Navigating the communications challenges of the global ocean shipping industry


Published on

‘The ocean shipping industry has never been a good choice for CEO’s seeking a normal night’s sleep...’. This paper explores the dependency of the world’s freight lanes on the global telecoms infrastructure.

Published in: Technology, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Navigating the communications challenges of the global ocean shipping industry

  1. 1. Navigating the CommunicationsChallenges of the Global OceanShipping IndustryJames E. deMin, Gerard O’Neill 1
  2. 2. ContentsIntroduction 3Background on the Evolution of Containerization 5and the Global Ocean Shipping IndustryContainer Ships 7Container Ports and Terminals 8Railways 10Trucks 11Barges 12Regulatory Environment 14Transporting and Tracking Cargo 16The Role of Technology 18Emerging Technology Trends in the Ocean Shipping Industry 19Summary 21 2
  3. 3. IntroductionThe ocean shipping industry has never • How will the recent jump in crude oil prices impactbeen a good choice for CEOs seeking a rebounds of the US and European economies,normal night’s sleep. Even in the best of global economic growth and the competitiveness of sourcing production in Asia?times, operating a global shipping business • there is a downturn in global trade, how are we Ifrequires liner executives to roam the world, going to fill the ever-larger container ships thatincurring far more than their fair share of are soon to join our fleet? Did we overestimate thejet lag and hotel nights. advantages of scale and capacity? • Longer term considerations include: where can weRecent global events have proved detrimental to shipping create competitive advantage and differentiation?activities. The aftermath of the Japanese tsunami, thelingering recession in the United States and Europe, the These are unsettling times for the global economy andslow-down of Chinese manufacturing output, sky-rocketing by extension, for the ocean shipping industry, whoseenergy prices and political tensions in the Middle East have vessels serve as “floating conveyor belts”, moving theall exacerbated the problems with the forthcoming delivery majority of international manufacturing output.of super-sized container ships ordered during peak times.During those lengthy international flights, ocean-shippingCEOs have plenty of time to ponder questions about theirindustry and companies, including: 3
  4. 4. IntroductionThe global ocean shipping industry is the backbone ofintercontinental value chains, carrying some 98 percent World trade has grown at anof global containerized trade volume and approximately60 percent of value (with the balance moving via air astonishing rate in recentfreight). Over the last five decades the ocean shipping decades and is in large partindustry has undergone a dramatic transition to integratedcontainer operations. Virtually all ocean cargo, apart from dependent upon the oceanbulk commodities such as oil, gas or grain has switchedto this containerized mode of transport. The benefits of shipping industry.modularization of general cargo into separate containersinclude highly efficient handling and the extremeversatility of vessels.World trade has grown at an astonishing rate in recentdecades and is in large part dependent upon the oceanshipping industry. Radical changes in cargo handlingcombined with enriched and growing populations inemerging markets have led shipbuilders to expand theirfrontiers of deadweight tonnage and speed with entirelynew vessel types. The result is an ocean transportationsystem that can carry enormous amounts of cargo swiftlyand reliably.However, this evolution has also created an increaseddependency upon information technology and theunderlying communications infrastructure, over whichenormous amounts of information must be similarlytransported. Accordingly, communications infrastructures,much like the newly developed vessels, container ports,trans-shipment terminals, drayage services etc. mustbe able to transport information with equal levels ofefficiency, security and flexibility. This capability isreferred to as ‘the intelligent network’. Ocean shippingis an industry based on numerous hand-offs of cargo(and information) amongst many diverse functions,geographies and system platforms. The efficiency andflexibility of the underlying communications infrastructureis of paramount importance. 4
  5. 5. The Evolution of Containerization andthe Global Ocean Shipping IndustryTo understand the global ocean container transportation with containerization. They failed to predict that the process of containerization itself wouldshipping industry, it is important to have a profound influence on the choice and geographicappreciate that it is a part of a highly- placement of producers.integrated system, involving numerous Not only have trade patterns and the types of cargo changed radically; the vessels that carry goods haveother critical industries and service almost changed beyond recognition. Similarly, today’sproviders. cargo-handling methods bear little resemblance to those that existed before.The concept of intermodal transportation dates back to The key to this change is three interlocked conceptsthe 18th century and actually predates railways. Some of that are much more than fashionable epithets:the earliest containers were those used for shipping coal containerization, intermodalism and globalization. Beforeon the Bridgewater canal in England in the 1780s. Coal the advent of standard 20 and 40-foot containers, worldcontainers (referred to as ‘loose boxes’ or ‘tubs’) were trade was a piecemeal undertaking, with sea and landsubsequently deployed on the early canals and railways segments accomplished in isolation, and little coordinationfor road and rail transfers – at the time road transport between the various independent operations. Shipownerswas carried out by horse-drawn vehicles. Wooden coal accepted cargo when it arrived at the pier. Shipper andcontainers used on railways date back to the 1830s on the recipient alike did not envisage so-called JIT (just-in-time)Liverpool and Manchester Railway, the world’s first inter- services. That luxury was simply not available and thecity passenger railway. en-route delays, which were always part of the transportIn the 1950s, a new standardized steel intermodal system, were an unavoidable reality of doing businesscontainer, based upon specifications from the US internationally.Department of Defense (DOD), began to revolutionise Today, all of this has changed. Sea-Land’s (the integratedfreight transportation. The International Organization for end-to-end transportation chain, evolved throughStandardization (ISO) later issued standards in 1968. recent decades) initial voyages over 50 years ago provedBy 2011, over 200 million container moves were taking the feasibility of container transport revolutionisingplace annually across world maritime ports, representing the movement of goods by allowing the sea and landgreater than 90 percent of all non-bulk cargo worldwide. segments to function as one integrated system.Container throughput is measured in 20-foot equivalentunits (commonly referred to as TEUs), representing a steelbox 20 × 8ft (6.10 × 2.44 m) (length × width), which canbe secured during handling and in transit using ‘twist-lock’ points, located at each corner of the container. Fewinitially foresaw the extensive influence of containerizationon the shipping industry.In the 1950s, Harvard University economist, Dr. BenjaminChinitz predicted that containerization would benefitthe state of New York, by allowing it to ship its industrialgoods to the southern US states more cheaply thanto other regions. However he did not anticipate thatcontainerization might also reduce the cost of importinggoods from abroad. In fact, most economic studies ofcontainerization at the time merely assumed shippingcompanies would begin replacing older forms of 5
  6. 6. The Evolution of Containerization and the Global Ocean Shipping IndustryOver the past five decades, this technological and labelled with a series of identification codes that includecommercial breakthrough has resulted in the near- the manufacturer code, the ownership code, usageworldwide demise of the break-bulk ships (in which cargo classification code, UN placard for hazardous goods andis stowed virtually by hand), an approach that had existed reference codes for additional transport control andalmost without change for centuries. security.Today’s container ships are the lynchpin of cargo Containers are capable of carrying up to 20-25 tonnes,transportation, but are only a part of the total integrated but transport costs are typically calculated in TEUs versusintermodal container transport system. Containers are weight. Automated information systems are in place tocommonly transported by a combination of container track every shipment throughout its journey and handleships, semi-trailer trucks, freight trains and river barges all of the related freight documentation part of a single journey without unpacking, but with These and every other aspect of this industry are highlymany handoffs and critical transfers of information and complex and designed to optimize an efficient end-to-documents. They are transferred between these modes end choreography of the flows of cargo and container cranes, reachstackers and various other This complexity ultimately creates extensive collaborationspecialized handling equipment at container terminals. requirements between numerous actors, sensory devicesEvery container has a unique BIC (Bureau International and systems for which the underlying communicationsdes Containers et du Transport Intermodal) code painted infrastructure must be properly designed in terms ofon the outside for identification and tracking, and is capacity, flexibility and security.Specialized container handling equipment 6
  7. 7. Container ShipsCustom-built container ships are used to transportcontainers by sea and once on-board the ships aretypically stacked up to seven units high.A key consideration in the size of container ships is thatlarger ships can exceed the capacity of important searoutes such as the Panama and Suez canals. The largestsize of container ship that is able to traverse the Panamacanal is referred to as Panamax, which at this point intime is approximately 5,000 TEUs. A third set of locks isplanned, as part of the Panama Canal expansion project,to accommodate container ships up to 12,000 TEUs infuture, comparable to the present Suezmax.As of December 2011, the top five ocean carriers interms of the number of TEUs (20-foot equivalent units)deployed are as follows: Ranking Company TEU Capacity Number of Ships 1 A.P. Moller-Maersk 2,150,888 545 Group 2 Mediterranean 1,638,962 414 Shipping Company 3 CMA CGM 1,100,007 384 4 American President 589,879 147 Triple-E container ship Lines At 400 meters long, 59 meters wide and 73 meters high, 5 Evergreen Marine 554,725 152 the Triple-E will be the largest vessel of any type on Corporation the water today. Its 18,000 TEU capacity is 16 percentTop ocean container carriers greater (2,500 containers) than today’s largest container vessel, the Emma Maersk. Also, the Triple-E will produceEconomies-of-scale considerations have dictated an 20 percent less CO2 per container moved, compared toupward trend in the sizes of container ships in order to the Emma Maersk and 50 percent less than the industryoptimise capacity and cost variables. The availability of average on the Asia-Europe trade lane. It will consumesufficiently large engines, sufficiently large ports and approximately 35 percent less fuel per container than theterminals capable of handling ultra-large container ships, 13,100 TEU vessels being delivered to other containeras well as the permissible maximum ship dimensions of shipping lines in the next few years, also for the Asia-some of the world’s main waterways – such as the Suez Europe service.canal and Singapore straits – have served to constrain thisgrowth. This massive scale was designed to provide an efficient, cost-optimized transport capability. As of June 2011,In 2011, Maersk announced a contract with South the cost to ship a container from China to the US isKorean-based Daewoo Shipbuilding Marine Engineering approximately $5,000, with oil at $100/bbl. Paradoxically,Co. Ltd, to construct a new ‘Triple-E’ family of container maritime transportation is the most energy efficientships with a capacity of 18,000 TEUs to put an emphasis mode, but bunker fuel accounts for about 50 percent ofon lower fuel consumption. By introducing the Triple-E total operating costs. As a result, any change in energyvessels in 2013, Maersk Line will be able to meet the prices has a direct impact on operations, as there areanticipated global sea transport demand, as well as limited options for passing along higher costs. Also, themaintain its market share. The first 10 vessels will be industry is subject to constantly changing regulations. Fordelivered in 2013 and 2014. The ships are called the example, local pressure to reduce environmental impact‘Triple-E’ class for the three main purposes behind has forced several ports to restrict ship engine idling timetheir creation (economy of scale, energy efficiency and drayage.and environmentally improved) and set a new industrybenchmark for size, capacity and fuel efficiency. 7
  8. 8. Container Ports and TerminalsA container terminal is a facility where trolley over the ship to lift the containers. Once the spreader locks onto the container, the container is lifted and movedcargo containers are trans-shipped over the dock and placed on a truck chassis (trailer). Thebetween different transport vessels and/or crane will also lift containers from chassis on the dock to load them onto the ship.vehicles for onward transportation.The trans-shipment may occur between container shipsand land transport vehicles, for example trains or trucks,in which case the terminal is described as a ‘maritimecontainer terminal’. Alternatively, the trans-shipmentmay be between land vehicles, typically between trainsand trucks, in which case the terminal is described as an‘Inland container terminal.’ Trans-shipments may also occurbetween ships and barges.Maritime container terminals tend to be part of larger portsand the largest maritime container terminals can be foundsituated around major harbors. Inland container terminalstend to be located in or near major cities, with well-established rail connections to maritime container terminals.Every maritime container terminal performs four basicfunctions: receiving, storage, staging and loading for both Low-profile container handling gantry cranesimport (entering the terminal by sea and leaving by landmodes) and export (usually entering the terminal by land There are also numerous other specialised equipmentand leaving by sea modes) containers. and personnel involved with container port operations; including customs, yard management, security, etc. Also, as both maritime and inland container terminals usually • Receiving involves container arrival handling at the provide storage facilities for both loaded and empty terminal, either as an import or export, recording its containers there are equipment and personnel to support arrival, retrieving relevant logistics data and adding these functions. Loaded containers are stored for relatively it to the current inventory. short periods, whilst waiting for onward transportation. • Storage is the function of placing the container in a Unloaded containers may be stored for longer periods known and recorded location so it may be retrieved awaiting their next use. Containers are normally stacked for when it is needed. storage, and the resulting stores are known as ‘container stacks.’ • Staging is the function of preparing a container to leave the terminal. In other words, the containers that are to be exported are identified and organized so as to optimize the loading process. Import containers follow similar processes, although staging is not always performed. An exception is a group of containers leaving the terminal via rail. • Finally, the loading function involves placing the correct container on the ship, truck, or other mode of transportation. In this function the emphasis is upon the internal logistics chain of the container terminal (i.e. vessel-truck-yard and opposite direction respectively).One of the most conspicuous aspects of container ports andterminals are the container-handling gantry cranes, used forunloading containers from ships. The gantry crane is drivenby an operator, who sits in a cabin that is suspended fromthe trolley. The trolley runs along rails that are located on Keppel container terminal in Singaporetop or sides of the boom and girder. The operator runs the 8
  9. 9. Container Ports and TerminalsVery large container ships also require specialized deep- The container ports serve as points of convergence betweenwater terminals and handling facilities. The container fleet two domains of freight circulation; the maritime and landavailable, route constraints and terminal capacity play a territories. The largest ports in the world are all gatewayslarge role in shaping global container shipment logistics. to enormous industrial regions representing complex and highly integrated elements of global commerce.The world’s busiest container ports as of December 2011are as follows: Port regionalisation – the improvement of inland transportation and an increasingly common phenomenon Ranking Port Country 2011 Container – is the result of the escalating level of integration between Traffic (in maritime and inland transport systems, particularly the thousand TEUs) use of rail and barges, which are less prone to congestion than road transport. An important function for container 1 Shanghai China 29,069 ports is handling ship-to-ship trans-shipments, which use an intermediate hub (or trans-shipment hub) for ship- 2 Singapore Singapore 28,431 to-ship operations. Such operations do not typically take place directly, thereby requiring the temporary storage of 3 Hong Kong China 23,699 containers in the port’s yard. The efficient trans-shipment of containers depends on the 4 Schenzhen China 22,510 ability of container ports and terminals to orchestrate the management and scheduling of assets, vessel planning, rail planning, vehicle booking, personnel management, 5 Busan South Korea 14,194 customs clearance and numerous other highly complex operations. Equally complex are the systems and softwareBusiest container ship ports applications which require their own hosting and communications infrastructures and which must also be able to easily integrate with those of the vessel operators, regulatory authorities and numerous other parties. 9
  10. 10. RailwaysIn many areas, containers are commonly In Europe, rail freight market share has been decreasing since the 1970s because the increased importance oftransported by rail in ‘container well cars.’ ‘just-in-time’ and door-to-door deliveries makes roadResembling flatcars, the newer models transport a better alternative than rail. Early privatisation of the US railroad helped to develop a market-based focushave a container-sized depression, or on the mode as an attractive freight alternative, whereaswell, in the middle allowing for clearance. most countries in Europe had nationalised railroads. As a result, the rail system in Europe was built up from theSince the 1980s the use of double-stack rail transport individual countries’ perspectives, focusing on domestichas become increasingly common for the inland transport rather than international traffic.of containers, particularly in the US. Double-stack carsprovide greater cargo security by cradling the lower Over the past decade, European countries have madecontainers so that their doors can be opened and also strides to deregulate and privatize the rail industry, whichserve to significantly reduce the instance of damage in increased competition and lowered costs, but obstaclestransit. In Europe, the more restricted loading gauge (the still remain. Europe’s railroad system has principallymaximum height and width for railway vehicles and their evolved to transport people, not cargo, which createsloads to ensure safe passage through bridges, tunnels problems for freight because it is always moved on a ‘railand other structures) has limited the adoption of double- space available’ basis, which means that unlike in the US,stacked cars. rail freight doesn’t take priority over passengers. Also, the European rail system is largely electrical, and, untilHowever, in 2007 the Betuweroute was completed, a recently, the dead-weight pulling capacities of these typesrailway from the port of Rotterdam into Germany, which of engines have been considerably less than the dieselaccommodates double-stacked containers. Double locomotives used in the US.stacking is also used in parts of Australia and the UnitedKingdom. Taller containers are often carried in ‘well cars’ Moreover, because European rail operators have(not stacked) on older European railway routes where the traditionally been government-owned or regulated,loading gauge is particularly small. operational inconsistencies between countries such as signalling, communication, and rail gauge conformity impede connectivity and flow.Railway Intermodal Transport through Cambridgeshire, England 10
  11. 11. TrucksTrucks are frequently used to connect the ‘line haul’ dedicated drayage companies or by the railroads. Asocean and rail segments of a global intermodal freight described in Figure #1 there can be significant efficiencymovement. The specialised trucking that runs between advantages to employing an integrated intermodal freightocean ports, rail terminals and inland shipping docks, system combining the use of both rail and trucks, asis often termed ‘drayage’, and is typically provided by opposed to relying solely on long hauling by trucks. Origin DestinationFigure #1 Comparison of Truck Only versus Integrated Intermodal Freight SystemsOrigin DestinationRoad transport provides a door-to-door service that A street-turn will involve a trucker delivering an importcannot yet be surpassed by rail or sea, and not every load at a particular facility, and then utilising an emptyplant or warehouse has the luxury of a railway line or container from a nearby facility with either the sameport nearby. Even using the integrated intermodal freight trucker or another truck operator, thus eliminating thesystem, the transfer of cargo from train or barge to truck need for two empty truck trips. This technique demandsfor the final leg of the journey often adds to transit times, real time tracking of the containers and the ability tobut can offer potential efficiencies in terms of costs and make the information available to the different partiesCO2 emissions. These efficiencies are made all the more (Ocean carrier, Trucking company, Consignee and Shipper)attractive as fuel costs rise. involved in multimodal land transportation. Based on the available information, a shipper can select an emptyAn emerging technique, directed at more efficient road container from the nearby consignee location and assigntransport involves a cloud-based approach to enhancing the move to a nearby available truck. However, thisdirect empty container interchanges between importers demands visibility of locally available containers as well(consignees) and the next exporter (shipper), to avoid as the ability to broker the collaboration necessary toempty trips to or from the marine terminal. One of the complete the transfer.most efficient ways to minimize unproductive empty tripsis to facilitate the direct interchange of empty containers,commonly referred to as ‘street-turns’. 11
  12. 12. BargesBarges, employing specialised container expanded into France, Switzerland and other European countries. In Europe, the main COB consideration isstacking equipment and techniques, the vertical clearance under bridges. Accordingly, mostare commonly used for transporting European designs use ‘hopper barges’, in which thefreight on large inland waterways such containers are lowered much in the same way as in a ship. As all European countries have load limitations foras the Rhine/Danube in Europe and the trucks to protect road, pavement and the environmentMississippi River in the US. (maximum weight of tractor-trailers is 40 gross tonnes), COB can represent an attractive alternative to road transport in those regions with navigable river-ways. As has been described, container transport is an integrated system of container ships, ocean ports, inland terminals, rail, road and river-ways. For this integrated system to operate effectively, there must also be an underlying communications infrastructure over which information can move unimpeded to the various touch-points of the transport system. From the port users’ perspective, the container vessel represents the most time-sensitive, high- value cargo and demands expedited cargo handling, which in turn, requires coordinated actions by ship operators, port authorities, landside transport organisations, regulatory and support agencies. These activities are scheduled, initiated, managed and controlled by the near real-time exchange of information over global Wide AreaPort feeder barge at Binnenschiff Malchow Networks (WANs), mobile communications, extranets andThe first batch of container gantries was installed on the many other modes of communications. Any inefficienciesRiver Rhine in 1968, only two years after the first fully or interruptions to the movement of this information arecontainer-configured ship arrived in Europe. Within the immediately felt throughout the transportation system,following decade, Container-on- Barge (COB) transport with delays and costs for idle time, demurrage, penalties and fines quickly adding up.Figure #2 Manifest information/Data Flow Diagram 12
  13. 13. BargesFigure #3 Overview of data exchange to generate shipping instructionsTo illustrate the complexity of data exchange, consider the As illustrated by Figure #2, while fairly straightforward,process of preparing even a simple vessel manifest, which this process is heavily dependent upon the efficientrequires network interfaces between multiple systems and information exchange between systems, parties andamong numerous parties. geographies, and is therefore entirely dependent upon the network infrastructure. The network must deliver end-to-end performance, security and non-repudiation, 1. he shipper prepares the product for shipment T among other requirements. and generates a packing list, commercial Furthermore, each of the documents referenced in invoice and shipping instructions. Figure #2 must contain valid and accurate Harmonized 2. he carrier receives, weighs and measures the T Tariff Schedule (HTS) numbers, which must go through consignment. a verification procedure. The shipping instructions must contain accurate weights and measurements, which 3. he carrier prepares bills of loading from the T are specific to each HTS number. Also, the information shipping instructions. presented on the vessel manifest, packing lists or other 4. he carrier electronically transmits the vessel T shipping documents must contain detailed product descriptions. manifest to Customs via the Automated Manifest System (AMS). Companies that Thus the information exchanges necessary to complete have elected to establish a direct interface merely the shipping instructions are fairly complex and with US Customs must have developed all of require communications between multiple actors, systems the necessary record formats as well. AMS and geographies, as illustrated in Figure #3. recognizes transmission of data in either the American National Standards Institute (ANSI) X12 (version 4010) format or the Customs Automated Manifest Interface Requirements (CAMIR) format. 5. US Customs advises the carrier of any holds. 13
  14. 14. Regulatory EnvironmentOcean shippers thought they had seen For example, a ‘Do Not Load’ message will beas much change as any industry could issued for any of the following violations:endure when the Ocean Shipping • if the consignee fields are left blankReform Act went into effect in 1999. • of ‘To Order’ and ‘To Order of Shipper,’ useHowever, during the following decade without corresponding information in theanother wave of changes has swept consignee and notify party fieldsacross the industry, representing major • consignee name with no address, incompletechallenges to IT organisations and the address or invalid addressdesign of underlying communications • messages for containerized cargo that have invalid or incomplete cargo descriptions, withinfrastructures. the use of vague cargo descriptions such asHistorically, cargo entering the US from any foreign ‘Freight-All-Kinds,’ ‘Said-To-Contain,’ orterritory had been subject to physical examination by the ‘General Merchandise’.US Government, to verify that it complied with US lawsand regulations. However, after September 11, 2001, a Costly monetary penalties are now imposed for Foreignnew combined organisation of Border Patrol, Immigration Remaining on Board (FROB) cargo that have invalidand Naturalization Service, Agriculture Inspection and the cargo descriptions, and have been loaded onboard theUS Customs Service known as the Customs and Border vessel outside the CBP-mandated 24 hour window. ForProtection (CBP) came into being within the Department example, carriers may be assessed a $5,000 penalty forof Homeland Security. Today, the CBP assumes a leading first violation and $10,000 for any subsequent violationposition in the defence of Homeland Security to protect attributable to the master or vessel captain. NVOCCs maythe US against terrorists and weapons of mass destruction. be assessed liquidated damages in the amount of $5,000.Under the Trade Act of 2002, CBP issued regulations On December 31, 2010, the EU initiated a very similarproviding for advanced electronic submission of cargo Advanced Manifest submission regulation, ensuring ainformation for security purposes. Within the US, CBP level of protection through customs control for all goodsis working with the thousands of companies who are brought into the EU territory. All ocean carriers aremembers of the Customs Trade Partnership Against required to submit an Entry Summary Declaration (ENS)Terrorism (C-TPAT) to emphasise the level of security in electronically to the customs office of the first Europeanthe supply chain, so that CBP cargo examinations can Territory destination 24 hours prior to cargo loading atbe performed even more selectively. Security concerns the non-EU port. Ocean carriers are required to providerecently prompted the most visible change in ocean complete shipping instructions including: Automatedshipping in the form of the ‘24-hour Advanced Vessel Export System (AES), number of items, consignor,Manifest Rule’ for advanced shipper notification. The 24- consignee, seal and container number. The ENS can behour rule became effective on December 2, 2002 requiring lodged by a third party, but that does not relieve thean advance cargo declaration from ocean carriers, port carrier of responsibility. The carrier must ensure the ENS isauthorities and Non-Vessel Operating Common Carriers lodged therefore by a person only with the ocean carriers’(NVOCCs). CBP uses the cargo information to identify and knowledge and approval.eliminate potential terrorist threats before a vessel sailsfrom a foreign port to US seaports, rather than after its This regulation is required for all international oceanarrival in the US. Furthermore, the CBP issues ‘Do Not freight being shipped from a non-EU port that is boundLoad’ messages for clear violations of the consignee name for the EU. The security risk assessment is transmittedand address requirement. from the first entry customs clearance office to the final destination port. The customs office of entry will always be held responsible for risk analysis of cargo even after the cargo has left the first port of entry in the EU. To avoid delays at the EU port of arrival, it is important that customers provide complete and accurate shipping instructions so that the ENS is accurate. 14
  15. 15. Regulatory EnvironmentAnother security program, the Container Security Initiative(CSI) went into effect in 2003, extending the initiativebeyond the first 20 international ports initially targetedin stage I. CSI is a US Customs Service initiative to preventcontainerized shipping (which is the primary system ofglobal trade) from being exploited by terrorists. With CSI,the US Customs Service has entered into partnerships withother governments to identify high-risk cargo containersand pre-screen them for terrorist weapons at the portof departure instead of the port of arrival. Under the CSIprogram, a team of officers from the CBP is deployed inforeign ports to work with host nation counterparts totarget and screen high-risk US-bound cargo containersbefore they leave foreign ports. Other initiatives currentlyin effect include the Customs-Trade Partnership AgainstTerrorism (C-TPAT), which is a voluntary initiative betweenthe US Customs Service, importers, exporters and carriersto tighten security in the supply chain. Ten countries,accounting for 17 of the top 20 ports that ship cargo Under the CSI program, acontainers to the US, have agreed to and are in the processof implementing the CSI program. Countries participating team of officers from the CBPin CSI with the US include Spain, the Netherlands, France,Belgium, Germany, Italy, United Kingdom, Singapore, is deployed in foreign portsJapan, China, and the special administrative region ofHong Kong. It is important to note that Hong Kong and to work with host nationSingapore are the two largest volume container carrierports in the world. counterparts to target andLater, the US and the EU signed a customs cooperation screen high-risk US-boundaccord; among other measures, it called for extending theUS Container Security Initiative (CSI) throughout the EU. cargo containers before theyCSI stations US customs officers in foreign ports to helppre-screen US-bound maritime cargo containers to ensure leave foreign ports. Otherthat they do not contain dangerous substances such asexplosives or other weapons of mass destruction. Ten EU initiatives currently in effectmember states currently have ports that participate in CSI. include the Customs-TradeBoth the US and the EU have also instituted programs withleading importers to pre-screen cargo shipments. Partnership Against TerrorismThese and other security regulations necessitate thenear real-time global exchange of large amounts of (C-TPAT), which is a voluntaryvery detailed and highly confidential information. Andthis brings with it increased dependency upon email, initiative between the USInternet access, managed security services, video Customs Service, importers,conferencing, Unified Communications Collaboration(UCC) and many other components of a globally exporters and carriers to tightenintegrated communications infrastructure. security in the supply chain. 15
  16. 16. Transporting and Tracking Cargo The ocean shipping industry currently spends greater than $100 billion annually operating its container assets, and industry analysts estimate that approximatelyTransportingof that amountCargo be directly attributed to repositioning empty $20 billion and Tracking can equipment to the point of its next cargo load. Due to information “gaps” or “blind spots” along the transport chain, equipment is only visible to carriers between 60The oceanpercent ofindustry spends in blind spots constrain container operators from and 80 shipping the time. These Despite heavy investments in equipment tracking on realizing all of the equipment management operations currently in the sea-land toexcess of $100 billion annually operating the part of ocean carriers, blind spots available communications value chain almost always exist. Whileitsthem, such as interchange or “triangulation”, a methodtransit on vesselscontainersin marine container assets. Industry analysts containers are in of moving and stationed from a surplus location to a demand location by using an know the location and status of each unit. terminals, carriers intermediate transport legestimate that approximately $20 billion producing (i.e. loaded or empty). containers moving that can be revenue or non-revenue However, visibility often deteriorates forof that can be directly attributed to via rail or truck while in inland terminals or at shipper/repositioning empty equipment to the consignee premises. Reduced visibility at these key points hampers equipment-tracking efforts and complicatespoint of its next cargo load. the detention and demurrage processes. For this reason, the shipping and logistics industry is concentrating its investments in this area of information technology. Ship Loading Operator Master Operator Engineer Driver Warehousing Origin Container Container Container Rail Drayage Road Drayage Destination Port Ship Port Terminal Terminal Tendering Storage Harbor Storage Loading Loading Receiving Pilot Customs CustomsSea-land value chain hand-offs (cargo and information)Due to information gaps or - Sea-Land Value Chain Hand-offs (Cargo and Information) Figure #12 ‘blind spots’ along the transportchain, equipment is only visible to carriers between 60 ‘A typical, large globaland 80 percent of the time. These blind spots constrain carrier maintains a The greatest opportunity to reduce costs by increasing equipment visibility iscontainer operators from realising all the equipment during blind spots on the landside, when assets leave the ocean carrier’s networkmanagement options currently available to them, such ‘network’ of approximately (in this case, the term “network” means the network of organizational locations,as interchange or ‘triangulation’, a method of moving 3,000 customers andcontainers from a of thelocation to a demand location by large global carrier maintains a “network” or depots surplus enterprise). A typical,using an intermediate transport leg that can be revenue or 4,000 suppliers, who have possession of of approximately 3,000 customers andnon-revenue producing (i.e. loaded or empty). 4,000 suppliers, whoThe greatest opportunity to reduce costs by increasing have possession of carrierequipment visibility is during blind spots on the landside,when assets leave the ocean carrier’s network (in this case, 21 assets as much as 20 to 40the term ‘network’ means the network of organisationallocations, or depots of the enterprise). A typical, large percent of the time’global carrier maintains a ‘network’ of approximately 3,000customers and 4,000 suppliers, who have possession ofcarrier assets as much as 20 to 40 percent of the time.Communications between carriers, shippers and vendorsare often hampered by the diverse information technologysystems used in the shipping and logistics industry supplychain ‘network’. 16
  17. 17. Transporting and Tracking CargoExample of Terminal Information Control System information flows 17
  18. 18. The role of TechnologyTechnology plays a major role in many of Gamma-ray systems offer a faster alternative and use pulsed fast neutrons to generate images of thethe changes the ocean shipping industry is container’s contents, 3-D mapping of content locationexperiencing. New regulatory and security and other important information. Some systems can identify the presence of carbon, nitrogen, oxygen,requirements are compelling ports, silicon, chlorine, aluminium and iron-based materialsshippers and carriers to take a serious inside the container.look at emerging technologies that can Another technology commonly used by the oceanstreamline their operating processes. shipping industry is Radio Frequency Identification (RFID). Containers with pallets stacked full of RFID-One example is X-ray based inspection systems. With this labelled items can be easily read and re-read as they passtechnology, a complete container can be x-rayed in its from location to location, both within the manufacturer’sentirety by a next generation mobile x-ray machine. factory or by logistics partners throughout the distribution process. Multiple read points will feedX-ray based inspection systems are the most common item and location data to various Enterprise Resourceform of non-invasive inspection technology in use today Planning (ERP) and Supply Chain Management (SCM)and detect differences in material densities to produce an systems, providing a real-time picture of a product’s location. Product descriptions and other data can be received in seconds, with exceptions noticed before the container is opened. This information can include routeing instructions, even for loads that contain mixed goods, and the technology can be seamlessly implemented and routinely checked to verify accuracy throughout the supply chain. These technologies require however a network infrastructure that can move large volumes of data, reliably and on a real-time basis, across a globally distributed supply chain while meeting demanding expectations for performance and scalability. The increasing use of imagery and EDI and other large transaction formats also creates the need for ever- increasing amounts of bandwidth.Figure #4 X-raying a cargo containerimage of the container’s contents. The system operatorperforms contraband detection visually, sometimeswith the help of sophisticated software, inspecting theX-ray images for anomalies. However, when cargo andcontraband are of similar densities, contraband detectionis made more difficult.For example, cocaine and bananas have similar densitiesand when cocaine is molded and painted to look like X-ray image of a truck containing persons attempting to Illegallybananas it is very difficult to tell the difference on an enter the US.X-Ray. Contraband can also be hidden in the shadowof cargo with a higher density. X-ray systems generallytake a few minutes to scan a standard 40-foot container. 18
  19. 19. Emerging Technology Trends in the Ocean Shipping IndustryOcean shipping companies have borne much of the brunt ofthe global economic recession. As the world slowly emerges provide visibility of the shipment as it makes its wayfrom the recession, there is an increased focus on investing through the supply chain and to manage the highlyin technology to improve operational efficiency and increase collaborative workflows involved.competitive advantage. Single Business Process Management (BPM) platform allowing multiple stakeholders to collaborate These trends include the following: efficiently and manage the process hand-offs seamlessly, thereby ensuring improved process • Business Transformation Initiatives – The rapidly integration across the end-to-end value chain. Such growing pace and complexity of this industry a platform is also a key enabler to the series of process continues to drive business process transformation off-shoring initiatives that are being embarked programs. The use of methods such as Lean Six Sigma upon by 4PL and freight forwarding companies. Key provides the core capabilities to define performance components of this platform are: a BPM engine driven metrics and drive measurable process improvements. by cloud-based Business Activity Monitoring (BAM) The resulting re-engineered processes in turn drive tools, Business Intelligence (BI) and performance requirements that must ultimately be implemented dashboards, portals and tools to easily collaborate within systems and software applications. The across various mobile device types. major ocean shipping enterprises seem to have accepted that standard/off-the-shelf Transportation • Cloud Computing Architectures – In an industry Management System (TMS) software packages do whose basic value chain is so highly dependent not provide sufficient functionality and flexibility to upon collaboration as that of ocean shipping, cloud support core business processes such as pricing, asset computing is understandably drawing a great deal of operations, tactical planning and routeing. attention. Cloud-based architectures offer numerous advantages, which include: satisfy these core functions best-of-breed To solutions are typically favoured. Conversely, for − Reduced total cost of ownership (TCO) administrative and corporate processes such as HR, − Storage and capacity on demand Finance and Procurement, these same enterprises show a distinct preference for packaged applications − Business continuity and recovery suites. While providing more tailored functional − Reduced maintenance (maintenance is performed support, this blended application approach also leads by provider) to numerous application interfaces and infrastructure complexity. − Increased speed to implement and flexibility • Real-time Optimisation Tools for Routes, Network and − Greater mobility to access from anywhere, Management of Assets – The need for predictability anytime, anyway. in a transportation network driven by short-term Logistics is more than moving cargo from A to B. forecasting and constrained by reliability and It involves numerous intermediate handoffs and capacity issues is a key concern for ocean logistics collaborations, characteristics that match well to the service providers. Thus empty asset optimization and capabilities of cloud-based computing architectures. simulation, network optimization and simulation, Nonetheless, these architectures bring about new predictive analytics based on booking demand, the considerations and challenges such as public versus use of sensor-based networks to enable real-time private cloud infrastructures that need to be understood re-routeing and other initiatives are increasingly before deciding to move in this direction. common in the sector.These initiatives in turn drive the need for real-time collaboration between Today’s online world is filled with public clouds, which systems, personnel and value chain partners, thereby enable customers to subscribe to and buy data storage placing increased demands upon the underlying space. communications infrastructure for the intelligence While public clouds may be cost-effective, businesses and flexibility necessary to integrate the numerous should be aware that public storage providers are variables. unlikely to be employing the same systematic approach • Increased focus on Workflow-driven Collaborative to firewalls, data encryption and other security protocols Business Process Management – The sheer number that exist within their own organisations. Accordingly, it of actors – shippers, consignees, carriers, customs is important to work with providers who have experience agents, regulatory authorities, warehouse operators in the technologies and challenges of deploying this and many more – required to enable even a architecture. straightforward shipment move create the need to 19
  20. 20. Emerging Technology Trends in the Ocean Shipping IndustryInefficiencies in the ocean shipping value chain represent Today, the industry is moving towards more fullyobvious opportunities for improving business processes integrated and industrialised applications andwhile simultaneously addressing regulatory compliance, infrastructure architectures, which are increasingly basedcustomer service and other concerns. Compared to other on cloud-computing, mobility and ease of ocean shipping has historically lagged behindthe technology curve, hobbled by fragmented, complexand paper-intensive processes. Globalization, eCommerce, This architecture is focused upon maximizing:customer responsiveness initiatives and the ability to • Asset utilization and schedulingcomply with security regulations have become key agendaitems for the industry. • Visibility to information at every point of shipment life cycle from order taking to postResponsible for approximately 200 million container delivery analyticsmoves annually it is estimated that the industry losesbillions of dollars annually to inefficiencies. For many • Business process automation, including real-timeshipping companies however the telephone, fax and collaboration and rule enforcements to preventemail remain among the primary means of conducting revenue leakages, reduce costs/ claims andbusiness, with data re-keyed numerous times into non- enhance customer serviceintegrated systems, which introduce inaccuracies and • Business Intelligence/Analytics tools that helpmake traceability through a documented audit trail next maximize asset utilization through forecastingto impossible. While many of these enterprises have and systematic planning tied to real-time sense-implemented ERP, SCM, CRM and EAM (Enterprise Asset and-respond capabilities.Management) systems the industry has been slow tointegrate logistics execution with these systems. Administrative Operational Systems Business Control Monitoring and Sense-and-Respond Intelligence Scheduling Productivity KPIs Modeling and Decision Support Asset Stowage Crane Yard Asset SCM Management Management Scheduling Scheduling Customer Reports Asset Stowage Drayage Trace and Optimization Optimization Scheduling Tracking Subcontractor CRM Review ERP Transactional Systems Incentive Systems Asset Customs Gate Security Schedule Clearance Transactions EAM Inter-Terminal Warehousing Asset Location Financial Transshipment Reporting Transactions and Picking Tracking IT Infrastructure Global Access and Connectivity (WAN/LAN/WLAN/Mobile) Global Management of Infrastructure Hardware Global Management of Security and Access Controls Centralized Management of Devices and Workstations Unified Communications and CollaborationIntegrated Ocean ShippingFigure #16 - Integrated Ocean Shipping Collaboration Architecture Collaboration Architecture As the ocean shipping industry continues to transform its complex business 20 processes, its reliance upon improving the integration of the supporting systems architecture becomes more critical. This integration is largely based upon the
  21. 21. Emerging Technology Trends in the Ocean Shipping IndustryAs the ocean shipping industry continues to transform its of the ocean shipping industry. It alone embodies thecomplex business processes, its reliance upon improving intelligence to administer security, authenticate users andthe integration of the supporting systems architecture enable them to access information not just via laptops andbecomes more critical. This integration is largely based workstations but via smartphones, tablets and numerousupon the supporting communications infrastructure, other mobile devices. And as the level of instrumentationwhich must be able to securely (and intelligently) bridge; in the supply chain increases these users are less and lessgeographic, enterprise and systems barriers. likely to be human and increasingly likely instead to be readers, scanners and other network-connected sensors. This intelligent network itself becomes an asset, having • Geographic – shipping cargo across oceans the capability to address mixed end-user and customer necessitates the ability to operate internationally, requirements and manage traffic across a heterogeneous which in turn requires the ability to collaborate set of access points and underlying transport bearers. across geographic borders. This is entirely a This network goes far beyond simple connectivity. It is function of the underlying communications developed and optimized for today’s requirements, but infrastructure. is also architected to accommodate future technology innovations and provide the flexibility and scalability • Enterprise – container transport requires an necessary to accommodate the dynamics of the industry. integrated system of container ships, ocean ports, In other words, the intelligent network is one that can inland terminals, rail, road and river vessels. The support mobility, cloud computing and accommodate the efficiency with which containers are handed off changing threat landscape. It also transforms the network from actor to actor is a function of the efficiency into a service-delivery mechanism that enables strategic with which they collaborate and this is heavily business efforts. dependent on the underlying communications infrastructure. • Systems – Each enterprise operates its own set Summary of highly-integrated applications including SCM, CRM, ERP, EAM and many others. Some of these The ocean shipping industry is, by its very applications are hosted regionally and others nature, highly globalized and dependent centrally. The numerous cargo handoffs inherent upon the efficient, uninterrupted exchange to the sea-land business model of this industry of information. The combination of a volatile, requires extensive application integration, dynamic value chain and heavily information- both intra and inter-enterprise. Again, this oriented regulations, necessitates an intelligent integration is largely a function of the underlying communications infrastructure capable of communications infrastructure. satisfying the specialized requirements for performance, scalability, availability, reliability and security.In accomplishing this transformation ocean shippingcompanies stand to benefit from the collaborativecapabilities brought about by ‘the intelligentcommunications network’. Just as the logistics industryhas evolved its capabilities from merely moving cargo frompoint A to B, the communications industry has evolveda set of capabilities to enable seamless collaborationacross geographic, enterprise and system boundaries. Thecommunications infrastructure has become a key deliverymechanism for the information that is the lifeblood 21
  22. 22. May 2012Offices worldwideThe telecommunications services described in thispublication are subject to availability and may bemodified from time to time. Services and equipmentare provided subject to British Telecommunications plc’srespective standard conditions of contract. Nothing inthis publication forms any part of any contract.© British Telecommunications plc 2012Registered office: 81 Newgate Street, London EC1A 7AJRegistered in England No: 1800000PHME ****