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HANSA 03-2020

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Finanzierung | Financing

Finanzierung | Financing Blockchain is the basis of a rising number of digital projects in the shipping industry Time for a global, neutral platform Maritime consultancy Drewry believes that future online marketplaces could bring mutual benefit to both carriers and shippers. Philippe Salles, Head of e-Business, Transport and Supply Chain talked to HANSA on how this will change the maritime industry In your recently published study you found out that online technology platforms on which shipping lines and their customers can negotiate forwarding contracts could help improve vessel utilization levels and reduce freight rate volatility. Has this been the first time you were examining this subject? Philippe Salles: We have done other similar researches before, such as a White Paper on freight forwarders and disruption, two years ago. At that time we focussed on the order-to-cash cycle, thus on the role of each entity using a B2B shipping platform. But this is indeed the first time assessing the long-term benefits for shippers and carriers moving to online freight procurement and booking platforms. How would you describe the status quo and the impact of platforms in the maritime industry? Salles: The development started in 2000 with platforms such as Cargosmart, Inttra – acquired by E2Open – and GT Nexus – acquired by Infor, and has accelerated a lot during the last decade. Digital platforms have been used since then, so this is neither totally new, nor has it caused a total disruption. But the technology demands systems within the shipping lines to get more central and easier to connect. Many of them have gone through internal changes, mergers and consolidation, in order to become more efficient and reduce their costs. Is there a difference in adopting new technologies between traditional companies in the maritime industry and start-ups? Salles: The latter are showing more awareness and are better in accelerating. But whereas we could see more discussions on information technology in the past, the C-Level of the companies has really pushed the agenda recently. Many companies are still focussed on the visibility and track & trace. But also new technologies like smart electronic Bills of Lading making use of Blockchain are now becoming reality. To which extent is the maritime industry digitalized? Salles: This depends on whom you are looking at. Bookings at the large shipping lines are digital in a range of 60 to 80%. For shipping instructions digitization is even stronger with currently about 70 to 80%. The next digital step is to make Bill of Ladings more instant, accurate and secure. There will always be manual and unconventional transactions such as project cargo. Track & Trace is available via websites and EDI data feed, the main issue and a real challenge is the notification of events in real time with a standard definition such as ETA which can apply to port pilot and/ or pier terminal locations. Also, shipping lines such as Maersk, Hapag-Lloyd and CMA CGM are offering their rates online. Some years ago this was only available through tariff sheets. Now, the customers can select a rate and obtain a commitment of the shipping line for their booking. How about spot-business, which, according to your study, accounts to 45% in the trade between Asia and the West Coast of North America and 70% in the trade between Asia and Northern Europe? Salles: It is very difficult for the shippers to procure online committed allocation, even though this is especially important, since there is always a big gap between spot business and the annual tenders. As many companies come up with their bookings relatively late, this results in high uncertainty for the shipping lines, 18 HANSA – International Maritime Journal 03 | 2020

Finanzierung | Financing who want to keep their vessels on schedule and therefore are relatively static. Thus the digital platforms need to make available procured online rates with accurate container space and equipment availabilities. Another issue you are referring to in your study are phantom bookings and rollovers. How big is the problem? Salles: Charging for dead freight has never been practiced in the industry, which implies that there are no penalties for customers cancelling their bookings in the very last minute. Also double-bookings in order to secure sufficient capacity and equipment on the side of the shippers and forwarders are very common. The amount of such bookings is estimated to be up to 20 to 25% of a vessel’s total loadings. But this problem concerns both sides: We think that approximately 3 to 4% of the total worldwide shipments are rolled over, meaning that the bookings were accepted by the shipping line and ready for loading on time including all necessary documents, but postponed for the next vessel due to over-booking. You state that supply and demand can be aligned through technology. How exactly is this going to work? Salles: Our study concluded that many of the market’s pain points could be addressed through the capability of flexibly buying or selling ocean freight services in advance, using a neutral, global platform. This platform connects shipping lines and their customers online to negotiate contracts, offering both, a space guarantee and a volume commitment, enforced via a deposit scheme. Philippe Salles, Head of e-Business, Transport and Supply Chain – Drewry © Drewry Are there some approaches already? Salles: There are some good initiatives, which support the adoption of electronic transactions, such as the Digital Container Shipping Association which is developing technical standards for ocean carriers’ B2B messages and will hereby contribute to UN standards. Another good example is the banking and Trade Finance industry where many of platforms are expanding based on ICC (International Chamber of Commerce) standards, e.g. for Letter of Credit, Document presentation and bank guarantees. One example applying these standards is Bolero, a spin-off of SWIFT, the Society for Worldwide Interbank Financial Telecommunication who established the well known code used for financial transfers. Many existing players are now encouraged to migrate to more interactivity acting as digital hubs for instance port community systems (PCS). How about the shipping lines themselves? Is the security of data a big obstacle for them? Salles: They also have standardization on their agendas. This will not come overnight, we see a much bigger focus on this than 20 years ago. Yes, data governance is a big issue. How much data can be disclosed is a grey area, especially relating to competition law. Start-ups tend to forget about the business model of shipping lines who are especially careful due to antitrust law and international trade compliance. What else will be the benefits of standardized platform solutions? Salles: They will push the shipping lines to create more differentiated and value added services. This could relate to being on time but also any time commitment. Accessing benchmarking rates get easier. Maybe not on all trades, but I think in general we will see carriers offering more detailed service levels to match customer’s expectation and thus increase their revenues within the next two years. Interview: Claudia Behrend HANSA – International Maritime Journal 03 | 2020 19

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