There’s no argument. Covid-19 has exposed global supply chain weaknesses – quickly and harshly. And its influencing logistics technology development.
As a result, shippers and carriers are turning to technology to fix these weaknesses. Many of these supply chain weaknesses are long-standing issues.
Now, the use of technology has taken on increased urgency in mitigating risk, improving operating efficiency, and cutting costs.
Some technology solutions are easier to tackle than others. Others need more time and money to implement.
Should you push ahead on schedule with your IT projects? Should you slow down your IT investments and focus on operations? Or should you hit the pause button, until the Coronacrisis ends?
Whether you’re a shipper or carrier, this blog post will give you insight into answering those questions. Those insights can help position your business for success.
Without further ado, here are six supply chain weaknesses intensified by the Coronacrisis.
Supply Chain Weaknesses Exposed by Covid-19
#1: Lack of Standardized Bills of Lading (BL)
Today cargo gets delayed at ports because bills of lading are not standardized. Everyone has a different format. E2Open saw the need for standardization ten years ago but failed. And Bolero International created an eformat for Evergreen Line, and it also failed.
They both failed because it’s difficult for a single company to implement a solution that applies to all industry stakeholders. Besides shippers and carriers, add NVOs to the mix and you can see the problem.
Let’s shift to air freight for a moment. The Air Transport Association (ATA) succeeded in creating standardized BLs. And today the air freight industry has standardized waybills. So it’s possible to fix this industry-wide issue. But ocean freight has no similar governing body like the ATA.
Nevertheless, this represents a huge target of opportunity for cutting costs. And technology will play a major role in resolving this issue.
#2: Lack of Freight Visibility
Currently, twenty-five percent of booked containers fail to show up at ports. Also, the industry suffers from chronic overbooking. These problems persist as shippers constantly look for the lowest shipping price. Both are areas ripe for cutting costs.
Presently, multiple initiatives are underway to tackle these issues. Maersk, Hapag-Lloyd, CMA CGM, Evergreen, and Cosco are rapidly developing new online tools. Many software companies are also developing a variety of new online tools. E2Open, Cargo Smart, Infor Nexus are providing shippers access into carriers’ digital platforms to confirm space on ships.
This capability enables the completion of shipping transactions with either a desktop or mobile device. And it opens the way for dynamic pricing based on supply and demand.
#3: Lack of Route Optimization
Route optimization is another area of persistent inefficiency highlighted by Covid-19. Today stable and predictable route planning is a challenge. And as you might have guessed, multiple stakeholders are working to address this challenge.
Challenges include last-minute changes, time-sensitive deliveries, and inter-modal shifts (e.g. from rail to road to ocean).
As supply chains adjust to the outcomes of the trade wars and Covid-19, complexity will likely continue in a post-Covid-19 world. As a result, businesses are relying on innovating with technology.
#4: Lack of Predictable Pricing
Shipping prices are uncertain. They’re erratic. They’re volatile. They’re unpredictable. And the present environment underscores this persistent problem even more.
Further complicating matters is that competitors are developing tools with different purposes. Some tools focus on operations and some focus on financials. Further complicating matters is that financial pricing tools come in three varieties: (1) rate-costing software, (2) forwarding contracts, and (3) freight futures.
The bottom line is shippers want to pay a fair price. Yet forecasting accurate prices has been elusive. Consequently, a flurry of activity is underway to find a solution employing technology. That means we will see a surplus of solutions, making it difficult to select the right one.
#5: Lack of Data-based Decision-making
Big data and analytics are one of technology’s top trends for 2020. Covid-19 has reinforced that trend. Now, C-suite executives are taking a greater interest in logistics. With logistics in the spotlight, executives insist on more logistics information. And they want their information in real-time.
To meet this urgent need, industry stakeholders are developing creative solutions. Many are focusing on reducing risk, optimizing operations, and cutting costs.
They’re looking at developing prepackaged reports for C-suite executives. They’re looking at eliminating siloed business processes. They’re looking at improving information sharing. And they’re looking at real-time data visibility and Blockchain.
There are many paths to achieving data-based decision-making. While technology aims to simplify operations, choosing the right solution can be complex.
#6: Lack of Effective Drayage and Demurrage Management
Drayage suffers from inefficiencies with about 15 million hours wasted at ports. This leads to unfair demurrage charges – a longstanding issue. Also, increased blank sailings due to the Coronacrisis have further inflamed this problem. Today detention fees run from $100 to $200 each day.
As with BLs, drayage and demurrage require a ruling from a governance body. In this case, the Federal Maritime Commission must get involved. In particular, it must issue a ruling to establish a platform allowing the challenge unfair penalty fees.
Again, the number of competitors working on solutions is dizzying. And that leads to confusion about improving container visibility.
The Way Ahead
The challenges facing your business today are daunting. But you can overcome them.
And everyone expects an uneven return to normal. But an uneven return to normal doesn’t mean your business has to emerge unevenly or feebly.
With a reliable partner on your side, you can ensure your business emerges smoothly and vigorously.
If you’re not sure which direction is right for you, contact American Global Logistics today. We’ll listen and then we’ll work with you to choose the optimal path ahead.
American Global Logistics can help you sort through the technology maze. Working with us will give you peace of mind.