Author : Pratnashree Basu

Expert Speak Raisina Debates
Published on May 26, 2020
COVID19 and the acceleration of digital transformations in maritime logistics

Maritime logistics is an indispensable component of international trade, as the bulk of global shipments traverse from origin to destination countries through sea lanes of communication. Upgrades in the maritime logistics sector - in terms of the ways and means through which the movement of goods takes place - are therefore often in continuous motion, an effort to optimise the process of shipping and end to end fulfilments. Alongside advances in technology, digital tools and applications are hence increasingly finding their place in streamlining operations and securing the movement of containers and cargo across maritime routes.

Optimisations in logistics with the help of digital tools are grounded on three essential actions. First, adaptations in business models which would help ease the mode of operations; second, making way for the digitisation of core business areas such as fleet monitoring, documentation, seamless networks of communication among shipping liners and port terminals and the management of revenue; and third, building digital foundations by modernising systems enabling shorter innovation cycles, agility and quick solutions. For instance, Blockchain technology is being used to make the process of documentation more secure. Optimizing networks and routines of cargo, along with controlling the monitoring of fleet activity allows the enhancement of vessel management systems. Adopting digital practices also attracts analogous talent to maintain the businesses effectively.

In fact, 2 out of every 3 shipping companies have already started adapting to digital methods.  A study conducted by Transparency Market Research on the maritime freight market analysed the feasibility of combining manual models with digital processes and found that digital transformations in the maritime freight market is set to reach $38.4 billion on digitalization techniques in the next 28 years. The compound annual growth rate of the industry is predicted to be about 10% from the year 2019 to 2027, mainly due to information technology developments.

The Indo Pacific region closely followed by North America and Europe, lead in terms of their share in digital transformations. The following charts depict the sector wise global growth as well as segmentation with respect to services and software solutions:

Source: “Digital Transformation of Maritime Freight Market: Automation Remains the Top-Driving Engine”, Transparency Market Research.

Navigating the impact of COVID-19

While the maritime industry came to a near halt in the initial phase of the ongoing global health crises, it is gradually getting back on its feet albeit under significantly altered circumstances. Nonetheless, it is expected that the impact of COVID-19 will result in accelerating the moves towards digitisation. This is driven largely by the fact that ocean freight volumes have been declining sharply over the past few months amid global shutdowns together with waning demands both at the ends of consumption and manufacturing. These in turn have necessitated the need for developing efficiencies so as to remain competitive. In the midst of assessments which suggest that the virus is likely to remain for another couple of years, it is becoming increasingly apparent that industries and businesses will have to adapt to sustain within the new realities.

The use of cloud-based Electronic-Delivery Order (e-DO) services, which lessen administrative tasks and issue orders across multiple liner networks, minimises paper touch-points in a sector that is otherwise characterised by a lot of paperwork. In the context of COVID-19 services like these are all the more pertinent in adhering to regulations of social distancing which are being and will in all probability continue to be followed worldwide. Simultaneously, telehealth is another area which can help operations as they gradually begin. Virtual cabin visits and e-consultations with medical specialists in accordance with the Centre for Disease Control and Prevention (CDC) and World Health Organisation (WHO) recommendations will contribute to the easing of concerns related to health management at sea. The introduction of virtual payment solutions is another useful step in enabling seafarers to access their wages and thus allowing a broad range of remittance options to be accessed and transferred by companies and their crew.

A key feature in gaining competitive edge is client retention. In this regard, the engagement and satisfaction of consumers has become a challenge for companies. For service industries like the maritime freight industry, it is essential to keep the assets and responsiveness of the clients in order, which offers substantial scope for digitization. The need for enhanced transparency and visibility in terms of the booking of freight for instance, calls for a connected ecosystem of platforms which facilitate improved interface between customers and ship operators. 

Key Challenges and Prospects

An expansion in the scope of digitisation will also widen the gap in the industry between the small players and the large ones who already dominates the space even before the pandemic. For instance, small container operators and freight forwarders will now be at an even greater disadvantage as they are less equipped in terms of finances and resources to put into practice digital systems into their functioning. On the other hand, leading businesses who hold the majority of the market space have the all necessary wherewithal required to step up their operations. At the same time however, unlike before, the post-COVID world is likely to be characterised by flexible value chains, modification in international container transport functions, multiple suppliers and forwarders in the overall drive towards diversification of exposure to risk. This stands to create scope for breaking traditional shipping patterns of reliance on uni-dimensional processes.

While the move towards incorporating digital systems had begun prior to the health crisis, it has undoubtedly been hastened by the impact of pandemic, the already extended duration of it and the acknowledgement that many of the former practices will neither be tenable under the present circumstances nor in future.

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Pratnashree Basu

Pratnashree Basu

Pratnashree Basu is an Associate Fellow, Indo-Pacific at Observer Research Foundation, Kolkata, with the Strategic Studies Programme and the Centre for New Economic Diplomacy. She ...

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