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The Impact of the E-Commerce Boom on Maritime Logistics

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By Brendan McCahill 2018-09-27 17:50:31

In today’s world of ocean shipping, many carriers have looked to technology to improve day-to-day operations—going beyond legacy systems and manual processes and moving towards more modern, effective and flexible technology solutions. With the substantial growth of international e-commerce, supply chain and logistics channels continue to change. This is driving innovation and convergence across key aspects of transportation: cargo shipping, fulfillment and customs compliance. As the maritime industry looks to further digitize, standardize, and ultimately streamline complex transportation processes, logistics-focused technology is becoming increasingly important.

A look at the international ecommerce landscape  

According to Statista, we’ll see a 246.15 percent increase in global retail e-commerce sales, from $1.3 trillion in 2014 to $4.5 trillion in 2021. This is nearly a threefold lift in online revenue – and this is just B2C international e-commerce. A 2017 Statista report estimated the B2B opportunity is nearly three times that of consumer international sales. As international demand grows for products and services, all of the service providers in transportation, but particularly the maritime industry, will need to keep up with rapidly changing supporting technologies while simultaneously improving customer service. 

When it comes to the convergence of e-commerce and logistics, especially on the international trade front, many heavyweights have already taken actions that disrupt the industry. Amazon, for instance, now has forwarding and custom brokerage licenses. When you compare Amazon’s delivery mentality on the domestic front (e.g., same day via drone) with the more traditional ocean carrier industry, they are driving challenging new standards for other types of logistics providers to meet. 

In addition, global sourcing and international fulfillment web sites like Alibaba are creating the opportunity for products and buyers to come together over vast geographic distances to offer consumers a myriad number of referenced and reputable suppliers. Combine all of this with a new round of Internet-based freight forwarder disruptors, who move freight globally by ocean, air, rail and truck, and the indication is that transactions need to become further aggregated and streamlined to meet both B2C and B2B customer needs.

Technological transformations 

Technologies and content have continued to develop that merge e-commerce platforms and processes with international shipping, duty and tax calculation, artificial intelligence (AI)/expert systems in HS Classification and compliance steps for manifest and customs declarations. These types of international commerce technologies are starting to be leveraged by mid-sized forwarders and layered service providers (LSPs) to offer full service e-commerce fulfillment options to international sellers.

The initiatives around digitizing and streamlining communication at ports for managing coordination with haulers, container tracking and electronic documentation will have a big impact on port congestion and the efficiency of port operations, as well as surrounding infrastructure challenges in the coming years. The fundamental technologies to address this have been available for some time, however, packaging and industry participation are just now starting to gain momentum. It remains to be seen how big of an impact blockchain will have on maritime logistics, though there are a lot of initiatives in the area unfolding now. For example, Maersk is working on blockchain with key customers (e.g., Walmart, Marks & Spencer) and, while they may view this as more experimental than an explosive trend, they are preparing.

Perhaps the greatest innovation being embraced by logistics providers is transforming themselves into data providers that happen to move cargo for a living. For example, consider how parcel delivery companies have integrated shipment data into the email notifications they send. Consumers receive an email that a parcel is picked up, loaded, departed, transferred through a switch point (or multiple switch points), and dropped at the door. The ultimate delivery of the package becomes almost an afterthought, given the data-driven ability to inundate consumers with order information. The ability to provide real-time order status information is a new role for the delivery sector—yet one that is expected now in the e-commerce arena; the pressure to meet expectations like these will only continue. 

Competing on data availability and dissemination 

In maritime logistics, fusing seemingly disparate data sets into business intelligence tools is how “big data” will continue to evolve and help organizations set themselves apart from the competition. Many people are surprised by the amount of information on the transport of goods that is available from international ocean and air manifests. When supply chain stakeholders know how to access that data, and then how to manipulate and report on it to make it meaningful, valuable insights can be gleaned. 

If, for example, you merge data about volumes of cargo with port productivity, space berthed at those ports and high productivity, and overlay that into a calendar for a view of historical trends, you have a data set that provides insights to help set pricing based on utilization and efficiency (i.e., there should not be a low expectation on price for cargo while the carrier is offering a highly efficient transportation service). More broadly, intelligence relating to supply chain risk, sourcing options and competitive intelligence on sources, volumes and lanes is extremely useful for strategic supply chain analysis, procurement, risk management initiatives, finance and commodity analysis, and more. With the advent of AI/machine learning, we expect even more valuable insights to come from the massive amount of data available on ocean moves in particular.

On its own, however, data is too voluminous and too disaggregated to offer a meaningful benefit. Leading carriers are those that are effectively using technology to manipulate data to better inform business initiatives and fulfill key tasks (e.g., developing market share trends, trade lane utilization, rating and yield management). Innovators are removing the fiefdoms of microdata control and, instead, managing all the data they create or subscribe to as a corporate resource, instead of corporate overhead.

Parting Thoughts

Across all modes of transportation, the supply chain is continuing to go digital. As we continue to see the impacts on ocean carriers associated with international e-commerce, technology will play an increasingly important role in helping the maritime industry meet numerous logistics challenges. From compliance with customs and security regulations, to strategically leveraging global trade data, to enhancing consistent transportation performance, technology can help the maritime industry build more agile supply chain systems.

Brendan McCahill is SVP Global Trade Data, Descartes Systems Group.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.