The war in Iraq created additional economic impact on an already fragile global economy that was still trying to recover from the aftermath of the Sep 11 events and the subsequent war in Afghanistan. Financial pressures have hit a few vulnerable sectors hard—most notably, the airline industry, which was already struggling to survive the slump in passenger traffic brought on by the war and the recent outbreak of the Severe Acute Respiratory Syndrome (SARS).

In stark contrast, the shipping sector appears to be riding the new downturn reasonably well.

But the challenges are there: decline in shipping volumes, weak freight rates and increased operating costs, such as higher insurance coverage.

The issue of security remains an all-important one.

With governments taking stricter measures to protect their ports from terrorist threats or attacks, international trade and their composite shipments are subject to tighter security regulations. Case in point: The Advanced Manifest Rule that was introduced by the US Customs in February this year.

The rule is part of the Container Security Initiative, which requires information about the kind and quantity of all cargo being shipped to the US to be lodged with the US Customs at least 24 hours before the cargo is loaded aboard a vessel.

Until now, accounting for cargo content has been somewhat “looser” and this new introduction of the law is expected to cause delays, if not additional expenses.

“The shipping industry in Asia differs greatly from its counterparts in the West,” says Farzin Karma, regional technical director, Asia- Pacific, Ulysses Systems, a company that provides business technological services to the marine industry.

“In the Asian region, shipping companies tend to place a greater emphasis on costs and the value that each dollar can generate.

“This is due to the highly competitive nature of the regional shipping industry, higher third-party ship management activity, and the prevailing emphasis on reducing the risk and cost of running ships.”

Given the existing market constraints, one must offer a highly competitive, value-based standard
of service and performance, and consistently stay ahead of the closest competitors, says Karma.

The ability to rapidly cope with change and reduce the cost of training are important contributors to the competitiveness of maritime organisations.

“Technology can play a vital role in optimising the use of scarce human resources by improving information management, enhancing useful output per person and minimising duplication of effort,” he adds.

To put things into perspective, the Asian shipping industry has never been considered to be at the forefront of technology adoption.

But the industry is fast shedding its staid image, with more shipping companies deploying technologies extensively and innovatively to become more efficient and to run more profitably.

Both the companies featured in this story — Fleet Management (FML) and APL—are using IT to derive benefits on the following fronts: operational efficiencies and its associated cost savings; customer service and satisfaction; and business growth.

It is still early days yet, and it remains to be seen whether they will be able to achieve their loftier goal of strategic growth. Nevertheless, they are beginning to yield appreciable gains in more efficient processes and cost reductions.

Fleet Management

For one, the use of IT has given ship management companies like FML, a subsidiary of Noble Group, an edge in this highly competitive market.

Headquartered in Hong Kong, FML has taken the initiative to automate and streamline its IT and communications process, as Kishore Rajvanshy, managing director of FML, wanted to “make operations more scalable and efficient through real-time reporting” that will translate to more benefits for the customers.

The company decided to streamline its IT and communications processes by designing a Web-based system that could handle large amounts of information at a much higher speed and with little human intervention.

The objective: boost operational efficiency while allowing for greater transparency between ship owners and managers.

“Having an open and transparent relationship based on mutual trust is one of the most important factors that influence a ship owner’s decision to entrust his vessels to a ship manager.”

Through this system, owners are able to access real-time data, such as the position of a ship, its technical performance and licence status, basic details of the crew onboard—as well as reports of incidents that might have taken place.

The data, which is captured by the ship’s master on a pre-defined e-mail format, flows directly from the ship into the system and is automatically updated on the Web site.

Both the ship owners and FML’s technical staff are notified immediately of any changes—such as pending expiry of certificates or licences for ships or crew—which would allow them to get the necessary paperwork updated.

According to Rajvanshy, satellite communications and applications that support its global and multi-office business are important to the shipping environment.

He notes that one of the challenges for IT in the shipping sector is to establish an efficient data communication system to meet the unique requirements wher every form of communication for ships goes through a satellite.

He adds that it is necessary to have an efficient data communication in place to save costs, as every character transmitted through the satellite from a ship back to the centralised server bears an individual cost.

With that in view, tailor-made solutions and integration compatible with existing IT infrastructures were key considerations borne in mind during the development of FML’s Web-based system, says Rajvanshy.

He emphasises that streamlining operations, including the setting up of a new quotation management system, helps ensure that customers receive the most efficient service at the best market price.

“That, in turn, enables expansion of business and provides for enhanced flexibility, as this is also a marketing tool for our ship owners. That ability for our customers to access such data is a strong benefit they receive.”

New modules are also being developed on an ongoing basis, says Rajvanshy.

At present, there are modules to manage quality control, crew certificates, a real-time ship position global tracking system, and spare-parts with quotations from the best suppliers as and when they require replacement.

APL

As the growth of global trade is expected to rise, so too is the volume of shipping documents—in particular, bills of lading.

In the next three to five years, the annual volume of the global container carrier could easily triple from approximately 1.5 million in bills of lading generated today.

It is inconceivable that a courier-based delivery system could scale to such a level without significant cost increases, says Phillip Chin, vice-president, E-Commerce Products, APL.

To take the costs out of the documentation processes for its customers and their providers, APL—a subsidiary of Singapore-based shipping and logistics group, Neptune Orient Lines—created E-BL Print.

Using a combination of Internet and encryption technology, E-BL Print represents a unique proposition to the way high-security documents are handled and transferred.

That system allows the bills of lading to be encrypted and sent via the Internet to third parties such as freight forwarders, consignees and its customers’ own banks.

In simple terms, that facilitates faster documentation and financial settlements because it literally
takes four to six days off the traditional laborious processes of documentation preparation, review and settlement.

While Chin declines to reveal the actual dollar benefit to customers, he points out that even for a relatively small item such as courier costs for documents, he expects that it will drop by nearly half a million dollars.

Correspondingly, the take-up of the E-BL Print system creates larger gross savings and increased revenue because APL can carry larger volumes of freight.
The system has also enabled the company to achieve internal productivity gains and cost savings by eliminating the need to print and post the bills of lading from its own offices.

The savings in direct costs, efficiencies and productivity gains are expected to amount to “several million dollars” annually, he says.

Aside from savings, customer satisfaction has gone up. So far, the uptake of this system continues to grow in every geographic region—with nearly 50% of its active customers globally now using e-commerce to save them time, reduce costs and improve control of their shipments.

In fact, the volume of bills of lading printed electronically rose three-fold in 2002, says Chin.
Investments in IT will not stop with E-BL Print. APL takes pride in being flexible and quick to adapt to changing market conditions as well as customer requirements.

Chin points out that APL is committed to IT excellence and using its technology to solve complex distribution challenges for customers.

“We are constantly searching for creative ways to drive our IT initiatives forward, improve our existing offerings, and squeeze more value from our electronic channels in order to strengthen our collaboration with our customers.”

Ng Weien can be reached at ng_weien@cmpasia.com.sg.

More on the shipping industry:
http://www.intelligentasia.com/transportation