E-commerce’s slow boat

E-commerceÆs slow boat    Born about 10 years ago, Web portals have become a significant piece in the fabric of containerized ocean shipping, but the pace of adoption continues to lag behind other industries such as finance and retail.
   A closer look reveals that adoption of e-commerce within various segments of the freight management lifecycle varies widely between portions of the so-called 'procure-to-pay loop.'
   INTTRA, GT Nexus and Cargo Smart ' ocean container shipping's Big 3 Web portals ' were initially started as carrier-funded experiments to move the booking process onto the Internet. Now they're much broader in scope, and have helped this industry to convert a number of formerly manual processes to e-commerce activities.
   For example, procurement of ocean transport capacity is moving to online platforms. GT Nexus reports that roughly $10 billion in transportation contracts (the majority of which is related to ocean transport) are managed on its platform. That figure is up roughly 300 percent from the company's 2006 estimate of $3.5 billion.
   American Shipper's annual study on transportation procurement (available at www.AmericanShipper.com/payment ) supports the idea that negotiations are shifting from a manual to electronic environment. In 2010, 40 percent of respondents classified their process as manual, down from 60 percent the prior year. Essentially shippers managing large, complex supply chains use e-commerce to simplify the process while leveraging their size to secure cheaper rates.
   Bookings, the next step in the sequence, have long been viewed as a holdout. INTTRA estimates its platform will process 18.2 million container bookings in 2010, a more than six-fold increase from the 2.5 million the company counted in 2005. But INTTRA estimates that transaction volume is still about 12 percent of the global market leaving lots of room for growth.
   'Many shippers still make their bookings by phone and receive the shipping instructions electronically,' said Andy Barrons, INTTRA's vice president of marketing. 'There is less data in the booking. The shipping instructions have many more data fields, which are also required to meet regulatory and customs requirements.'
   'In the past five years, we have seen an increase in both online shipping instructions and bookings as carriers and shippers seek ways to improve their shipment management processes,' said Joe O'Brien, managing director of CargoSmart North America.
   In that timeframe bookings processed by CargoSmart have grown 693 percent. 'The rise in online bookings has been primarily shipper driven,' O'Brien said. 'When vessel capacity tightens, as was the case last year, shippers use online tools to manage their booking process and secure space on vessels.'
   The industry has been faster to adopt electronic means for managing and transmitting the shipping instructions associated with each booking.
   'That's the greatest opportunity to streamline, create efficiency, and reduce errors and speed up bill of lading turn time,' Barrons said. 'There is a lot of data in shipping instructions and likewise a lot of opportunity for errors.'
   Since 2006 CargoSmart has seen a nearly fivefold increase in the number of shipping instructions processed. The company credits this trend in part to carrier incentives, such as waived documentation fees.
   'Carriers experience bottom-line benefits and internal efficiency through online documentation and as a result they have pushed their customers to adopt electronic submission tools,' O'Brien said.   
   For shippers, freight forwarders and non-vessel-operating common carriers that are not capable ' or not willing ' to use e-commerce, platforms like CargoSmart are working to digitize their shipping instructions process.
   'Shippers and logistics service providers submit information using their preferred file format while fulfilling their carriers' electronic submission requirements,' O'Brien said. 'Mapping technology saves customers from having to re-input data into an online application or bearing the costs of maintaining EDI connections to carriers.'
   All indications are that the portals have gained significant ground in their initial goals to apply e-commerce at the front end of the shipping process. 'We shouldn't forget that there is a lot more to be done in streamlining the shipping initiation process and reduce the use of manual processes,' Barrons said.
   Rate structures, surcharges and other complexities are common to the ocean transport industry, making settlement a difficult task that often leads to incorrect invoices, disputes, short payments, and other extra steps. As a result the settlement process becomes a manual exercise where efficiencies are lost.
   'We see a significant opportunity to streamline invoice presentation and dispute resolution processes,' Barrons said. 'We estimate that there are 40 million to 50 million invoices per year that each cost between $20 and $60 to process.'
   American Shipper's research on freight payment (available at www.AmericanShipper.com/payment ) estimates that 69 percent of payments are made with a check. There is certainly a large opportunity for the industry to improve on this front moving forward.
   Portals have also set their e-commerce sights on other long-held manual shipping practices.
   'The next big opportunity we see is to provide e-commerce solutions for NVOCCs,' Barrons said, specifically referring to the booking process between shippers and NVOs.
   In fact, INTTRA announced Dec. 7 that it was opening its window to NVO customers. NVOs 'will be able to participate as both a sender of data or a shipper, and as a carrier as a receiver of data,' said Robert Haney, director of NVO product management at INTTRA.
   According to Greg Kefer, director of marketing for GT Nexus.,'I think the key opportunity to streamline the process is about addressing the full, closed-loop process. We see it as an eight-step process: procure, optimize, allocate, contract, execute, track, audit, pay and measure.
   'Most companies still take a silo approach to this. By simply addressing the individual areas, tremendous value has been proven,' Kefer said. 'Imagine what would be possible if the whole loop was all automated and connected together in a single standard platform? A few companies are close today and the technology is pretty mature now so we think the market is beginning to shift into this centralized model.'