giant shipping companies by eliminating smaller competitors, and technology has changed the age old functioning of trade within the industry. Witnessing a worldwide boom and introduction of advancement in technology, the shipping industry has adopted digitalization with a warm embrace with an optimistic vision for the future. Disruptive technology, such as Blockchain, the Internet of Things (IoT) and Artificial Intelligence (AI) in recent years have moved from newcomer oddities to ideas that are increasingly discussed in terms of having potentially transformative impacts on the industry.
Let us look at the common problem that most shipper’s face with container shipping before the execution of any shipment, i.e.: confirming a freight rate to move their cargo. Depending on the nature of the shipper’s operation, they may either use a SPOT rate or a CONTRACT rate. A SPOT rate is a one-time freight rate applicable for a shipment for a specific sailing. A CONTRACT rate is a fixed rate with a carrier or a local service provider (LSP) for a defined time period. Freight forwarders act as a middle agent allowing the shipper to avoid the
hassles of extracting, reviewing and finalising of rates for their shipments. The freight spot rate market fits specific needs for smaller shippers that do not have enough volume to obtain yearly pricing contracts. By aligning with an LSP, smaller shippers do have other options because the LSP can consolidate these smaller shipper volumes with its other customers to produce value pricing options to hold yearly pricing. In comparison to medium and larger shipper’s whose volumes are huge and they can directly negotiate with carriers for annual contract rates. In recent times, most of the major shipping lines have their rates available on their website with customer based individual logins. Freight forwarders can use this to their advantage by having a common platform, consolidating various shipping line rates available to the shipper online which eliminates the time consuming activity of requesting and reviewing rates from multiple carriers. It adds convenience and makes the shipper’s choice simplified. With carriers digitalising, forwarders who can offer instant freight prices to their shipper consolidating various carrier options on screen, will stand a greater chance of winning business. They are empowering shippers with the relevant data to make a faster shipment decision.
The focus on digitalization will help the industry establish faster network transactions, cargo routing, forecasting and data driven pricing decisions. However, the continuous use of traditional methods by carriers can be due to thefear of investment and cost enhancement for putting new systems in place. Technology will continue to be a major driver and a game changer for carriers who are willing to take the risk and have potential to spend for these adoptions. Keeping pace with new advancements can help improve decision making within the management of shipping and routing, providing faster and more efficient trade service. Digital information, computer coding and new technological infrastructure will be the new drivers of the future world.
Challenge for everyone in the shipping industry.
However, digitalization will help deliver better business results and have better control over trade and operational risk under one window. Cloud technology within the digitalization wave will enable the opportunities further.
Amidst the digital buzz, the DCSA (Digital Container Shipping Association) is an organisation set up by professionals from the largest shipping companies, headquartered in The Netherlands in 2019. Their mission is to digitally interconnect the shipping industry and enable customers with a choice of seamless, easy-to-use services that provide the flexibility to meet their business and sustainability goal.(https://dcsa.org/ )
The complexities within world markets have increased and the shipping industry has grown with lots of competition along with regulations that need to be followed. To keep up with these complexities and face growing markets, improvement in the business models with the help of innovation and technology is a must. With the advancements of technology worldwide in various forms of businesses, the shipping industry will be eventually having to adjust and introduce digitalization into its business model. The digitalisation evolution has only just begun, and it will continue to shape the industry’s future in every aspect.