integrated system for shipping lines - niit technologies system for... · integrated system for...

www.tradeshipinc.com

TradeShip Inc, USA September 30, 2013

WHITE PAPER

Integrated system for shipping lines


Introduction

Shipping business is one of the fast growing industries despite the challenges. Market share of top 10 carriers has increased from 50% to 60%. Today there are about 5964 ships active on liner trade with 17,627,384 TEU capacities. By looking at the ship order book of liners, it is imperative that this is one of the important global businesses.

There are number of small carriers are increasing their fleets also extending their operations from costal trade to international trade. Big carriers have further looking at the possibility of expanding their business either by increasing the fleet or through acquisition or mergers.

Shipping is one of the oldest businesses. 70% of global cargo import/export is still carried out using the ocean route. As compared to other means of cargo transport such as air, which is more expensive and has limitations in terms of handling huge volume of cargo, cargo import export via sea route is probably the most preferred mode of transport due to its huge volume handling capability along with the competitive pricing.

There are wide verities of carriers involved in this particular business depending upon the nature of their operation. There are international carriers that perform import export activities across countries and continents and there are local carriers that perform costal trade (within the same country and different sea ports). There are other types of carriers such as feeders which are mainly used to connect to main carrier service to local ports. There are other special types of vessels called Barge that is used for connecting ports via river.

These days service to customer has to be top priority and liners want to make sure end to end service to customer by connecting multiple modes of transports and provide maximum door-to-door service. Barge and feeder along with the inland legs within and across countries constituting multi-model transport capability. In order to provide end to end service to customer, it is important to have seamless integration within the system and also with other partners. Door-to-door services have its own challenges as it needs to connect with multiple services provides without any delay.



There are other key players in the entire transport chain such as;

Depots - These are responsible for storing empty and full containers and release the empties based on the order requirements. The big challenge here is to keep the supply of boxes available based on the business need but at the same time keeping the imbalance intact.

Container leasing companies – They supply containers to the shipping companies to help manage the imbalances.

Intermodal Carriers – These are responsible to carry cargo/containers from the shipper’s door to the ports.

Stevedores – They help loading and unloading of containers and cargo off the ships

Tariff &Pricing

A reliable Tariff system is essential to the successful running of any shipping line. Freight Desk, Agents and representatives all depend on this to ensure that line approved rates are quoted to customers consistently.

The tariff is the very basis of any business and is particularly important to shipping lines operating on a global scale. Having a tariff “book” establishes a base line for all operations and provides valuable information to freight desks and agents. If this is linked to a Products and in turn profitability then the line will have invaluable data with which to manage their business.

Every Tariff is organized as a book within which there can be several chapters. Tariffs are generally setup for a Scope and a Spec with the Scope defined by geographical locations. Depending on the Tariff, the scope can be a single location, a pair of locations or a Route with a “From” and “To” location pair and set of transit locations in between them. The Spec

of a tariff is the set of parameters used to define a rate, which then can be uniquely identified with in a scope. The set of parameters can vary by Tariff.

Additionally the ocean tariff is organized by Trades. A Trade is defined as a market region in which a shipping line offers products and services. Trades define the regions from where the products and services are exported and the region to which they are imported. Tariff can be specific for a brand or for all brands depending upon the liner structure.



Standardizing freight and surcharges are mammoth task unless you have an automated and standard pricing mechanism in place. There are number of factors that need to be considered in order to arrive a competitive pricing. There are direct factors and indirect factors. Factors that could influence the pricing could be global scenarios such as crude price or local scenarios such as terminal handling costs or even commissions.

Routings

Vessel schedule and other related transport schedule (such as barge schedule, feeder schedule & cargo rail schedule) is the cornerstone of the building routes. Creating and offering possible routes by integrating multi-model capability is one of the challenging tasks. Especially these schedules are subject to change and you need to address all the changes real time in order to offer most precise routing information to customer. It is also possible to integrate routing options with the pricing so that routes can be sorted based on duration and price. This can enable the end user as well as liner to select most competitive routing.

The vast array of routing options that are available, make the task of building a quotation or establishing a shipments’ profitability a hugely onerous task without the support of an application that provides this as an efficient automated feature.

Shippers are looking for quick answers - similar to a flight booking search engine that we are all familiar with. The user simply enters some basic details and is promptly presented with a range of option from which they can choose the most suitable.



Capacity Management

Maximizing utilization on vessels is paramount to the success and profitability of a line due to the carrying capacity surplus on most routes and the tight margins within which the lines operate. In order to do this lines are dependent, on not only booking information, but equally importantly, forecast information to determine ‘unsold’ or available space on board its vessel. A Forecasting system that provides the information noted above enables the lines’ Sales Teams to accelerate and focus their efforts on selling unutilized space on the respective vessels in the relevant locations. Equally importantly this forecast information is a valuable input to the Equipment Control team in determining equipment balancing and repositioning options between surplus and shortfall location

With tight margins and reduced freight rates clashing with increased operating costs lines are keen to take advantage of any opportunity to address these issues. Additionally few lines will service all routes on all trades with their own, or chartered, vessels thus competing in all desired markets in challenging. Lines need to find ways to trade on these desired routes by collaborating with traditional competitors as well as ensuring they do everything they can to maximize the utilization of the vessels they operate.



Slot sharing agreements is one way in which to address these problems. Lines cooperate with other operators who wish to trade on common routes by sharing slots on each other’s vessels, be they ‘rented out’ (on vessels they operate) or ‘hired in’ from partners.

Vendor management

There are different vendors involved in order to support the quote to cash process of a carrier. They may be directly or indirectly involved to support the cargo control and execution process. Vendors such as terminal operators, agencies, and transport operators are directly linked to the order processing whereas repair depots, container manufactures, vessel manufactures, vessel slot partners may indirectly involved in the main quote to cash process. For all types of vendors you need to have mutually accepted agreement with charges and other terms in place. Based on these agreements, tasks or jobs are performed. Some are based on job order request (such as transport job order which is performed based on the request from the liner) whereas others perform the task based on the mutual understanding and submit the task performed (such as terminal operations or repairs) without having job/work orders. These may be subject to approval. Once the tasks are performed invoices provided by the vendors needs to be cross verified before proceed to the payment. Managing vendor is a highly complex process. Manual verification and checking will take long time to settle. Things become worse when you have multiple vendors providing same service and choose one of them to perform task. If there is no standard mechanism to choose the vendor to perform a particular task, the process become very vulnerable. An automated and integrated system can offer excellent job to support all vendor related transactions in a very accurate way.

Equipment Management

From the time the cargo is picked up from the customer’s premises until it is delivered to the consignee, the cargo moves through the hands of various parties in the supply chain. The Shipping Line needs an extensive IT system to support, record, manage and monitor the Cargo through the supply chain.

A very well integrated IT solution with capability to record, manage and track various activities in the supply chain is required. These days the need for using standard EDI mechanism to exchange the container tracking details between line and other trading partners such as terminals, depots, customs etc. An integrated system with standard EDI message integration has lot to offer in this regard.



Quote to cash process

A structured quote to cash process can enable the liner not only to standardize line the order processing operation but also enable efficient tracking of data. With increasing competition and multiple routing choices on offer to shippers, lines are increasing looking to establish contracts with their shippers that formulate legal agreements between the parties with the intention of securing committed business levels. Furthermore the existence of contracts improves the efficiency of the booking and B/L processes and ensures that the necessary approval are in place, eliminating the need for laborious approvals at the time of booking & B/L finalization.

In order to better manage customers and establish long term relationships that will secure market share, shipping lines require a strong customer contacts tools that is linked to their tariff, routing and master data tables thus enabling the users to build individual contracts. In order to comply with internal business policies the customer contracts tool address all the necessary approval processes.

Quotation or contract being the basis, cargo booking initiate the order processing. Cargo booking carries several information which is essential to initiate several associated business process. Based on the booking, various departs of the liner can start their work. For instance, if there are pre-carriage requirement then intermodal department can start allocate vendors. Similarly for other value added services such as stuffing, stripping etc. A confirmed booking carries complete information so that related vendor activities can start.

Despite the increasing use of EDI, documentation plays a critical role in any shipping lines business. Whilst hardcopy documents are still commonplace, the same softcopy versions still require the same input from the various modules within the system in order to be generated. Ensuring that all documentation can be produced, error free and with limited user involvement is paramount to the success of the overall operations.

Shipping lines depend on a solution that is integrated with, or interfaces to, their other modules so that they can, with minimal effort and user intervention, produce the wide range of documents required to support and, effectively, run the business. Such a system must be accurate, efficient and robust whilst adhering to demanding performance criterion.

Partner system integration

These days you cannot enforce partner to use liner system for supporting business transactions as most of them have their own systems to manage their business. Instead, it is increasingly getting popular to have B2B integration or B2C integration. Consequently carriers are inclined to use standard message interface protocol such as EDIFACT /ANSI for



the integration purpose. It has increasing become mandatory to have liner system to be equipped with standard EDI data exchange process.

Summary

Cargo shipping business is one of the complex and unique type of business. Having said that, handling the cargo business end to end become very challenging and complex due to the nature of this business. Starting from pricing until invoices goes through different complex stages involving multiple partners, systems and peoples offices across different geo graphical location. In a highly competitive shipping industry with marginal freight rates and expectation of high levels of customer service, shipping lines are increasingly required to have products and services on demand. An integrated system can not only ease the effort to manage the business but also it forces to take necessary standardization in much business process. When you have more standard is in place, you actually reduce the dependency of experts.

The lines themselves have an increasing dependency on their tools to enable them to provide this service whilst keeping a tighter control over the deals that are being offered - either through their own freight desks or on through their agents on their behalf. More and more lines are turning to a standard suite of products that they can offer their customers as well as for in-house purpose. An integrated and solution for shipping lines would not only ease the business operations but also it can provide win-win deal for shipping lines.

Business Application

EDI System

Customer

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SeaLiner

Agent

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EDI System

Terminal

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Internet


EDI System

Customs

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EDI System

Depot

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EDI System

Line

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EDI System

Agent

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