Digitalisation: solving one problem at a time 

The abiding memory of most people that have worked at the sharp end of project forwarding is the handling and manipulation of data – received from suppliers, shipping lines, trucking companies, ports and anyone else involved in the supply chain. But could all that be about to change? 

While digitalisation of the supply chain has been around in some form or other for decades now, the heavy lift and project logistics sector has been something of a laggard in this field. Every project freight supply chain is different – with multiple suppliers, sub-contractors and sub-sub- contractors, all of which can change at short notice – making widespread adoption of unified technological processes unfeasible. 

The shape of the retail sector, for instance, lends itself to a digitised, end-to- end supply chain system. Often, a single company can bang the table and insist that all suppliers – and their suppliers and sub- contractors – input their shipment data into its platform. 

In the highly fragmented project freight forwarding sector (which requires the personal touch), change has been slow. 

There are those in the supply chain, especially Customs authorities, that insist on seeing a hard copy of documents. Some projects span many international markets, and can take place in areas of the world where computers and IT systems are behind the times. 

As a result, paper is still king across large parts of the project logistics supply chain. One reason for this, according to Stefan Kukman, founder and chief executive of electronic document specialist CargoX, is the sheer complexity of many project logistics operations. 

He said: “Logistics is a complicated business because it is often orchestrated across multiple continents, through a wide variety of cultures, environments, and different methods and technologies. That is why the basic paper document, such as the bill of lading, has survived for so long – it is the lowest common denominator.” 

In other words, it may be slow, and ultimately expensive, but paper is reliable. 

Many benefits 

However, the freight and logistics industries cannot afford to ignore the many benefits that digitalisation can bring, Kukman continued. “Foremost, it enables standardised processes, data sharing, security, and even predictive analytics. This means that supply chains are equipped with better information in real time and participants can always see what the current situation is, accordingly planning their capacities and work processes with more efficiency.” It is all about reducing “the level of chaos”, he explained. 

Increasingly, a successful project shipping business is as much about managing data as managing ships or other hardware. Henrique Wohltmann, managing director of Hansa Meyer Global Holding, said his company’s aim is “to be one of the market-leading information and data architects. In the next years we will see how digital competencies will become the key competitive advantage in breakbulk business.” 

Hansa Meyer’s digital end-to-end approach and clear understanding of individual customer needs is all about data and connectivity, he continued. “We have to generate specific value by providing, using and analysing data based on the ability to connect to the systems of our customers, partners and competitors. 

“Internally, we believe in infrastructure and software as a service (SaaS) and we have to digitise our processes, step by step, to the next level,” Wohltmann added. 

We saw in our latest survey that market differentiation through integrated end-to-end solutions seems to be the number one strategy for logistics service providers in the breakbulk business.

- Sven Hermann, ProLog Innovation

Sven Hermann, founder and managing director of logistics consultant ProLog Innovation and also professor for logistics and supply chain management at Hamburg’s Northern Business School, agreed. “We saw in our latest survey that market differentiation through integrated end-to-end solutions seems to be the number one strategy for logistics service providers in the breakbulk business.” 

In that ProLog survey, 70 percent of its respondents see a high, or very high, potential to ensure or enlarge their customer portfolio with new digital processes and services. 

However, half of them also mentioned that “the singularity and complexity of projects are the main obstacle for digital innovation,” Hermann explained. “If they are investing in technology, it is mostly in optimisation algorithms, big data or augmented or virtual reality.” 

He said that at this year’s Forum Project Logistics, hosted in Bremen during January, half the 70 or so respondents considered the greatest challenge in the breakbulk market to be cost, followed by the declining global demand for capital goods. 

But tellingly, more than half of those surveyed also felt the ability to retain customers through digital solutions to be of high importance. 

A quarter of respondents said they were driving innovations through optimisation algorithms with, again, half stating that the greatest obstacles to the development of digital innovations are the uniqueness and complexity of the projects – followed by the digital skills of the employees and system diversity or interface management. 

Half of the respondents offer targeted training courses in digitalisation for their employees. 

Integrating data flows 

CargoX’s Kukman said that suppliers, exporters, freight forwarders and ship operators, among others, have taken steps to integrate data flows and services to improve user experience and maximise data visibility and agility. 

“The biggest challenge is how to efficiently open up services and platforms for easy implementation with businesses of all scales – and at the same time ensure good communication between the systems of large business entities. Interoperability is gaining traction and becoming the most important factor in conducting trade, and the latest generation of systems has been built with this in mind,” he explained. 

Today, there are many tools that can help canny operators to reduce their costs and at the same time improve their competitiveness. Portals, for instance, usually have user interfaces for entering and retrieving information and can be interconnected so as to enable tracking, information exchange and processing. 

Application program interface (API) and other data exchange technologies are standard business IT methods that have been used by companies around the world for years to allow their business software enterprise resource planning systems (ERPS) to communicate with one another. 

One of the issues that is often raised when discussing digitalisation, particularly in project logistics, said Kukman, is how to persuade the often myriad suppliers – including smaller firms – to provide information in a usable format, although really “it is in suppliers’ best interests to provide accurate, prompt and standardised data to support processes. In the end, if by doing this they take some of the workloads off the logistics companies, they can negotiate for better prices or additional services to be provided.” 

Blockchain possibilities 

Blockchain is opening up exciting possibilities. Kukman believes it is the perfect way to foster cooperation between all the entities involved in the supply chain. Although the technology is still in its infancy, so was e-mail in the 1990s – and that has since become a universal communications medium. 

He said: “With blockchain, information, or even more importantly true ownership exchange through an indisputable digital signing mechanism, builds a completely new level of trust among business partners.” 

With blockchain, information, or even more importantly true ownership exchange through an indisputable digital signing mechanism, builds a completely new level of trust among business partners.

- Stefan Kukman, CargoX

A variety of off-the-shelf and bespoke solutions are available. Indeed: “Blockchain technology is currently giving rise to a whole array of solutions; major efforts are under way to integrate them, and to develop common standards for easier use in all segments of trade and supply chains,” he said. 

Also, contrary to some assertions, blockchain is not expensive at all, as the IT infrastructure already exists and the development of functions, such as smart contracts, has become routine for software developers. In fact, said Kukman: “The technology is ripe for business adoption, which is proven by the Digital Container Shipping Association and Global Shipping Business Network, both of which are working on establishing industry standards. Countries all over the world are keenly aware of blockchain technology and are putting frameworks in place to efficiently open opportunities for users and vendors.” 

He added that CargoX is eager to see the new generation of the Ethereum 2.0 blockchain network, which will serve as the transactional backbone for its solution and many others, providing a totally new dimension of the Internet for business. With the new platform, blockchain transactions will be even cheaper and faster, and scalability will be drastically improved, Kukman predicted. 

Continuing the cost-control theme, whereas great efforts go into the engineering and design of physical equipment in the offshore industry, far less goes into planning the logistics side of the operation and this is the source of many of the cost increases and time slippages that occur, according to project shipping management company Xellz. 

The Netherlands-based company has been developing a platform for the project logistics industry over the past few years, said Peter Bouwhuis, president and ceo. 

Additional IT tools 

Xellz has been implementing its platform in projects for its customers with great success, he explained, adding: “Of course we believe this platform has been checking all the boxes, although I have to say that we are not done yet and are still in the process of developing additional IT tools to serve the platform and to complete the picture.” 

Digitalisation of project logistics and heavy lift industry processes is not easy and there will be many companies struggling with this, he said. “The industry does not have a uniform platform or development as we speak and most companies are doing development on their own – if they are developing at all.” Many have been deterred by the high cost and lack of technological know-how. 

When Xellz started out it was, simply put, looking for a system that would give it and its clients “100 percent transparency, control and eliminate as many duplicate tasks as technically possible”. Bouwhuis believes that the Xellz platform is now about 95 percent of the way there and is working with a team of people to reach an even higher level. 

“In terms of transparency and control, we have reached our goal but there is more to do in terms of document management and surveying operations,” said Bouwhuis. But he warned: “Digitalisation is great but companies should never forget that with all the data that is being collected and analysed, the human factor is always going to be there.” 

Project logistics and heavy lift projects cannot be automated as much as normal recurring operations. “In projects we always look at other situations – freight, climate, geographical location or time of the year. Local rules and regulations are a constant variable, as well as project demand and schedules. This is why we have our project logistics control centres which analyse on a constant basis and intervene if and where needed. A constant flow of GPS tracking data from cargo, transport equipment and project movements is collected by the platform.” 

Constant change 

However, before getting carried away, there are pitfalls to avoid, Kukman warned. “The business IT field is one of constant improvement and constant cost cutting. There is a trap: sometimes, companies pay much more than they should because they buy solutions that offer much more functionality than they actually need. 

“Companies that have decided to provide a wide array of functionalities to completely digitalise their whole supply chain at once have taken on an extremely difficult task – they need to implement countless processes, consider numerous document types, and incentivise a large number of users to start using these complex solutions. That is why digitalisation will take a long time. 

“We believe that solving processing problems one issue at a time is the right way – and this is where interoperability between existing and future solutions is of great importance.” 

This article has been taken from HLPFI's March/April edition.