Raising the bar in technological advancement

Singapore freight forwarders – Star Concord
10-Jun-2024

Despite the recent progress the shipping industry has made when it comes to technological advancement and standardisation, there is still a long way to go when it comes to establishing a widespread foundation. 

Digitalisation is central to advancing the logistics industry at a pace that can keep up with its growth. Yet the rate at which this is achieved is largely dependent on how ready an industry is for this change.

For example, when it comes to digitalisation, the shipping industry still lags behind other sectors – including aviation, banking and telecommunications. Given the complexity and quantity of data that must be transferred on a daily basis, the sheer number of parties involved in the process, and the long history of reliance on paper, stakeholders are often reluctant to take the first step. 

A common concern is that, if a company puts resources into developing processes to facilitate digital data transfer, they may not be compatible with those of other stakeholders in the supply chain.    

Having common standards in place negates this issue by ensuring all businesses are operating along the same guidelines – in turn, giving businesses the confidence to move forward with implementation. In this regard, standardisation is perhaps the most important catalyst needed to advance digitalisation within the shipping sector.

“Digital Container Shipping Association’s (DCSA)Digital Trade Initiative aims to develop standards and facilitate the end-to-end digitalisation of the container trade documentation process for all stakeholders, starting with the electronic Bill of Lading (eBL). A universal eBL will create a more efficient, cost-effective supply chain that is secure and environmentally friendly,” Thomas Bagge, CEO of DCSA, stated.

“The Bill of Lading (B/L) is the cornerstone of global trade but is currently predominantly paper-based. This creates a vast array of issues that can be solved by achieving widespread adoption of the eBL. For example, the exchange of paper B/Ls is expensive, costing around US$11 billion per year. If stakeholders were to transition to the eBL, they could save US$6.5 billion in direct costs.

“Additionally, paper B/Ls are being constantly created, requiring thousands of pieces of paper that must then be manually inspected by customs officials.

This is an inefficient, time-consuming process that is vulnerable to human error, and also presents a security risk. 

“Another advantage of the eBL is improved transparency, as digitalising trade documentation throughout the supply chain means that stakeholders have continued access to accurate, up-to-date information. This improves efficiency in day-to-day operations, allowing for the effective management of shipment movements. 

“Finally, traditional B/Ls have a negative environmental impact due to mass paper production and printing. A digital transition could potentially reduce greenhouse gas emissions by 32 to 86 kg per end-to-end transaction.”

Timeline for technology

Despite the recent progress the industry has made towards digitalisation and standardisation, there is still a long way to go when it comes to establishing a widespread technological foundation. 

Consider the eBL, for example, where there are a number of key obstacles. While there is an incredibly strong business case for its uptake, for many stakeholders the benefits are still unclear – particularly at organisational level. What’s more, while many actors within the supply chain rely on shipping to transport or receive goods, shipping is not their core business, so technological innovation within the sector is less of a priority. 

In addition, legal and regulatory inconsistencies remain a significant hurdle. While the use of the eBL is possible in many countries, confusion around its adoption persists due to inconsistent stances. Meanwhile, in some jurisdictions, electronic documents are banned altogether. 

Nevertheless, regulation is catching up to the benefits of eBLs. The UK passed the Electronic Trade Documents Act in 2023, ensuring the legal recognition of electronic documents. Meanwhile, the UN Model Law on Electronic Transferable Records remains a significant driver of global digitalisation. 

Stakeholder collaboration is also gaining support, with the Future of International Trade (FIT) Alliance launching its eBL declaration to encourage action from stakeholders throughout the industry. 

“Given global trade is expected to triple by 2050, digitalisation will become increasingly crucial: while paper-based practices cannot support this growth, digitalisation can thanks to optimised efficiency,” Bagge outlined.

“One part of DCSA’s mission is to facilitate digitalisation by supporting the widespread adoption of the eBL. The eBL is a legal electronic document that is critical to internal trade by documenting the shipment of cargo, operating as a contract of carriage. 

“By creating an interoperable system, the eBL will speed up the process of data exchange, reduce errors, and improve transparency throughout the supply chain.”

 

 

 

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Author: Edward Hardy