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June 23, 2021

Voyager News, Voyager Blogs

Digital shipping takes a lesson in tough love

What can shipping learn from the airline industry? Not a new question certainly but one whose importance has not diminished as owners struggle to embrace digitalisation beyond their internal processes and into their supply chains.

And it seems there is plenty shipping can still learn, specifically that it needs to get tougher with IT vendors and suppliers on standards and interoperability, reset its relationship with forwarders and have financial stakeholders fully onside. Fail in any one of these and the fresh talent the industry needs will quickly choose a different career.

Henk Mulder, Head of Digital Cargo at IATA and Andre Simha, Chief Digital Officer at MSC and Chair of the Digital Container Shipping Association had the opportunity to compare notes during the Smart Maritime Network Athens Conference, despite both being locked down in Geneva by travel bans and the imminent arrival of the US president.

As Simha noted, the airlines’ progress to digitalisation has been similar to shipping’s; from exchange of paper to EDI then to open APIs, with the main difference that without better standards for data exchange there was less ability to build big solutions, so results are limited to basic messages.

“It’s interesting to see that so many airlines were able to get together; in maritime we have fewer [container] lines but you got together to create standards and got them adopted,” he said. The motivations – efficiency, ecommerce and digital platforms – are similar, so how did IATA manage it?

As an ‘old organisation’ founded in 1929 when there were few planes in the sky it was easy for the airlines to get together “over brandy and cigars agree how to do business and that spirit has never left the organisation,” Mulder quipped.

“When airlines decide to do something, the mindset is that they will agree and once they agree it will be implemented, to the point where some decisions are mandatory. When certain things are decided, every single airline has to implement them or may be asked to leave.” Ironically digitalisation is not a topic IATA cannot enforce, “if we could we would have finished the job 20 years ago” he added.

And having fewer voices doesn’t always help. “With more people it’s a democracy; fewer members is harder so in that sense, it’s interesting to see what strategies will work for maritime.”

Simha said a similar camaraderie exists in liner shipping and what the lines can agree on is that technology is not the differentiator. “In the old days one carrier would invest in an app or a solution then six months later everyone would copy it, which is not efficient.” Air and sea transport share a lot of customers but shipping deals with many more third parties “so many to deal with that there is little time to look at standards and efficiencies,” he added.

The DCSA has to talk to customers, regulators customs authorities, governments, vendors, ports and terminals and convince all of them that standards on exchange of data should be a priority. Each has legacy systems of production which dictate how when and where changes are made. “Many companies will wait before they dive in and that’s what slows us down.”

To Mulder, ‘standards should be no different from products’ but the problem for both transport modes is that they often don’t have a direct relationship with customers because a forwarder is acting on their behalf. It’s a problem IATA has tried to solve and many forwarders have expressed support for change.

“But what we find is that forwarders themselves are siloed. If you walked in to talk to them about maritime, air, road or rail they will split you up across the sectors, so we need to change the conversation and perhaps get maritime and airline interests together. Every company has digitalised, it’s just that what comes out is not the same,” Mulder said.

It has taken shipping a long time to achieve basic digital interactions but Simha pointed out it is also held back by having to please not just customers but banks, insurance and other stakeholders that each have to approve use of any new technology.

The use of proprietary software and systems is also a common bugbear. Simha shared the experience of two electronic bill of lading providers on the same Zoom call ‘who were clearly holding back’ from sharing about their technology. At an IATA workshop Mulder saw vendors skirting the same scrutiny ‘while still whispering to their customers’. But he said having IATA in the room creates a platform so that “sooner or later they are going to have to comply with a standard; communication has to come from all sides’.

The critical takeaway, as ever, is that failure to digitalise makes shipping an even less appealing career option to the best and brightest. Mulder had a chastening warning that in 10 years time, his college-age kids could be running companies. “We will be reporting to digital natives and I can’t imagine a scenario in which they will accept people in warehouses with clipboards and paper trade documents. Even now I’m still presented with IT projects written in code created in 1970; they will not accept that.”

This ‘younger generation’ will soon be the majority of the workforce and to Simha the argument “is not about should we or should we not. In MSC digital is top of the agenda but can’t do it alone. We have to do it because the young will not accept working that way or they won’t be working in shipping.”

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