Carriers may miss the boat

Carriers may miss the boat

What will be the top issues facing container shipping in 2004? It's a question that's asked at the start of each year. I believe the top challenges for the container-shipping industry this year will be the technological advances being driven by the Department of Homeland Security's mandates and by commercial initiatives such as Wal-Mart's demand that its top suppliers embrace radio-frequency identification. These developments are driving technology advances in shipping and logistics at a faster rate than ever before.

Companies that have already started to prepare for these challenges are well-aware how complex, costly and time-consuming the job can be. Port authorities, marine terminals and railroad companies are developing information systems that can improve security, provide better asset management, and streamline their day-to-day operations. These companies realize that their information systems are no longer merely tools for automating processes and increasing efficiency but can provide a new competitive advantage - one that may be necessary for their survival.

How are ocean carriers adapting? The record is mixed. The logistics units of some carriers, such as NYK Line, have already started implementing RFID that improves asset tracking and enhances security by providing total asset visibility.

Many carriers, however, are still struggling with technology. In November, I published a report assessing the e-commerce capabilities of the 54 largest ocean carriers as of the end of September. I established an E-Commerce Capabilities Index based on comparisons of 168 functions in 18 comparison criteria. The carriers' scores were not encouraging.

All of the carriers I surveyed scored under 50 percent. Only nine scored above 23 percent. The scores reflect the low priority ocean carriers have put on developing their e-commerce and integration capabilities. Another surprising finding is that 13 of the 54 carriers do not provide electronic tracking and tracing, a key functional service. And the carriers that did offer track-and-trace functions did so only at container, bill-of-lading or booking number, not at the item level.

Interestingly, the top nine ocean carriers, which include lines such as Maersk Sealand, APL and P&O Nedlloyd, offer functions on their Web sites that exceed what is being offered by the multi-carrier Web portals they also support. However, even the top ocean carriers still cannot match the potential competition that is coming their way from UPS and other third-party logistics providers.

The ocean carriers' comparative slowness in embracing technology could turn out to be a critical mistake. Last year, UPS and other ocean transportation intermediaries asked the Federal Maritime Commission for freedom to contract directly with shippers - a privilege that the Ocean Shipping Reform Act now grants only to vessel operators. UPS's proposal was supported by letters from more than 200 members of Congress, a move designed to put political pressure on the FMC. Many people, myself included, believe it is only a matter of a few months before the UPS request is granted. The entry of UPS and other 3PLs in direct competition with ocean carriers will create new kind of competition to which ocean carriers are not accustomed.

In recent years, UPS and FedEx have used their integrated services' superior information technology to seize market share from airlines and forwarders in express cargo. While airlines were stuck with cumbersome, multi-step booking, tracking and tracing procedures, integrated carriers such as UPS and FedEx were able to use bar codes and other technology to track cargo at the item level. The edge they developed for commercial customers also gives them a leg up in dealing with emerging government security requirements.

Most ocean carriers, however, have lagged in development of their information systems. The results of that decision may become more apparent this year. As competition increases from 3PLs and other sources, information systems will play a critical role in ocean carriers' survival. These carriers should start now and dedicate the appropriate resources to catch up with the rest of the world. If they don't, they'll miss the boat.

Capt. Emad Samwel is president of Ethos Management Consulting, which offers management and information-technology consulting to organizations involved in supply-chain transportation. He can be reached at (905) 884-8272, or via e-mail at esamwel@ethosmanagementconsulting.com.