A Deeper Look at Container Line Operational Metrics
Welcome to the 86th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I discussed how experimentation with decarb technology is an essential part of the virtuous cycle. This week, guest commenter Peter Creeden further explores my reporting on Hapag-Lloyd’s commitment to equip its containers with trackable devices. Peter is managing director of Sydney-based advisory firm MPC International and a veteran of liner carrier Hamburg Sud.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.
The announcement by Hapag-Lloyd, as reported in Eric’s article, Hapag-Lloyd’s box tracking salvo likely an industry-wide catalyst, is a significant step forward for the industry.
Al Tama’s comments in the aforementioned article point to a shift in the market. The willingness-to-pay (the maximum price a customer is willing to pay for a product or service) for data by importers and exporters has been significant. Obviously, supply chain disruption has been the catalyst, but the shift away from the strict adherence towards just-in-time management practices to just-in-case practices, and the holding of more stock, have also been the driver. Additional inventories and stock locations require better visibility because of the added complexity. ESG reporting is also becoming more of a requirement and accelerating the demand for better visibility reporting.
Today’s reporting system is based on terminal (ocean, rail, or depot) systems that provide limited and sometime incorrect information. It is only near “real-time” in the major developed countries and it isn’t reliable enough to build predictive modeling, which will significantly improve the supply chain.
Outside the developed countries, reporting timeliness and quality are still important issues to deal with, and require significant manual workloads. The application of these IoT devices will immediately provide a way to validate the movements of containers and streamline the inventory reconciliation process. These improvements in data quality will have an impact on container productivity, container maintenance and repaid costs, and cargo claims processing.
The investment by Hapag-Lloyd will be a big enhancement and a greatly improved data source, which will provide value for both Hapag-Lloyd and its customers as well as the third party platforms.
In the 82nd edition of this newsletter, Eric immediately identified the benefits of IoT devices, or sensors, towards driving dynamic pricing. His points were sound and they will be realized in the long term. In the short term, IoT devices will provide immediate benefits, which will be the stepping stones to true dynamic pricing.
IoT devices will allow visibility by going beyond the gate, filling in the black holes in the current reporting system. This will provide a big benefit to improving “status days” and productivity. “Status days” is one of the key reporting tools used by the equipment control teams at container lines to measure the number of days that a container is in each movement phase. IoT devices provide the granularity which will allow Hapag-Lloyd to know the definitive turn point and time. This will immediately reduce the workload for all stakeholders and clear up any ambiguity around container detention and equipment supply.
Seeing where the container is actually packed or unpacked will provide Hapag-Lloyd the opportunity to improve their container fleet management and provide a clear understanding of the inland movements. It will improve equipment supply management by allowing the step change from weekly minimum working stocks to daily minimum working stocks, which, in turn, will drive a more proactive approach to ensuring containers are available for export.
IoT devices will also drive adoption of triangulations, or “street turns,” and promote “virtual container parks” by importers and exporters that can work with Hapag-Lloyd to promote their locations as pick-up or drop-off locations for other local shippers. I would assume these virtual container parks would be limited to larger importers or exporters that do more than 100 packs or unpacks a week. The cost benefits would be significant and greatly improve inland transport efficiencies by allowing “one-way” pricing instead of the current round-trip.
It will also greatly improve the equipment imbalance and allow for a hyper localization of equipment imbalance pricing. Today, most shipping lines’ pricing systems are based on equipment imbalances key figures, credits or debits, based on past performance over a wide area. IoT devices again will provide the granularity to greatly improve this for specific locations, and allow for these imbalance adjustments to be more accurate for true dynamic pricing.
IoT devices will also allow Hapag-Lloyd to bridge the gap between their view and their customers’ view on visibility. Delivery in Full on Time (DIFOT) has been an important KPI for most supply chain managers. Historically, this KPI has been somewhat ambiguous. IoT devices will greatly improve the ability to measure DIFOT and thus improve overall supply chain efficiency.
IoT devices also provide real traceability or provenance reporting. For proper ESG reporting, this is becoming a must-have requirement. This is particularly true in agriculture, where the quality of produce is a competitive advantage, differentiating it over lower quality competing products. Tracing the goods from the “farm gate” to the end customer is driving the demand for third party AgTech platforms. These customers and platforms need the granularity that IoT devices provide to prove the authenticity.
As we move forward in this new, post-pandemic world, we need to build upon the reporting systems of the past in order to meet the new visibility requirements. IoT devices will be the new tool enabling us to adapt and meet the future demands. Hapag-Lloyd’s investment is the turning point for IoT devices becoming the new standard.
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
The most important technology story we published on JOC.com this week came from my colleague Bill Mongelluzzo (ironically the least technologically adept editor on our staff!). He writes about automation being a banana skin (as it has always been) in ongoing ILWU contract negotiations. Watch this space.
Nowports is your latest logistics tech unicorn and the first one in the Latam region. Investment in the Mexico-based digital forwarder continues a couple patterns: most of the current unicorns are intermediaries of some sort, and most have been backed by SoftBank (Flexport, Forto, and Flock Freight, notably).
I wrote about Draying.io, a Miami-based startup aiming to build a marketplace for the drayage industry. Founder Gerard Bonell has spent time building software for drayage brokers and carriers and is now turning his attention to a system that makes the process easier for shippers.
Also in drayage news, Envase (which has rolled up a number of widely-used dray carrier TMSs), acquired GeoStamp, a GPS based visibility and analytics provider.
Freightos’ airfreight booking and rating platform WebCargo has added an integrated payment tool for forwarders to pay airlines. The logistics payment space is red hot - don’t expect it to slow down any time soon.
And here are some recent discussions, reports, and analysis I found interesting:
My S&P Global colleagues, in partnership with the World Bank, released the Container Port Performance Index for 2021 this week. The accompanying report details the methodology and scope of this index, which makes apples-to-apples comparisons of every container port globally. Spoiler alert: some of the most important North American container gateways…did not do well.
The contentious Gartner Magic Quadrant on Real-Time Transportation Visibility Providers came out this week. Hoping to dig in next, but looks like project44 and FourKites are the only ones in the top right quadrant.
Catch the on-demand replay of this webinar for importers on the Forced Labor Prevention Act with Maersk and Altana.ai.
Some upcoming events I’ll be involved in:
If you’re at Reuters’ Supply Chain Execution conference June 2 in Chicago, come and say hello. I’ll be interviewing Port of Long Beach Executive Director Mario Cordero about the port’s Supply Chain Information Highway initiative.
Also on June 2, I’m doing a virtual fireside chat with Transporeon and SupplyStack (which Transporeon acquired in ‘21) about the future of real-time visibility.
Lastly, the agenda for our Inland Distribution Conference in Chicago Sept. 26-28 is taking shape. I’ll be doing a one-on-one with Emerge CEO Andrew Leto and then leading four tech-oriented discussions on LTL, freight procurement, small carrier tech, and venture’s future role in trucking. Don’t miss this - it’s the most substantive surface transportation conference in the market.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.