Change resistance hindering digitization in project logistics

Change resistance hindering digitization in project logistics

The massive amount of data going back and forth between project shippers and their service providers has created an incentive to digitize, even if project cargo is inherently more complex — and therefore more difficult to automate — than conventional breakbulk or container shipping. Photo credit: Shutterstock.com.

When it comes to project cargo, some argue the idiosyncratic nature of the sector necessitates personal relationships and, as such, make it impossible to truly digitize and automate via technology. Others argue this is an out-of-date — perhaps even slightly self-serving — narrative and that project transportation is as ripe for modernization as landline telephones or printed newspapers were 30 years ago.

As with most things, however, the truth likely lies somewhere in between. Indeed, many experienced project cargo veterans say the sector is first and foremost about savvy relationship management, but that having the right technology behind those processes can make all the difference.

There are many “soft spots” in project logistics, where the complexity of operations makes them near-impossible to digitize, let alone automate. There are countless ways that cargo owners configure requests for quotes (RFQs) for project transport, for example. Some RFQs spell out every detail, while others might only give a bare-bones description of a project’s scope and the cargo involved.

There are also myriad ways in which prospective service providers can respond. Their bids could be as large as a phone book, or as small as a few paragraphs, with little uniformity across companies and activities. Contracting also varies widely. Once contracts are signed and transport operations are under way, there is a deluge of communications, documentation, certifications, permits, and reports that all must be mastered and managed.

Given this massive amount of data going back and forth between shippers and their service providers, even those least interested in digitizing project cargo logistics see the benefits of technological tools that streamline and organize that information. On the flip side, even the most ardent proponents of digitization acknowledge that project cargo is inherently more complex — and therefore more difficult to automate — than conventional breakbulk or container shipping.

The big ‘brain’

According to Peter Bouwhuis, president and CEO at Netherlands-based project manager XELLZ and managing director at trade association Project Freight Network (PFN) and the associated education and events firm iBrabble, many project forwarders simply aren’t interested in modernizing.

However, the real stumbling block is a lack of standardization within the industry. “There is not and never will be a project logistics standard,” Bouwhuis told JOC.com. A concept such as TradeLens, the IBM and Maersk-led blockchain container shipping platform, works because it is focused on one repetitive element out of the entire supply chain, he said.

By contrast, project cargo shipments are “never replicated, so they can’t be treated like single transactions, as in TradeLens. In projects, shipments are never a one-document, one-transaction operation,” said Bouwhuis, who spent several years working for project carriers, forwarders, and cargo owners before opening his businesses. “The whole thing about digitization is that you have to box it into a standard before you can digitize it into a constant flow.”

To function properly, a project cargo version of TradeLens would have to make sense of not just container transport, but also barges, heavy-lift ships, self-propelled modular transporter (SPMTs), semi-submersibles, port terminals, and trucking, to name a few. “You [would] have to take all of these elements and put them into one system,” Bouwhuis said.

XELLZ manages complex projects using its projeXsmart platform, a super-system that manages all the project’s main and sub-events within one organized, overarching control center. “It’s like a brain,” Bouwhuis said. He and his team are now managing the early stages — from pre-engineering, budgeting, and procurement to data tracking — of a multi-billion-dollar European megaproject, not yet publicly announced. 

Information from many points, generated by an array of resources — automatic identification system (AIS), customs declarations, survey reports, radio-frequency identification (RFID) tags, and other connected sensor devices, for example — feeds into the XELLZ brain via application programming interfaces (APIs). “We have mission control that makes sure data is fed in, analyzed, and put into projections, such as when cargo will arrive at a job site,” Bouwhuis said. The project owner requires all service providers to cooperate and share data, and perhaps more importantly, is responsible for making sure all data, even when pulled automatically into XELLZ by an API, is accurate, he said. “This takes manpower.”

With a centralized platform, information is no longer siloed in different locations by the many vendors working on a given project. “All communication is done within the system, within our platform; no emails,” Bouwhuis said.

Moving a cargo piece from Rotterdam to Hamburg, for example, could involve six different service providers and generate “many, many pieces of information,” all of which “will be in one spot on our system,” Bouwhuis said. “I will know what’s been communicated and be able see videos, damage reports, certificates from crane companies, driver’s licenses, GPS tracking — everything will stay within that one location on the system. If a key person breaks a leg and can’t come to work tomorrow, someone else can take over. Customers can look into the system. It’s tamper-proof and encrypted.”

According to Bouwhuis, XELLZ thus far has no direct competitors in the space. “This is annoying, as it takes forever to explain what we do to our customers.” Their logistics teams often see XELLZ as competition and are resistant, even when the need for collaboration is painfully apparent, Bouwhuis said. 

Changing the industry mindset

Adolph Colaco, founder and CEO of e2log, a digital logistics platform specializing in project cargo logistics, agreed that project transport players are often extremely protective of their turf. “It’s the same on the shipper side. There are comfort levels with the people they work with,” he said.

“Tech-wise, [digitization] is doable, but the biggest challenge is the mindset of the industry and the lack of people’s willingness to change,” Colaco, who spent 25 years as a carrier, forwarder, and shipper in the project industry before founding e2log, told JOC.com. “I come from the business. I’m not a tech guy. Our tagline is ‘Simplify oversize.’ It’s like there’s this mystical thing about oversize, but we are challenging that.” 

On the e2log platform, shippers first create a “project structure,” Colaco said. They then build their RFQs for a given activity or project and sub-projects. For example, “If an EPC [engineering, procurement and construction company] is building a project in Congo, and phase one is deployment of turbines, they create a section for all cargo moving in that phase, build RFQs from there, and send them out to preferred logistics providers or to the broad marketplace,” he said. Shippers could also build RFQs for industrial supply chains, such as oil rig construction or relocation.

The RFQs are — or at least should be — comprehensive, including details such as weights; dimensions; drawings; health, safety, compliance (HSC); method statements — in a word: everything. Colaco said some shippers have been surprised at the thoroughness e2log requires, but generally cooperate and have even said they found it a good discipline. The process streamlines the infinite number of ways that an RFQ can be presented to bidders, and forces the shipper to present more complete information, he said. The incompleteness of shipping information in RFQs has long been a complaint of project forwarders.

In e2log, bids are broken down into ten discrete elements: cargo assessment, packing, transport to load port, customs clearance at load port, loading and port activity at load port, international transport, offloading at destination port, customs clearance at destination port, transport and port activity at destination port, and delivery to final destination. The shipper gives dates, but no transport preferences, and can ask for full door-to-door or partial bids. Once bidding is final, the lowest offer is displayed, showing both cost and time. “The system does not make recommendations. This will not necessarily be the bid chosen,” Colaco said, as the actual contracting is not handled by e2log.

The platform’s end-to-end track-and-trace capabilities kick in once bids are accepted, Colaco said. As with XELLZ’s projeXsmart platform, the e2log system is a single repository for all documents, requirements, reports, and communications — from vessel flags and fumigation reports to the CVs of logistics engineers. “Everything is hanging in a single spot,” Colaco said.

As far as Colaco is concerned, the traditional insistence on the importance of relationships in project cargo is just an excuse to avoid digitization. Similar to Bouwhuis, he said the real problem is a lack of structure and transparency into siloed data. “Relationships compensate for inefficiency.”

Using the tools

Shippers have been trying to digitize project transport logistics for years, said Michael Ruediger, project director, Americas, for Houston-based forwarder Pentagon Freight Services. “They want to compare apples to apples,” he said.

While he acknowledged the logic of this line of thinking, Ruediger emphasized the difficulty of capturing the flow of services in a project transport environment. e2log and similar systems are fine for simple breakbulk or for container shipping, he said, “but with project cargo, you may have a packing list with 100 pieces listed, and 20 of those may be very specialized pieces with special handling … The port charges may be very complex, and not easy to apply to a packing list,” or capture on a digital platform. Because of this complexity, he prefers to itemize bids in an offer letter that can be anywhere from eight to 20-plus pages, depending on the scope of work and customer preference.

“We feel this is still a relationship business,” Ruediger said. “It comes from building trust with the customer. These systems are even partially designed to take the emotion out of the process. Through dialogue, a customer can gauge our expertise, and we can still build that necessary relationship.

“In other cargoes, maybe it’s just a number and that’s all that matters, but if you are moving something that weighs 300 tons, you have to understand what that takes,” he added. “We could be bidding on projects with very tight schedules, and when we put the offer together, we are stressing time and have factored in certain services to expedite the project. If that went through a digital platform, those nuances wouldn’t be captured.”

Ruediger agreed, however, that there are plenty of sub-areas and processes where digitization can prove useful, including GPS tracking, Internet-of-Things (IOT) systems, cloud-based communications, and document sharing.

Other industry experts noted that not all cargo that moves under a given project is oversized, but that doesn’t make it any less complex. “People in project logistics all love to see the photos of big cargo. But ultimately, on any project, most of the hours worked are on smaller, less ‘sexy’ cargoes — steel cargoes, parts and components — often the stuff that goes in containers,” said one long-time, Houston-based project forwarder. Some of this work can be digitized, if proper processes are in place. The individual components of a distribution control system (DCS) for running a plant, for example, would “look a bit like the bridge on Star Trek or part of Mission Control at NASA — lots of keyboards, cables, computers, and monitors, and other IT stuff. Usually the P/O [purchase order] will show just one line item: DCS system,” but behind that P/O is a 50-page specification list for each and every piece of the DCS, the forwarder said. For those kinds of projects, “What’s needed is a bill of materials, and eventually packing lists, which show in which box which item is, and a way of ensuring that ultimately all items were shipped. This is where the time is spent. This is where IT tools can help ... if and only if there are proper processes to capture everything.”

Contact Janet Nodar at janet.nodar@ihsmarkit.com and follow her on Twitter: @janet_nodar.