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Why Digital Transformation Matters in the Shipping Industry

Tomas Swinburne
Dec 24, 2019
Digital Transformation in Shipping

Digital transformation is reinvigorating the shipping industry through new technological applications to streamline operations, customer experiences, and efficiency. In shipping, digital platforms, real-time tracking data, big data, IoT, blockchain, and online 3PL integrations are leading the way to disrupt and redefine this legacy industry.

But why is the digitalization of freight only happening now?

With so much uncertainty since 2016 and throughout 2019 due to the China-US trade wars, players in the shipping industry took a hard hit to their bottom line. From shippers to carriers, nobody has been immune to the market pressures driving down freight rates, and hoisting up tariffs on goods. With TEU overcapacity and a lag in global demand due to ongoing trade wars, the outlook for 2020 looks pessimistic. Transforming business models in ocean shipping through digitalization seems to be one of the few avenues to navigate back to profitable and sustainable growth.

What is Pushing Digital Transformation in the Shipping Industry

Digital Transformation in the Shipping Industry

Digital transformation doesn’t happen in a vacuum. Market forces and technology in shipping are pushing carriers, NVOCCs, freight forwarders, and BCOs/shippers to rethink how they operate. Two of the most significant pressures include the China-US trade war and antiquated technology.

Uncertainty from the China-US Trade War

The China-US trade war is affecting everyone. With higher costs for importers, lower manufacturing output, layoffs, and depressed freight rates, this trade war is creating massive uncertainty for everyone in the retail and shipping industry. According to China Briefing, the US placed tariffs on US$550 billion worth of Chinese imports and China placed tariffs on US$185 billion worth of US imports. Nobody in the shipping industry has been immune to these tariffs.

For carriers, the last few peak seasons and holidays that coincided with the trade war didn’t provide them with a much-needed boost to their rates with lower PSS adjustments. Even with weak demand and over-supply of space, retailers and shippers aren’t benefitting from lower ocean freight rates. The additional cost of tariffs on imported goods from China offset any gains from cheaper rates.

As the China-US trade war continues to reduce global trade, and fears of yet another global recession, it’s hoped that trade war between China and the US will not become the “new normal” in the international arena, as this could cause further barriers for unhindered international trade, and thus, slowing international economic growth.

Outdated Shipping Industry Freightech – The Necessity to Digitally Transform

The shipping industry is at a crossroads, and becoming digitally agile is no longer up for debate. Unfortunately, it still takes shippers up to four phone calls, 12 emails, two faxes, and between 12-48 hours to make a cargo booking. Digitally streamlining bookings, document management, and tracking processes will significantly improve shipper and freight forwarder operational efficiency.

According to Aptara, some benefits of digitalizing business operations include:

  1. Increased Productivity — Less time is wasted on needless and manual tasks
  2. Cost efficiency — Companies like Cisco save hundreds of thousands of dollars on printing, shipping, and labor costs
  3. Easy access to documents — Storing documents on off-site and on-site cloud backups makes document management easier between shippers and freight forwarders
  4. Stay Competitive — With the above three benefits, you will be able to stay competitive.

Who is Digitally Transforming in the Shipping Industry?

Who is digitally transforming shipping?

Digitalization is a top-down transformative process. Carriers have been the first to digitalize processes, thus creating new standards for other carriers and new expectations of services from freight forwarders and shippers. Some of the players that are digitally transforming include:

  • BlueX — Our venture-capital funded start-up created the CarrierX Initiative, the industry’s first digital white-label solution for carriers to monetize containers. CarrierX also offers an open freight marketplace (OFM) to all carriers to integrate end-to-end solutions to shippers.
  • Maersk — This carrier began its path to digitalization to monetize containers after substantial losses in 2016 with stellar results. More recently, Maersk Chief Executive Soren Skou said in an interview with the WSJ that Maersk was aiming for 50% of their revenue being from ocean services and 50% from nonocean services (inland services).
  • Hapag-Lloyd — This ocean carrier estimates that their digital transformation will be completed by 2023.

Equally, the rise of start-ups offering a myriad of digital solutions is constantly growing.

How to Digital Transform Your Shipping Business

Executing a digital transformation strategy for your shipping business may feel daunting. Some businesses take the approach to develop their own digital solutions, but this requires investment, time, and skill that most shippers and freight forwarders don’t have.

Most shippers and freight forwarders tend to outsource their digitalization to third-parties that provide digital platforms. This is a good digitalization strategy to reach customers and increase operational efficiency. These platforms don’t require massive investments or technical skills to get started on. Some benefits of digitalizing through a platform include:

  • Improved operations and E-services — Digitalized instant quotes and bookings, integrated customs filings, and online contract and rate management.
  • Greater visibility and transparency — Real-time tracking and accurate global sailing schedules

No matter what route you decide to take with your digital transformation, be sure to embrace it. Enable your business with the right investment and third-parties.

Get Started on Your Digital Transformation with BlueX

The BlueX open freight marketplace offers a pathway for shippers and freight forwarders to digitally transform, and some benefits include:

  • Bookings in one digital space
  • Access to tier 1 rates
  • Faster bookings in minutes, not days
  • Streamlined payment options

If you want to get started on your digital transformation, message us at info@bluextrade.com.