Container sector a bright spot on journey to digitalisation

March 6, 2019

“The time has come for the container shipping industry to join the digital revolution.” So said Boston Consulting Group just over a year ago. And time it was, if not arguably long overdue. As BCG went on to say, “carriers run the risk of losing direct contact with some of their most profitable customers,” if they did nothing.

And the container shipping sector listened and responded. In truth, for the lines it was no decision at all. The relentless pursuit of scale had dazzled technically but failed to deliver sustained profits or schedule reliability. The trouble was that for all the progress, the lines’ customer relationships were anywhere between testy and toxic.

Digitalisation might prove an unlikely balm to this running sore, but there is some evidence that better online tools, tracking and booking visibility and the feeling that the lines were more aware of their needs was what customers wanted.

A recent survey by freight platform Freightos examined the digital strategies of the world’s top 30 air and ocean carriers. The survey employed 26 different parameters and in every category, ocean carriers were reported, on average to be more digitally mature than their airline counterparts.

As Freightos notes in the resulting white paper, digitalisation “opens the door for carriers to strengthen their direct relationships with end customers, further reduce their costs (including for fuel, vessel operation, and customer service), and pursue new revenue streams beyond traditional shipping services”.

Even so, only a few leading carriers have applied digital technologies toward enhancing their commercial and operational activities. Box tracking, empty-container repositioning, document management, network design, and pricing are among the activities that these carriers have started to digitalize.

Until recently, a benchmark study on carrier digital maturity would have had very little to measure, outside connections via Electronic Data Interchange (EDI – a system developed in the era of punch-card computing) and some largely non-interactive websites.

There had been some pace-setters but by 2015, it had become apparent that there was a groundswell of change. Carriers have been maturing their digital efforts through communicating directly with digital systems – internally and with customers – using real-time APIs. A better online experience provides a one-stop shop and a B2C-like ecommerce experience for business customers and prospects on their platform.

The last element is the most difficult; transformation that focusses top-down on changing internal and external systems, processes and culture.

Company-wide transformation requires a systemic program of change; challenging for an industry characterised by independent offices reliant on siloed systems and processes. Without a unified effort to break down the silos together, transformation efforts can struggle.

Even so, ocean carriers are more likely to invest in transformation than airlines. Half of all top ocean carriers have transformation (digitalisation or innovation) executive roles, separate from the traditional CIO/CTO role and 40% publish a digital strategy. Maersk highlighted this need back in 2017. However, this has yet to reach the airline sector, where Lufthansa is the lone airline this survey found to have a cargo transformation role.

Freightos acknowledges there is still a long way to go. Even though ocean carriers lead in every category, technology has been slow to transition from the deck to the cargo hold. While smaller companies often leverage shorter transformation times to get an edge, results show that, the larger the carrier, the more digitally mature they are likely to be.

Where the digital rubber meets the road, only five carriers were identified as having real-time API connectivity to customer systems and only two of these – Maersk and MSC – are in maritime.
APIs in particular are far easier to implement and carry richer more flexible data in real-time. APIs obviate unnecessary delays with booking, document transfers or shipment updates. For all that carriers still largely rely on EDI (or worse, human communication) to exchange information, their most valued customers get a raw deal with visibility, communication, accuracy and resourcing requirements.

APIs are also an ecosystem game changer. Once built, they can power any number of supply chain platforms. As an example, consider Google Maps, the ubiquitous geographic layer for apps worldwide. It reached this status because it combines rock-solid data with an easy API that companies can build directly into their product.

Backend capabilities don’t get much media attention, but highly visible customer portals do. Carrier customer offerings weren’t always impressive and until very recently, they largely ignored customers, leaving intermediaries to pick up the slack.

Some slow moving datasets, like ocean schedules, were easily migrated online. Airline schedules were already online for the benefit of passengers. But others became sticking points, especially when data was unavailable internally. Until booking, allocation and pricing come together for real-time booking and confirmation, customers can’t access a one-stop shop, highlighting the gap between everyday consumer experiences and current business processes.

As Freightos points out, real-time connection must be more than systems connecting, it must also include people connecting. Providing support, typically in the shape of live chat has been a key aspect of digital freight forwarders’ success and something that the lines will have to consider implementing more widely.

There are bright spots though. Ocean carriers rated much higher than air carriers on the door to door delivery and RFQ form parameters. This, perhaps, isn’t surprising as many carriers have traditionally sought to expand their service offerings. Low-touch digital platforms are one part of the puzzle carriers need to expand direct relationships from large beneficial cargo owners to small and medium size companies as well.

Another encouraging sign is the recent willingness to sponsor accelerator or incubator programs. A consolidated sector like containers provides ocean carriers with the incentive to invest in shepherding new products and ideas to market.

Some passenger airline units support accelerators, but ocean carriers are more likely to tie up with in-house incubator/accelerator programs than their airborne counterparts. CMA CGM and Maersk excel, boasting involvement in three programs apiece. In addition, they are more likely to invest in technology, like MSC and CMA CGM’s investment in Traxens shipment tracking.

It’s encouraging to see an example of where shipping leads – rather than lags the tech trend and natural perhaps that it is the container sector that shows the way. For as the original BCG report also pointed out; although the challenges of digital transformation can be significant, it is never too late to get started.