Many industries are in constant growth and digitalization, thanks to the emergence of new technologies. However, this is a pending task in the freight transportation industry, which continues to operate in a very traditional way.
For this reason, new initiatives have recently begun to appear aimed at improving processes relating to international logistics and the freight transportation (such as blockchain technology), and thus provide a solution to the 8 main problems facing the industry:
1. Supply Chain Visibility (Security)
Security is a growing concern in the international logistics. This is due to the fact that in a freight transportion process, the cargo passes through multiple agents in the supply chain, from the moment it leaves the exporting company until it reaches its final destination.
Thus, there is no way to ensure that all actors (there may be up to 27) are acting appropriately, so there is no visibility of the supply chain, which ends up being a problem, as no part of the process leaves a clear record that the procedures have been properly followed.
To better understand how the supply chain works in a freight transportation process, we can see it summarised by clicking here.
2. Risk of fraud
One of the problems arising from the visibility of the supply chain is the existence of the risk of fraud. Such is the problem, that the annual abandonment or theft of merchandise exceeded $30 billion USD in 2016, with an average value of theft of 190,000 dollars.
3. Documentation inefficiency
Bureaucracy is one of the biggest problems in freight transportation, as it is currently a manual process.
As we have indicated, there are up to 27 agents in the supply chain, and each of them is responsible for different documents, which will also circulate among the corresponding actors. Thus, the documents that are transferred for each container are approximately 20, which also, as long as physical documents or messaging are used, makes it inefficient from an environmental point of view as well.
The main consequence of this is not only the probability of human errors in the documents, but all this involves tasks that consume too much time and use too many resources (as well as people) dedicated to it instead of focusing on other points of improvement or development. In this way, any error or delay in the documentation process will result in extra costs.
4. Inefficient communication between actors
In the same way that the transmission and preparation of documentation is inefficient, it is also inefficient among the agents involved. As much as there are systems and platforms such as ERPs, which facilitate these processes (especially internally), the usual communication between the actors continues to be primarily through e-mails and telephone calls.
Even so, despite the fact that each of the agents usually has an ERP or a system that facilitates the documentation process, the problem of inefficient communication continues to occur. This is because these systems work in isolation, which means that there is no interoperability between them, and therefore there is still no fluid communication and transmission of documents.
There are many reasons why delays can occur in the delivery of goods to their final destination, such as the time it takes to release the cargo and inspections made by customs once the cargo is released.
These inspections often cause delays due to problems with the documentation, so if any are missing, the customs authorities can not greenlight the cargo, so the exporter will have to provide customs with the pending documentation within a maximum period of 15 days.
Obviously, this means that the goods stay longer in the terminal, resulting in significant delay costs (which vary from country to country and company) for the company responsible for transport. These costs increase the longer the goods remain in the port, although they also tend to have a margin of several days (usually around a week) where no costs apply. And, apart from those days without costs, the average is between 1 and 2 days late.
And this is something that is normally out of control of both the exporting company and the importer. In addition there are other external causes such as weather, technical problems of the ship, natural disasters, etc.
6. Missed Deadline
From the above-mentioned delays, we get one of the reasons why in many cases, will not be met the deadline for delivery of the goods.
This does not only mean that the goods arrive late at their destination, but also a possible loss of customers and the image of the company is damaged in addition to significant additional costs.
The responsible for this problem will usually be the company in charge of carrying out the transport, however, these negative consequences also fall on the rest of the agents.
7. Loss of cargo
Another frequent problem in the freight transportation is the loss of goods, which in the last three years, only in maritime transport, has meant an average annual loss of 1.390 containers, according to the World Shipping Council.
Since the carrier is responsible in this case (from receiving the goods until delivery), the cost of this problem will result in compensation that the carrier will have to pay.
8. Extra costs and penalties
All these problems seen in the previous points end up resulting in added costs or costs that are already available but could be reduced.
The most common extra costs for delays in the freight transportation, and especially in maritime transport, are those relating to occupations, delays and storage.
The delays, as we have indicated in the point 6, will be charged by the shipping companies for not having returned the container during the corresponding period.
If the container exceeds the days allowed to remain in the terminal, occupation costs will be charged, which, like delays, are charged (by the terminal) for each day that passes, gradually increasing its price.
On the other hand, the cost of storage, which is only present in sea transport, will be given when the goods in the groupage exceed the time they must remain in the warehouse.
All these costs account on average for 20% of total logistics costs.
Faced with these problems, multiple initiatives are being developed to improve some of the processes that present problems within the supply chain.
Most of these new solutions are focused on greater visibility of the supply chain, and therefore greater security. And that is why many of these proposals revolve around IoT, Big Data & AI, decentralised technologies such as Blockchain technology, digital logistics marketplaces, etc.
Without a doubt, one of the most outstanding and booming solutions is blockchain technology, which is increasingly present in many industries (international logistics, food, finance, etc.) and being used by more and more companies, as well as Walmart, or the TradeLens initiative, promoted by IBM and Maersk. In the same way, many new start-ups are emerging, as would be the case of ChainGO Tech.
The current trend towards the use of this decentralized technology is due to the fact that the main advantages it presents are totally in line with the main problems seen previously. Thus, it creates transparency, since every movement made and who has made it is always recorded; security, also due to the immutability of the documents uploaded (in the case of document management and information platforms in logistics) and as a result, a saving of time, and above all in costs.
If you are interested in learning more about the advantages blockchain technology provides to the supply chain, we tell you in just 10 steps by clicking here.
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