It’s no secret that port operations are buckling under supply chain strains caused by the COVID-19 pandemic. However, the underlying inefficiencies at ports have been causing headaches for managing products across global supply chains long before the pandemic even hit. Today, we’re seeing the cracks breaking as legacy siloed and, often, manual systems create bottleneck after bottleneck, making agile response to immediate, global crises impossible and the need to integrate systems and streamline processes imperative for the health of the industry and global commerce moving forward.
Terminals have been slow to adopt “smart” industry 4.0 technologies, which are paramount to keeping up with an increasingly digital and connected world and dealing with global trade demands that change day by day. From lack of visibility into container statuses to a reliance on manual paperwork used to log data and coordinate the sourcing, handling and shipment of product, the systems and infrastructure at terminals are nowhere near as efficient, connected and transparent as they could and need to be. While consumers today have the ability to place an order and manage, track and receive shipments without ever dealing with an actual person, businesses dealing with global freight have seen their own user experience fall behind consumers’ by more than a decade in some technologies.
Legacy Port Systems Are on Their Last Legs
Delays in loading and unloading containers can lead to terminal congestion, and further result in heavy demurrage charges. Given that cargo ships can carry upwards of 24,000 containers and take days to unload, efficiency improvements of even a few percent can mean significant time and cost savings. Not to mention that communications with carriers and other terminals also rely on antiquated systems. Some terminal operators still receive vessel locations relayed by word of mouth and predictions from carriers and captains. As one can imagine, this process is often inaccurate. According to McKinsey, when using this system, the average difference between a captain’s estimate and the actual time of arrival is 13 hours. Add a global pandemic on top of this, and the problem worsens exponentially.
As thousands of shipping containers have piled up and supply and demand patterns have been upended by panic buying and export bans, the ripple effects from the global crisis are choking ports and paralyzing shipment operations. About 22% of 67 global ports surveyed recently by the International Association of Ports and Harbors (IAPH) report delays (6-24 hours) or heavy delays (> 24 hours) in cross-border road transportation. From the same survey, 35% of the ports reported extra restrictions in the first week of April on all incoming passenger vessels compared to 16% for all container vessels and 14% for all other cargo vessels.
As we get past the first wave of the pandemic, expect a tsunami of shipments to emerge from loosened restrictions and normalized or even increased manufacturing capacity. Those rising cargo volumes could potentially overwhelm warehouses and distribution centers and back up marine terminals. So what can be done?
The Digital Age Offers a Path Forward for Terminal Operators
Fortunately, the future isn’t all doom and gloom for marine terminals, provided they adopt some key digital transformation practices to better handle operational uncertainties exposed during the pandemic in addition to other risks—specifically to enable transparency, visibility and self-service options.
First, transparency is the most urgent need for ports, according to McKinsey in 2017, and this statement still rings true three years later. Terminal operators must realize that, while the carriers may be their primary customers, the carriers’ shipper, forwarder, and trucker customers are also important. Digitized operations can provide transparency into all data and operations updates from all players along the supply chain that help to deliver freight to and from ports.
Secondly, visibility is crucial for terminals to be able to quickly adapt to operational uncertainties, disruptions and delays caused by bad weather, changes to vessel ETAs, and unscheduled maintenance. Operators must aim to have a unified view of all operations with dynamic tasks based on real-time events while ensuring a clear line of communication between all parties. And last but possibly the most crucial factor for implementing this digital transformation, terminals must establish self-service portals for customers to digitally connect with them on past, present and future activity.
Technologies that can make port operations more efficient and transform links with the entire supply chain also include Industry 4.0 and Smart Ports concepts. Marine terminals must keep abreast of the latest in supply chain optimization strategies by implementing Smart Port technologies such as automation of cranes and terminal tractors, Internet of Things (IoT), artificial intelligence and blockchain. Automated ports systems that are carefully planned and managed can overcome operational difficulties, reducing expenses by 25 to 55% and increasing productivity by 10 to 35% for operators.
In order to achieve this transformation, terminals must first review the current state of their operations within the supply chain, and set performance goals in terms of agility, service, capital, and cost measurements. After identifying the major pain points such as paper-based billing and inefficient drayage routes, operators can develop a roadmap to eliminate these and achieve performance goals. A crucial step all players involved in marine terminal operations must take is to move from manual processes to connected digital platforms. This can include automated, self-service quoting to eliminate errors; digitizing documents such as bills, hazmat declarations, shipping instructions, finance declarations, insurance and customs forms; real-time analytics for accurate tracking and communication; and proper end-to-end management of all operations.
As local and global economies begin to slowly re-open, it’s critical that terminal operators take these key steps to ensure they come out of the pandemic with minimized losses and that their operations are ready for the next big supply chain disruption.
Joe Hudicka is the managing director of logistics and transportation software company Neurored.
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