Digitalisation in the chartering business of the bulk market
The following sections present the research findings regarding the implementation of digitalisation in the bulk market chartering business. More specifically, the findings are presented for every stage of a charter’s pre-fixture, fixture, and post-fixture. Furthermore, reference also is made to the electronic bill of lading.
Digitalisation in pre-fixture and fixture stages
At the question of which digitalisation technologies are in development for the pre-fixture and fixture stages, the interviewees answered that over the years, there were featured various web-based platforms offering e-chartering services (e.g., Signal Ocean Platform, Soft Ship, Gat Ship, Safe Sea Net, National Maritime Single Window /NMSW, AXS Marine, ShipNext, CPVault, Magellan Chartering Solutions, ShipFix, Veson Nautical, EdoxOnline etc.). These e-chartering platforms offer a range of applications such as maritime news, market forecast, fixture reports, ports’ information, voyage estimations, laytime calculations and other pre- and post-fixture applications. In this way, a software platform that has been developed side-by-side with shipbrokers, charterers and shipowners leverages artificial intelligence to turn complex data into meaningful market insights for brokers and other market participants (www.thesignalgroup.com/newsroom/digital-transformation-shipping-data). Especially a shipbroker—who acts as a middleman between the shipowner and the charterer during the chartering negotiation—to be successful, needs to quickly and efficiently consolidate and analyse critical shipping data provided by the digital platforms (Signal Group 2020a, b).
Regarding the benefits offered by digitalisation at the stages of pre-fixture and fixture of a charter, the interviewees mentioned that many of these platforms meet the market’s expectations. These platforms aim to reduce the number of emails sent and received among shipping market practitioners, saving up time and facilitating a smooth negotiation process. Instead of sending out emails, users can set up various groups and give permission to see open cargoes and positions. In this way, the other users do not need to read many emails, but they have the information available and can find what they need. Chartering negotiations may be saved in a secure file with an automated recapitulation of all agreed terms. Electronic negotiations conclude fixtures.
However, despite the benefits of chartering platforms, the interviewees suggested that a global e-chartering platform must be created and managed by a credible independent organisation to ensure that no company has an advantage over other competitors. After completing each voyage, the global platform should allow charterers and owners to give a rating, evaluating the counterpart’s performance. After many such fixtures, the average rating would become quite representative. An online global environment may help the shipping industry become more transparent and competitive. In this way, shipping will also become less personal and more standardised.
Furthermore, some interviewees use online solutions that digitally capture charter party documentation and information for contract management. These online tools initially digitise paper-based charter documentation and then store it in an online repository. The data is hosted at an International Organization for Standardization (ISO) certified and Statement on Standards for Attestation Engagements (SSAE) audited facility within the European Union and is accessible from anywhere. A dashboard provides an overview of charter documentation, and users are provided with version control and history, as well as drop-down menus and email notifications.
Digitalisation in post-fixture stages
After the charter fixture, the carriage of goods by sea stages follows. Again, digitalisation offers many benefits at the stages of post-fixture as well.
At the questions of which digitalisation technologies are in use at the post-fixture stage and the offered benefits, the interviewees mentioned that they use integrated software solutions, ranging from vessel requisitions to company financial statements and prompt, reliable and cost-effective ship-shore communication systems. Five companies overcome technical problems in ship-to-shore connectivity by deploying digital systems, like Inmarsat Fleet Xpress, throughout their fleets to provide fast and reliable connectivity between ships and management offices. These systems allow them to use office applications onboard the vessels.
Five interviewees stated that they have digital systems allowing detailed performance monitoring. More specifically, the companies use high-technology ship management applications that automatically input data from ship to shore, logistics monitoring, continuous training, safety control, the ships’ maintenance and the fleet’s performance and management.
Three interviewees declared they implemented enterprise resource planning (ERP) and fast Ka-band satellite communications. A fully integrated ERP at offices and vessels covers tasks related to trading, chartering, voyage planning, voyage estimation, projection, operation, vessel performance, port calls, electronic invoicing, accounting, insurance, payments and banking, crew management, technical management, planned maintenance, risk management, audits and vettings.
The above systems collect real-time data from sensors onboard the ships or from the main engine and other machinery. Then, these data are used to produce real-time reports or alerts. Furthermore, these data are used to predict serious failures. In addition, an intelligence platform is used for the information in the ERP system to be further analysed, and more sophisticated reports to be used by management as decision support tools. Other benefits these systems offer include profitable bunker management (accurate calculation of bulkers and consequent reduction of bunker consumption), engine performance optimisation, profitable voyage planning (based on actual weather conditions), etc. Furthermore, timely damage prevention will save the company from drydocking expenses, towing operations, off-hire claims and other unpredicted expenses.
All interviewees admitted that any investment in digitalisation and associated technologies deliver competitive advantages and cost benefits for shipowners and managers. They consider that digital technologies like blockchain, the internet of things (IoT), artificial intelligence, machine learning etc., in combination with modern connectivity methods, may provide prevention of system failures, reduction of maintenance costs, a decrease of off-hire claims, the accuracy of the information, compliance with maritime regulations, control of security and availability of data. Further adoption of IoT, artificial intelligence (AI), and machine learning in the shipping industry could facilitate these benefits for all stakeholders. In other words, digitalisation may bring a real revolution to shipping in the near future.
Digitalisation and bills of lading
When asked about the use of e-bills of lading, the interviewees answered negatively to the question related to the use of electronic bills of lading. This is due to the cyber risk, the ability of electronic bill of lading to function as a document of title, the transferability problems, the ambiguity of the legal status of e-bills of lading in jurisdictions, the high investment cost, the long hours of training etc.
Digitalisation in the chartering business of the liner market
As mentioned above, in preparation for this study interviews were taken from eight leading container lines, jointly representing more than 67 percent of the international market share.
Digitalisation in the pre-fixture (pre-booking) and fixture (booking) stages
In the container lines market, these stages involve a) either the acceptance by the cargo owner of the container lines tariff or the negotiation of an acceptable freight rate, giving rise to a unique quotation code, and b) a booking note and or shipping instructions sent by the cargo owner (or their forwarder) to the container line using the said code. Technology has been in use for at least 2 decades, and this procedure can be done online using the container lines’ systems. This process utilises data entered by the cargo owner ab initio, and obviates double data entry by any party at any stage of the very long documentation chain until cargo is delivered to the final receiver. Interviewees unsurprisingly reported some shippers’ resistance to taking part in this process, insisting on sending bookings/shipping instructions by fax or email, thus obliging the loading agent to enter the data in the container line’s system.
A defence in attitude among container lines is notable even at this early stage. Some container lines simply no longer acceptable to cooperate with shippers unless the shipper is willing and able to liaise with the container line solely through the container line’s digital channel. As a result, the container line will either refuse their business altogether or encourage this shipper to use the container line’s service via a forwarder who fully uses the container lines’ systems. It is even possible that this service, the ‘digital’ aspect of liner documentation, is offered as part of added logistics services by the forwarder to the cargo owner.
Digitalisation in post-fixture (post-booking) stages
In the liner market, once the freight rate has been agreed upon, a booking made, and shipping instructions sent by the shipper, the bill of lading is issued. Then, the information entered by the shipper (or forwarder) is checked and verified by the loading agent, and the Bill of Lading is ready to be issued.
Interviewees reported that the facility allowing selected and pre-approved shippers to print the original bills of lading at their premises did not prove widely successful. Interested exporters were given access to parts of the Maersk system, which enabled them to print the original bill of lading at the exporters’ premises. This removed the necessity of sending hard copies of the most important document in the procedure from the Line’s premises to the shipper. However, this step was met with insufficient acceptance and was mostly abandoned, before the recent cyber-attacks. Most exporters preferred to deal with the bills of lading in the traditional, analogue, hard copy way. Notably, most payments continued to take place physically by the customs broker issuing a cheque at the container line’s agency premises.
Avoiding printing the bills of lading at their premises was not the only way that the customers of container lines, exporters, and importers showed their reluctance to adopt the digital channels of the necessary process. This resistance to digitalisation appears to be more pronounced in less developed, smaller markets and by smaller clients. All interviewees reported that customers with smaller volumes seem to be finding it easier and prefer to liaise with freight forwarders in a more analogue mode rather than deal with the digital profile of container lines. This is covertly encouraged by some container lines. The forwarder then undertakes the electronic exchange of data with the different systems of each container line, thus utilising and offering to the smaller cargo owners’ economies of scope. During the interviews that took place in preparation for this research, every major container line reported that the main reason digitalisation and the paperless procedures have not progressed faster is the resistance on the part of the cargo owners, either because of trust and confidence issues on the paperless processes or because of insufficient information technology (IT) skills on their part. This is also supported by literature (Liu et al. 2011, Schleyerbach and Mulder 2021) reporting unwillingness from the user’s side to keep up with the digital advances.
The correct handling of the bill of lading is key to any successful migration to a completely paperless procedure for containerised exports and imports. Container lines and their customers have found ways to implement paperless procedures without waiting for the resolution of all legal and other impediments (Richardson et al. 2021) to the electronic bill of lading roll-out. These ways are more easily applicable when the specific trade does not involve a letter of credit, and a bank is not part of the process (Marxen 2020; Wass 2019).
Every interviewee mentioned the so-called ‘telex release’ method as a means very frequently used today to release cargo to consignees without presenting an original bill of lading. The term refers to the outdated use of the telex machine as a means of communication, now replaced with other electronic means of communication like email. For most carriages, bills of lading are issued without involving a bank, without a bank being named as shipper or consignee, and without necessitating endorsement for the transfer of cargo ownership from the mentioned consignee to another. In most carriages, the bill of lading and the consignment are not held as collateral nor become part of a Letter of Credit procedure. In these cases, the ‘telex release’ is a shortcut to the procedure, which is very frequently used by all the container lines in this study.
As also outlined in the literature (MOL, Mitsui OSK Lines 2021), the process can be briefly described as follows: the exporter provides the information necessary to the loading agent to issue the bill of lading. This information is entered into the container line system, and the bill of lading is either not printed at all or printed but not handed over to the exporter, it is kept at the issuing agent’s premises. Either way, the physical cargo transport proceeds normally. When the exporter receives payment for the transported goods and is ready to release the goods to the receiver, after settling any outstanding amounts between them and the agent, instructs the latter to release the cargo to the receiver. The agent can then proceed in different ways: he can change the character of the bill of lading in the container line’s systems to show that the bill of lading is not negotiable but a sea waybill instead. The cargo receiver is not obliged to surrender an original document to the delivery agent. Alternatively, the load port agent can instruct the delivery agent to release the cargo to the receiver, indicating that the bill of lading is ‘accomplished’ and in their possession. In support of such instructions, container lines usually ask that these be accompanied by a scan of the original bill of lading and the shipper’s written instructions.
These are procedural shortcuts that offer solutions in cases of payment or other delays in the documentation chain and can help the timely release of cargo at the destination, even in the frequent cases of very short transit time. The exporter needs to be comfortable using this solution in terms of trust and confidence in this paperless process and the chosen container line. This method does not require a high level of IT competence from the side of the exporter; it is, therefore, more widely available than other digital solutions and applications. It is also more widely accepted by shippers who remain hesitant to go further with digitalisation.
Digitalisation in the wider liner business
Exchanging information is not limited to the container line internal network. All interviewees took time to talk about how electronic ‘bridges’ are put in place today by using EDI files to facilitate communication with other entities external to the container operator. The exchange of these files connects the container lines’ systems with those of the terminals, port and customs authorities. The output of one system, if in the appropriate format, the output of one system can be the input in another. Delivery orders for empty and full containers are communicated electronically in real-time by the container line to all appropriate parties. The container line equally well receives information entered by terminals and, increasingly, customs authorities. Increasing digitalisation of entities such as customs authorities and container terminals facilitates and accelerates the container lines’ digitalisation process. The benefits in efficiency and speed are here without any downside, every stakeholder reaping only gains.
In greater detail, discharging and loading plans are exchanged between the container line and the terminal to plan port operations. This is done electronically today, when, until very recently, manually prepared plans, highlighted in various colours and manually crossed out with pen and pencil, were given in hard copies to every party involved. Dangerous or awkward cargo information is sent by the container line to the terminal well in advance electronically. The terminal plans its position according to the nature of the cargo and the cargo already stored in the terminal. Thus, control by the competent authority of dangerous cargo regulations adherence is made simple because of the electronic means available today. However, there is no uniformity to these electronic ‘bridges’ used so widely today among terminals, container line, customs authorities, and agencies. Purpose-built solutions are reportedly in use very frequently worldwide, although significant efforts are being made for uniformity and standardisation (https://dcsa.org, https://smdg.org/).
All interviewees reported that the pandemic provided an excellent opportunity to persuade cargo owners to use electronic means to cooperate with the container lines when the latter had to prohibit physical visits to their premises. Payments were only allowed by bank transfer; delivery orders were given electronically; containers were released using the EDI links discussed above. This demonstrated to the reluctant cargo owners that digitalisation works and is trustworthy. Visible improvements in efficiency and speed also became evident to all stakeholders. However, it remains to be seen if the digital means to manage transport activity continue to be preferred after the pandemic. Container lines may continue to insist on these means in the future to maintain improved efficiency and lower costs supported by the paperless processes.
Attitudes differ among container lines about digitalisation. Some container lines voiced concern claiming that the electronic means of conducting business obviate personal contact, weaken customer relations and reduce customer loyalty. Although it is commonly accepted that digitalisation is here to stay and will eventually be the only way to accomplish all container transport steps, container lines disagree on the degree of persuasion or coercion to be applied to the customer. In bigger, more advanced markets, a gap is becoming apparent where freight forwarders are allowed, even encouraged to move in and provide assistance to customers with smaller volumes who do not wish to learn how to deal with the digital system of each container line. Not only are small customers unwilling to learn to use digital systems, but most frequently, each container line uses a different system. As a rule, forwarders are assumed to be quite competent in using all container lines’ digital platforms and can add this service to the product they sell to the cargo owner who does not wish to deal with the container line’ digitalisation.
The container bill of lading: Electronic or paper?
What transpired by interviews carried out with professionals from major container lines, a leading roro car carrier, and letter of credit specialists in banks is that the advent of the electronic bill of lading (e-bill of lading) will mainly improve processes where the bill of lading functions as a negotiable instrument transferring cargo ownership where banks are involved, and the cargo serves as collateral, namely a means of financing trade (Michael 2022). The obvious momentum currently in existence (Tan and Starr 2020) will most likely provide results, and the e-bill of lading will become more widely available and acceptable. The leading container lines have already implemented eBL applications supported by blockchain technology, TradeLens (tradelens.com) and WAVE (www.wavebl.com). These systems are slowly being implemented on major trade routes and will doubtless be spreading everywhere, even though Maersk and IBM announced their decision to withdraw the TradeLens offerings and discontinue the platform. The willing support of exporters and importers, who have been seen to resist similar advancements in the past, remains in doubt. What remains to be seen is whether the container lines will allow a choice in the matter.