ILA deal opens door for greater terminal-supply chain connectivity

Port of New York and New Jersey.

While terminals have made good strides in improving technology within their four walls, they are poorly connected with the greater supply chain in which they play a critical role as the interface between the water and the land; that connectivity has to occur for the industry to advance. And with International Longshoremen's Association and International Longshore and Warehouse Union labor peace, there’s now time to do it. (Above: Cranes at a terminal attend to a ship at the Port of New York and New Jersey.) Photo credit: Hugh R. Morley.

The conclusion of extensions to or new US longshore labor contracts presents a rare but limited opportunity to move beyond the chronic distraction of labor strife, real or potential, and focus on bringing marine terminals out of the connectivity wilderness.

The news on June 6 that the International Longshoremen’s Association (ILA) and United States Maritime Alliance agreed on a tentative, six-year master contract for East and Gulf coast dockworkers followed last year’s extension of the International Longshore and Warehouse Union contract on the West Coast. If approved by the ILA rank-and-file, the agreement would all but guarantee labor peace until at least 2024, paralleling the West Coast deal that lasts until 2022.

That is a lot of time to focus on other things. A good place to start is improving connectivity between terminals and other supply chain participants. While terminals have made good strides in improving technology within the four walls of their facilities, they are poorly connected with the greater supply chain in which they play a critical role as the interface between the water and the land.

This particular challenge is part of a larger picture of individual organizations in the container supply chain optimizing their own entities — easy because it doesn’t require collaboration — while avoiding the hard work of collaborating externally, which would unlock significantly greater value but raises tough questions of competitiveness and differentiation. The current difficulties in achieving blockchain standards across the industry are emblematic of the industry’s struggle to put hugely promising technologies to work in ways that will benefit the entire system.

Terminals are classic examples, facing unceasing pressure from carriers to lower prices. Those in competitive markets such as Los Angeles-Long Beach or New York and New Jersey have no choice but to remain price competitive or face the loss of vessel calls to other terminals. Add to that pressure from beneficial cargo owners (BCOs) to limit payments for detention and demurrage; all of this curtails available investment for technology.

The way technology has developed illustrates how silos get created and perpetuated. The data divide between terminals and shippers can be partially attributed to terminal operators investing in systems to optimize operations inside the four walls of their facilities while BCOs most often invest in transportation management systems (TMS) to optimize the flow of their goods. Neither of those systems, however, is naturally suited to give insight into the other, according to JOC senior technology editor Eric Johnson.

Bonafide collaboration would have information transmitted to, not just from, terminals

Terminals are a great example of the potential for collaboration to create value. Terminals today give out a lot more information than they receive in return and suffer as a result. They are obligated to send electronic data interchange messages on container status to carriers, which pass the information along to customers. They communicate details on vessel arrivals and departure, containers available for pickup, when containers are out-gated, when containers are put on hold and, if so, by whom, the shipping line or customs.

But to take their own efficiency to the next level, for example through a collaborative process such as blockchain, terminals need information provided to them.

“What is going to make a terminal operator say ‘yes, I want to participate [in blockchain]’ is that I want information back. As a terminal operator, we’re not seeing this yet,” Michael Shaffner, director of operations planning and technology at Port Houston told the XChain2 Conference in Houston on May 21.

Data on when truckers will arrive and with what containers would reduce turn times, providing needed relief to drayage truckers, and reducing chronically excess costs associated with pulling containers out of stacks for specific truckers.

“Technology that would link a terminal operating system [TOS], i.e., our brain, with some sort of technology that the trucker or shipper could see, that gives visibility and it creates an opportunity,” Chris Garbarino, chief operating officer at Port Newark Container Terminal, told a logistics technology event at the State University of New York Maritime College on March 15. “As a terminal, any time we are able to deliver a container that is immediately available with no wasted movement, it means a shorter turn time.”

This is why some of the most interesting technologies coming onto the market aren’t necessarily improvements on legacy TOS or TMS systems, but rather those that connect legacy systems through application programming interfaces. In the interface between terminals and BCOs or the truckers and logistics firms working for them, Johnson reported recently on firms such as Australia-based 1-Stop Connections, which is developing tools to connect legacy systems, enabling terminals and shippers to sidestep major technology implementations and tap into cloud-based solutions that can begin creating operating benefits in a short period of time.

“Every cargo terminal I worked with, there were two consistent messages: how can I get visibility of cargo beyond the four walls of my terminals, and how can I deploy a solution within weeks and not months or years, that’s in the cloud and not cost-prohibitive,” 1-Stop’s Nishant Pillai, vice president of sales in the Americas, told Johnson.  

Contact Peter Tirschwell at peter.tirschwell@ihsmarkit.com and follow him on Twitter: @petertirschwell.

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