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Terminal velocity

Splash columnist Kris Kosmala identifies the tech issues that led to container ports buckling during the pandemic.

Are you familiar with the concept of terminal velocity? It refers to the steady speed achieved by an object freely falling through a gas or liquid and is achieved when the speed of a moving object is no longer increasing or decreasing. The current container shipping debacle feels just like that.

Did the story really start around Chinese New Year 2020? Just then, pandemic-induced lockdowns in China prevented Chinese workers coming back to work in China’s factories and ports. From that moment onwards, the world of supply chains relying on seaborne transportation has never looked normal. What started as a workforce reliability problem has quickly turned into an inventory catch-up game across the oceans. As soon as the factories of China started humming again, the new production output and the backlog started swelling up across export terminals. Containerships normally filled up to 85% needed to be loaded full, taking precious extra hours at berths.

The data flow today is still too spotty, too fragmented, and too non-standard to prevent maritime supply chains from buckling under sustained pressure

Then senior managers of the largest carrier started publicly speaking of shippers needing to stop working on “just in time” principles and switch to ordering in excess for “just in case” situations. Predictably, importing supply chain managers reacted to disruptions by ordering more, just in case.

And what did the carriers do? The carriers rewarded the shippers with new “on time” arrival records steadily hovering about 15%-20% (last reports from the US West Coast indicated 11%, an all time low). And who is to blame according to the shippers, the carriers, and the regulators? The container ports and terminals.

Container terminals are usually pretty good at managing disruptive events with contingency workforces and overtime. Those measures didn’t stand a chance against the reality of the pandemic. And without humans, nothing moves in the terminal, no matter the degree of its automation. There is a silver lining in the current situation. This prolonged period of serious crisis allows us to evaluate the significance of technology in keeping maritime operations on an even keel.

The case for terminal automation has been somewhat confirmed by the speed with which highly automated Chinese ports reached full capacity after each series of debilitating lockdowns and export production delays. Similar rapid recovery has not been experienced by ports with lesser automation.

However, terminal automation has its limits. Normally, it is seen as a way to reduce reliance on human labour. In other words, an automated vision envisions using half of the people to unload twice the size of the ship in the same time window as a smaller ship, seemingly a great boost in efficiency reflected in increased productivity. The problem with productivity is that the only way you can achieve that in a terminal is by adding more people and adding more automated machinery to serve more ships concurrently. Where terminal automation focused on eliminating people by replacing them with intelligent machinery, productivity and operational resilience was powerless against the whiplash of consecutive disruptions.

The pandemic has ruthlessly exposed gaps that would have been papered over under normal operational circumstances

The real promise of highly sophisticated equipment is its ability to reliably generate utilisation and performance data, which in turn allows for quick and efficient re-allocation of terminal resources. We always knew that in maritime supply chain management, faster flow of detailed and precise data plays a critical role. What we have learned during the prolonged disruption is that the terminal can only be as efficient as the terminal users allow them to be. The data insights obtained by the terminal must flow to multiple external parties forming the terminal’s and port’s ecosystem and vice versa. And I mean insights, not just raw data. This flow today is still too spotty, too fragmented, and too non-standard to prevent maritime supply chains from buckling under sustained pressure.

The most visible, but not the most important, issue today is terminals’ inability to accommodate ships coming in out of schedule. Plenty of angst had built up among the carriers about their ships sailing as quickly as possible to their destinations only to be told that there is no berth space to accommodate them. The Just-in-Time (JIT) Port Call initiative is still in its early stages. Eventually, it will enable a digital just-in-time port call process management that will facilitate vessel arrival handling so that waiting time is eliminated or significantly reduced. That’s tomorrow.
Today, some terminals implement berth planning optimisation with point solutions which attempt to address the issue of utilising linear berth space. Intuitively, this makes sense, but the problem of berthing the vessel is not solely a problem of allocating 3,000 m of quay to 400 m long behemoths. Where the vessel is positioned has to be connected to the planning and the optimal movement of horizontal transports. The quantity of shore equipment requires optimal workforce allocation. Machines and people can move only so much quantity of cargo per period, which means the transport crossing terminal gates have to be optimised as well. Each one of those areas has its unique cost objectives, but all need to be solved concurrently by one integrated solution. That has not stopped the IT vendors to continue offering the terminals four or five very different silo technology solutions, each requiring custom integration to each other and to the terminal’s TOS.

Looking at the carrier-terminal interface, the advances of earlier years have reached their limits. The most often cited barrier to higher efficiency is lack of standardisation of data and processes leading to bottlenecks forming in processing documentation that accompanies the containers. The proliferation of different technologies, data definitions and data exchange methods when carriers, terminals and shippers communicate with each other has been incredible. The efforts of the Digital Container Shipping Association on the DCSA Information Model will eventually provide common industry language to describe data definitions and form interface standards. That’s the future. The present is still affected by silos and custom-built interfaces and data inconsistencies.

The passive distribution of data (ETAs, ATAs, EDTs, RDTs; truck turn time, etc) through port and terminal information systems exposed shortcomings of such approach in times of prolonged disruption. The biggest problem is that passive systems do not allow the terminals to see in real time the plans and responses of the BCOs/shippers. In other words, letting shippers know that the ship arrived and is being unloaded is not enough, if the terminal doesn’t know that those BCOs/shippers won’t be able to pick up their containers within the agreed free days. The arrival of container tracking IoTs has not improved the visibility that would allow each party to act quickly in synchronised actions. All in all, there’s plenty of scope for process-wide and technology improvement that has to be driven by much smarter insights.

Once the yard reaches capacity, terminals without sufficient real estate and without sophisticated yard optimisation tools that consider space, moving equipment, people, and evacuation intentions of the shippers is not going to cope well. Yards that are inefficiently emptied out lead to ships taking longer to unload and load, which in turn introduces more uncertainty into transportation planning by the importing/exporting BCOs/shippers. Since their TMS solutions are rarely integrated to terminal information systems in real time, the time lag between data and insight creates its own bullwhip effect and rapidly spreads the disturbances throughout shippers’ own networks.

In conclusion, container ports are very dynamic and complex environments. Their present processes and support systems were sufficient to face and solve constant challenges of supply and demand up till now. The pandemic has ruthlessly exposed gaps that would have been papered over under typical operational circumstances known from the past. Hopefully, the industry has learned new lessons and will re-evaluate supply chain techniques, tactics, technology solutions, and future investments.

The turn from steady-state to one in which small changes in demand and supply cause oscillating and increasing reverberations in capacity, production, and resource availability throughout the supply chain is a cataclysm as much as an opportunity to change. And I hope that lasting change and the innovation that is still needed is on everybody’s mind. The industry should not waste this crisis.

Kris Kosmala

Kris Kosmala is a partner at Click & Connect where he advises companies trying to leverage digitalization to change their business competitive position.


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