Tapping In: the rich reservoir of digital added-value services in container logistics

Data is the new oil. This aphorism has been repeated to the point of cliché, and it misleadingly ascribes scarcity to a growing, renewable resource. Data is everywhere, gushing through our silicon wells at a rate of 2.5 exabytes a day⁽¹⁾ — enough to fill 45 containers’ worth of servers⁽¹ᵃ⁾, were it all to be stored. Rising in tandem with (and as a consequence of) our information hoarding are software systems —machine learning, deep learning, and other terms under the “AI umbrella”— capable of spotting patterns within staggeringly large datasets and, occasionally, drawing insightful conclusions from them.

The shipping industry is no stranger to data. The very word “logistics” likely originates from the ancient Greek logistika (to count/calculate)⁽²⁾⁽³⁾; the abacus was first used by merchants to keep track of inventory⁽⁴⁾; the earliest known analogue to the modern bill of lading was made in 15 CE⁽⁵⁾. The transfer of information is inherent to the transportation of cargo, and much of modern logistics’ regulatory-administrative apparatus concerns the timely, orderly and secure transfer of this information. The advent of new technology offers more than marginal improvements in information sharing: it also offers more than systemic improvements in information-sharing methods. In fact, the Digital Age presents cargo movers with entirely new methods of adding value to the supply chain.

A box full of data

It is natural to ask whether the modern exploitation and commercialization of data has occurred within container logistics to the same extent it has in other fields such as aviation and manufacturing. An instinctive response might be that it has: administrative fees are built into shipping costs; contract rates are informed by knowledge of externalities such as oil prices and aggregate demand⁽⁶⁾; the freight forwarding business exists partly due to shippers’ inability/disinterest in logistical information processing. The movement and usage of data, essential to the shipping process, is also a component of container transport through which revenue is made.

On the other hand, this picture might be met by derision from the digitally-native, who until recently considered maritime transport a technological backwater, and where there is still plenty of “room to grow”: a single avocado shipment from Mombasa to Rotterdam can involve 30 different parties, 100 people and 200 unique exchanges of information⁽⁷⁾ (still routinely done via telephone, fax and “snail mail”⁽⁸⁾). Although the persons, procedures and paperwork involved have evolved over time, the fundamental exchange of information has remained unchanged for thousands of years: to some outsiders, recent and substantial innovation in this space is nowhere to be seen. Moreover, despite the industry already generating 120 million unique data points a day⁽⁹⁾ with plenty more on the way, little is being done to explore and exploit that data to the benefit of shippers and/or service providers.

However you perceive the digital prowess of container logistics, there is one thing which both the perspectives above have in common: they mainly consider data as a tool to help optimize moving the box from A to B. There is an intuitive logic to this approach, given that the very purpose of containerization is to facilitate the movements of goods; furthermore, there are still ingrained bureaucratic obstacles which even rudimentary data sharing practices have yet to overcome⁽¹⁰⁾. On the other hand, keeping the spotlight on “essential” digitalization precludes the possibility of using information technology to break free from containerization’s encroaching commoditization and add novel value to cargo shippers.

Chasing new horizons

Intermodal containers have become the de facto mode of long-distance transport for many categories of goods, with markets now effectively saturated with providers and competitively dense; hence, container shipping lines and terminal operators are under increasing pressure to maintain a competitive edge. The simplest way to do so is to increase market share, and some shipping lines are indeed pursuing this option⁽¹¹⁾⁽¹²⁾, particularly given their recent cash uptick⁽¹³⁾⁽¹⁴⁾; naturally, horizontal growth in a crowded market is an uphill battle, and is constrained in the long run by the gentle swells of the global economy. Testament to this is the habit of consolidation within liner shipping, which has done little to improve profit margins since it became trendy two decades ago⁽¹⁵⁾.

It thus follows that companies in the sector are also looking for vertical growth opportunities. This implies expansion into adjacent aspects of container logistics — a strategy that some liners and terminal operators have whole-heartedly thrown themselves into by striving to provide end-to-end services for shippers⁽¹⁶⁾⁽¹⁷⁾. The diversification of business activities ostensibly decreases a company’s risk exposure⁽¹⁸⁾: given the close-knit nature of container operations, though, the extent of this benefit is limited. The end-to-end expansion approach also brings risks of its own⁽¹⁹⁾⁽²⁰⁾; furthermore, the benefits of vertical integration to cargo owners cannot be taken for granted.

Too often, the homogeneous nature of container shipping leads people to consider horizontal and vertical growth as the only two dimensions along which companies can expand their obtainable market size. Beyond tending towards a false dichotomy, this conceptualization is belied by the possibility of improving your offering to your existing customer base and thus adding value: put more simply, container transport needn’t be as commoditized as it is arguably becoming⁽²¹⁾.

Drilling down

Steps are already being taken in this direction. Low-tech “value-added services” are already commonplace across the board; many shipping websites now feature entire sections dedicated to these added-value services. While many products comprise intrinsic variations in shipment priority and container quality, there is a growing presence of innovative digital solutions on display. Multiple liners offer real-time monitoring services for reefer/high-value cargo⁽²²⁾⁽²³⁾⁽²⁴⁾⁽²⁵⁾, while others promote ever-clearer visibility and command over transactions of cargo and information⁽²⁶⁾⁽²⁷⁾ - the latter being the very data exchanges the industry is scrambling to digitalize (q.v.: the long-overdue electronic bills of lading⁽²⁸⁾⁽²⁹⁾).

While most of these shipper-facing initiatives are being promoted by the liners⁽³⁰⁾ (and, to some extent, freight forwarders⁽³¹⁾), it would be simplistic to ignore the role container terminals have in the provision of these added-value services. Being the focal points between intermodal movements puts ports in the ideal position to act as intelligent disseminators of data⁽³²⁾; it’s no accident that the top three ports in Europe are each betting on their own data-sharing systems (Rotterdam⁽³³⁾, Antwerp⁽³⁴⁾, and Hamburg⁽³⁵⁾), nor that major terminal operators at these ports are also striving to become “one-stop shop” data providers⁽³⁶⁾⁽³⁷⁾⁽³⁸⁾. Whether or not they are aware of it, container terminals are well on their way both to providing digital value-adding services themselves, as well as enabling the provision of these services by connected stakeholders.

Breaching the future

How are shippers reacting to value-adding digital services in container logistics? The net momentum amongst cargo owners tends towards cautious, yet curious experimentation⁽³⁹⁾. The successive impacts of COVID-19 and the container capacity squeeze have accelerated this trend⁽⁴⁰⁾, with shippers under renewed pressure to reinforce their supply chains by trying out data-driven “performance enhancements” promoted by freight forwarders in need of differentiation⁽⁴¹⁾.

The forwarders aren’t alone: container lines fighting the “accelerated relegation to moving containers from point A to point B”⁽³⁹⁾ are also wising up to the necessity of embracing digital futures in order to stand out to a tough crowd⁽⁴²⁾. Far from being passive spectators of the adaptations occurring on their premises, port authorities and terminal operators have been proactively supporting the provision of digital added-value services, in order to retain their places as the foci of trade. Stagnant logistical habits across the sector are being stirred by faster, smarter, more versatile techniques for moving goods and sharing information about these movements.

Hemingway once noted that change happens in two ways: “gradually, then suddenly”⁽⁴³⁾. The “gradual” change has begun encircling the oil economy⁽⁴⁴⁾⁽⁴⁵⁾ — something shipping lines can already see on the horizon⁽⁴⁶⁾. Digital change is happening across all facets of intermodal transport — gradually, then suddenly. The transformation of the humble container into a smart, versatile source of information is taking place gradually, and is poised to become sudden: let us ensure that we make the most of it.