While nearly any process, document chain, or decision factor can be digitalised, the 5th part of our digital decarbonisation series looks at one of the most impactful areas for change -improving the interface between shipping, its customers and supply chain partners.
The term ‘trade friction’ neatly describes inefficiencies at the interface between the consumer market and the supply chain. From the moment a cargo owner initiates the freight of goods, to the moment the goods arrive at their destination, inefficient processes and the lack of transparency and choice can result in considerable wasted effort. The concept of reducing this friction through digitalisation is not new. Much of the global supply chain already relies on electronic data interchange (EDI) protocols to convey information from link to link and this has been widespread since the 1990s.
On average, moving one shipping container from door to door generates over 50 EDI messages, though depending on the region, carriers, and cargo type involved, some or all of these messages may be sent in other formats – including paper. What this illustrates is the complexity of communication in a typical cargo transaction. There is pricing, booking, transport, customs and excise formalities, port services, pilotage, stevedoring, ship navigation, trans modal exchange, transfer of ownership, and trade financing to consider and more. The volume of information required is vast and the timeliness of it is critical to the efficiency of the cargo transaction.
Inefficient processes and the lack of transparency and choice can result in considerable wasted effort
The reality is that all instances of inefficient data exchange, where required information is not available at the right time, is incomplete, or deviates from what is expected, result in an increase in carbon emissions across the supply chain. Inefficient processes and the lack of transparency and choice can result in considerable wasted effort.
If a bill of lading needs to be printed and couriered separately to the cargo itself, this will clearly increase the carbon footprint of the transaction overall. Assigning harbour tugs to connect to a departing vessel before cargo operations are complete results in the tugs idling for longer, increasing the associated emissions footprint etc.
One example of the impact that reducing trade friction can have is offered by fuel producer Neste, who utilises a 20-strong chartered fleet and procures over 1000 spot charters annually. In 2021, port congestion resulted in many of their chartered vessels spending up to 40% of their time waiting to load or discharge. The company implemented voyage optimisation software from NAPA which enabled the sharing of information between terminals, refineries, and the fleet, providing more efficient routing options and reducing the amount of idle time experienced. The first results came after a voyage by the MT Donia, a 5261 GT oil/chemical tanker from the ARA region in Northwest Europe to the company’s refinery in Porvoo, Finland, where speed adjustment at the beginning of the voyage resulted in saving 30 tonnes of fuel.
Digital technologies are beginning to have the required influence on attitudes and behaviours in the ocean freight industry.
Electronic bills of lading are key documents in every cargo transaction, commonly serving three functions; as a receipt for the transfer of goods, as a contract of carriage, and as a document of title. After sustained effort over a number of years, electronic bills of lading are slowly starting to infiltrate the market. The savings potential for them is significant, considering we are only talking about digitalising one document in a complex system.
According to the Digital Container Shipping Association (DCSA), in 2020, ocean carriers issued 16 million original bills of lading, costing stakeholders a combined US $11 bn in the process. Research from the UN Economic and Social Commission for Asia and the Pacific (ESCAP), suggests that fully digitalising regulatory trade practices such as the bill of lading could save between 32 and 86kg of CO2 equivalents per end-to end transaction. Scaling these savings to match trading volumes in Asia and the Pacific alone would imply savings of 13 million tons of CO2, the equivalent to planting 439 million trees.
“… fully digitalising regulatory trade practices such as the bill of lading could save between 32 and 86kg of CO2 equivalents per end-to end transaction.”
The reality is that all instances of inefficient data exchange, where required information is not available at the right time, is incomplete, or deviates from what is expected, resulting in an increase in carbon emissions across the supply chain.
Standards are still under development for the widespread adoption of paperless trade, but some industry players have moved ahead and implemented it anyway.
Ocean Network Express issued its first electronic bill of lading in 2020 for a shipment of synthetic rubber from Russia to China. Shortly after, the carrier extended the option to regional, and then global, customers via its ‘ONE Ecommerce’ platform. There are a number of similar examples across the maritime industry, but generally uptake remains low. The DCSA estimated that only 0.3% of transactions in 2020 used an electronic bill of lading.
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DIGITAL DECARBONISATION SERIES
In partnership with Inmarsat, Thetius launched a major report on digital decarbonisation at the Nor-Shipping conference in April 2022 to critical acclaim. Read by thousands of industry professionals across the globe, The Optimal Route examines the impact of digital technologies on the trajectory of decarbonisation in shipping.
Based on the findings of this research, we have put together a new series of articles on digital decarbonisation which will be released to our subscribers over the coming weeks. Each article will zoom in on an aspect of digital decarbonisation and together will provide a jam-packed analysis that includes the latest and greatest examples of how digital technologies can prove the difference between success and failure in decarbonising the ocean supply chain.
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