Gain Pains

Gain Pains

Copyright 2002, Traffic World, Inc.

There aren't many growth industries in these economically challenged times, but one that is sure to buck the trend is security. And within that burgeoning industry, supply-chain security is a major sector.

That brings scant comfort for shippers. For them, this sector's main products - in the near term at least - seem to be regulations and information-hungry government databases. In November the International Chamber of Commerce issued a statement urging governments not to let tightened security measures brake world trade flows. Timed to coincide with the introduction of the U.S. Customs' 24-hour rule that requires advance cargo manifests from sea carriers, the statement warned: "In developing new security safeguards, policy makers must be careful not to unnecessarily compromise or undermine the efficiency and reliability of the transportation industry or impose unnecessary costs."

But the steady march of new trade-related security measures is a boon for e-commerce. First, given the compliance deadlines being imposed on companies and the level of detail they are required to mine, there is little choice but to use electronic communications channels. Second, having been nudged in this direction, more enterprises are likely to commit to web-based information systems, adding to the message volume that is the lifeblood of these systems.

These developments have not been lost on solutions vendors. INTTRA, the ocean freight transportation services provider sponsored by ocean carriers and logistics companies, recently announced portal enhancements that streamline documentation processes to help users comply with the 24-hour rule. The GTN portal operated by GT Nexus, also backed by ocean carriers, is gearing up to handle the traffic generated by the rule. Opportunities for software vendors are opening up. TradePoint Systems LLC has launched Manifest 24, an Internet-based application that aims to help carriers meet the rule's requirements.

"While it will be painful to implement change, the infrastructure is in place to manage that change and the long-term and medium effects are going to be very positive," said John Urban, president of Alameda, Calif.-based GT Nexus. Fortunately, when the GTN portal was created it included digitized fields for critical information on shipments such as container and seal numbers, he explained. The portal also accommodates the U.N. harmonized codes, the standardized cargo information that he believes customs authorities will require. "We are prepared for these regulations without knowing that they were coming," said Urban.

Shippers are less prepared. For many the new rule, which requires detailed cargo information to be submitted to U.S. Customs 24 hours before a U.S.-bound vessel is loaded at a foreign port, is a challenge. The rule came into effect on Dec. 2 and there is a 60-day grace period to fully implement it.

For ocean carrier APL the main changes revolve around ensuring that the relevant information is captured from nonvessel-operating common carriers and consolidators, and "giving visibility to the information," explained Robin Kirby, director, business process design. Kirby is a member of the GT Nexus Carrier Executive Committee. The GT Nexus portal helps APL create the templates for these transactions, said Kirby. In addition "we have our own home-port bill-of-lading product," as well as EDI links and a desktop bill-of-lading tool for customers with no web access. Getting the many trading partners involved to collaborate is a headache, she acknowledged, and the compliance effort represents a significant investment in terms of redefining processes and making system changes.

Another GT Nexus Executive Committee member, John Gurrad, vice president, business planning and e-commerce, MOL America, said the rule has required minimal system changes for the carrier. Deciding on cut-off times for receiving the information and when to lock documents in the system to meet the new deadlines are two relatively minor issues, he explained. However, "we don't have an online system now," he said. "We are in the process of implementing a new MOL website." It will have features comparable to GT Nexus for submitting shipping instructions.

Both carriers agree that the 24-hour rule will help drive up Internet usage levels. "We are strongly encouraging customers to use e-commerce," said Kirby, and in this cause APL is offering later cut-off times for cargo manifest information that is submitted electronically. "We should see the number of customers turning to electronic means significantly increase," she said.

According to Gurrad, since most of the transactions passing through the GTN portal currently originate in North America, "we see this as more inducement for Asian and European customers to use GT Nexus." Ultimately it is the shipper who must decide to go electronic "but this kind of jogs his mind," he said. Moreover, as users become familiar with using Internet-based channels, "hopefully they will use it for bookings and other transactions as well."

Urban said GT Nexus is receiving more requests from freight forwarders to integrate with its portal. Established forwarder practices, such as creating bill-of-lading instructions and faxing the information, may not cut it under the new security-conscious regime. Converting to electronic means not only makes compliance easier, it means that even small forwarders can be connected to carriers at the applications level, Urban noted.

Would the 24-hour rule have been feasible without the Internet? Probably. Anything is possible given the right incentives. But pre-Internet compliance would have required "armies of people or caused several days' delay in everybody's supply chain," said Urban. "The pragmatic answer is that it would have been very difficult to comply."