The logistics industry as a whole is slow to embrace digital change, yet container shipping has been especially reluctant to dispense with analog methods. Complex decisions on empty-container moves continue to be handled manually within spreadsheets, based on human intuition.
Now, however, with total vessel capacity expected to reach an all-time high in 2020, companies at every port and shipping nexus are beginning to re-evaluate longstanding business processes.
Approximately 90% of global trade volume is carried by sea, and seaborne trade is expected to double by 2030. While the march of globalization has taken a hit in 2020, the need to push forward with digital adoption within the container shipping industry remains more important than ever.
Most ocean carriers own too many containers in reserve, leading to significant inefficiencies. Moreover, the system offers no clear visibility into cost. In many cases, the logistics team manages empty repositionings globally, while a separate procurement team controls vendor expense.
This disconnect leads to situations in which lines know the total amount they paid to a certain vendor in a certain location, but the drivers behind these costs aren’t clear. How many containers were moved, and why? Could another vendor have handled it for less? Those who make such logistics decisions often lack full awareness of the cost impact of their actions.
This lack of insight into how and where delays occur, as well as how the process might be improved, can significantly inhibit container shipping. Fortunately, digital changes that are driving the industry’s development have created new opportunities for real growth.
Improving Global Container Shipping
The good news for container shipping is that the loss of containers at sea has fallen dramatically in recent years to an all-time low. Such physical incidents result in swift corrections in procedures. What’s harder to address are the losses that come from a lack of data.
Analog solutions and manual data sheet entry provide a means of moving cargo from port to port. Yet these longstanding methods of handling the world’s resources have hit a sharp pivot point in 2020.
One in every three containers globally is moved empty, according to Boston Consulting Group. This imbalance, which costs the industry up to $20 billion per year, can be countermanded by applying better logistics planning strategies.
Inefficiencies in managing empty containers tend to stem from slow relocation times, as well as the cost of repositioning, storage and ownership. There’s no way to eliminate the entire $20 billion cost of empty container repositioning, but it’s estimated that about 30% of this amount can be averted with the help of the right technologies. Such improvements can better inform future logistics decisions, particularly if there’s competition on the route.
In previous decades, forecasting was built exclusively on human knowledge —workers in one part of the world would predict demand based on their bookings and personal experiences, which were then combined into a single master forecast. While this method can approximate actual demand, it’s subject to human error and bias.
Moreover, the worldwide container shipping industry is faced with fewer workers, falling demand, and disruptions to supply routes. Ensuring that every vessel leaves with the right amount of containers, on time, every time, is more than just a goal today — it’s crucial to a company’s very survival.
The key hurdle for container shipping, as with other branches of logistics, is deciding how to predict future shipping patterns with greater accuracy. Companies that adopt demand-forecasting solutions have the advantage.
Artificial Intelligence Answers
The digital approach to container shipping is solutions-based. While we may think in terms of “the rest of 2020,” ocean carriers know the next year and beyond will follow a similar pattern of volumes. There’s value in historical data, which long-standing logistics firms rely on to achieve success every year. But taking a more precise look at demand, within a region or across the globe, is a greater challenge.
This is where artificial intelligence can be used to separate the signal from the noise. Predictive algorithms and data models work with internal company information to determine when and where containers should be shipped, taking into account external factors such as holidays and other time-based events.
AI allows carriers to evaluate customer demand two to three months ahead of delivery. Empty container repositioning, increased repair costs, and over-budgeted labor are all major revenue inhibitors for any shipping line. When container flows are optimized, resources are less strained and revenue increases, since the companies no longer have to deal with excess empty capacity.
The sheer scope of global ocean trade makes it difficult for most shipping companies to manually optimize their supply chains. With the help of AI, decision-makers get a broader picture of where their containers are going, and where they should be.
Optimizing Solutions for 2020
When it comes to shipping containers across vast oceans, there’s little room for guesswork. Each departure must be attuned not only to the bottom line but to the realities of demand in the arrival port, which may be weeks or even months away.
What’s more, economic contraction means a need for smaller fleet sizes worldwide. We’re now facing a situation where demand and supply are both in flux. To bring clarity, companies must look to the right predictive analytics tools.
AI acts as a lodestar for those operating in troubled waters. When container shipping is driven by the right data, speed, safety, and profit all increase, due to the optimization of empty-container flows and sensible demand prediction.
Container shipping companies today need to predict fast-changing events with certainty. That means using digitally sourced information, and focusing on data-driven decisions. Executive action and employee engagement remain paramount, even in times of social distancing. Evolution today lies in the way leaders are utilizing the right technology to set sail with confidence.
Jon Fath is chief operating officer at Transmetrics.
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