Gray spaces, tracking and EDI, oh my! Some forwarders fall behind on digitization

It’s no secret that COVID has driven industrywide technological developments. From advances in cold chain tech to the shift toward e-commerce , the pandemic period has wrought lasting changes. But rapid change has made it difficult for some to keep up, according to Bruce Rodgers, executive director of the Canadian International Freight Forwarders Association (CIFFA), which acts as a representative and supportive body for Canada’s international freight forwarding community. “The technological advances that were projected to be seven to ten years out actually occurred in seven to ten months,” Rodgers told Air Cargo World . “And as a result of that, I think it’s put the whole industry behind what is happening out there.” The industry has been “leapt over” technologically, said Glenn Palanacki of logistics software solutions developer Descartes, due to the continued existence of “gray spaces,” the points along the supply chain where the exact state or location of a shipment isn’t known. Gray spaces occur at places like ports, where a shipment passes quickly from one group’s authority to another, even as the shipment’s tracking information might simply list it as being “at port.” To combat issues like gray spaces, forwarders will have to make use of electronic data interchange (EDI) and other developing technologies. But, nagged by the fear that an investment might not pay off, forwarders tend to follow technological trends, rather than lead them, according to Rodgers. This creates a vicious cycle of digital stagnation. The scourge of the gray spaces At the root of gray spaces lies the issue of tracking. And although tracking tech has continued to improve throughout the pandemic , gaps remain. Prior to COVID, Descartes had launched a new cold chain initiative that became accelerated by the pandemic itself. “We’re able to track in real time the movement of that vaccine through the supply chain,” Palanacki said. “Inside the container, or even within the shipment, we want to track things like temperature, light, and we have an accelerometer in there as well.” These innovations serve to ensure both shippers and forwarders remain informed about their shipments. However, what’s happening inside a container still leaves open the question of what’s happening outside it, such as where it’s located and who’s handling it at a given moment. “We can always improve on tracking, and I think that we need to focus on the various handover points in the flow of cargo,” said Paul Glionna, vice president of systems development and operations at Canadian freight forwarder Universal Logistics. “Those handover points are difficult to coordinate.” Enough individual gray spaces have the potential to lead to the larger issue of a “lack of a single point of view across the whole supply chain,” according to Fred Werginz, head of commercial operations at Luxembourg-based IT solutions provider CHAMP. This ultimately creates “a lack of transparency in the view that the shippers and forwarders have,” he said. “And that creates uncertainty in the supply chain.” Companies like CHAMP have already begun to launch solutions targeting these issues. CHAMP’s premium tracking uses air waybill numbers to proactively track the location of a shipment, notifying the shipper as the shipment moves through the supply chain and when things change. It’s a “proactive type of tracking,” said Werginz. Such proactive status updates are useful when what every shipper wants to know is, “When’s it going to get there?” according to Glionna. “That’s what everyone wants to know, is that final mile delivery,” he said. “That’s the biggest challenge is to say, ‘how do we coordinate all these parties and gather the information?’” EDI: way forward or roadblock? Gray spaces can also be seen as the result of missing data. “Forwarders consume huge amounts of data that can be incredibly valuable to our clients,” said Glionna. “The challenge has always been how to get that data in a streamlined fashion.” Shippers, forwarders and regulators — like customs offices — regularly exchange such documents as airway bills and bills of lading, which have historically been physical forms. However, players throughout the supply chain have moved toward the use of electronic data interchange (EDI), which allows parties to share documents digitally, saving time and improving the quality of data. EDI is increasingly requested by customers in the air cargo space, according to a statement sent to Air Cargo World by the International Federation of Freight Forwarders Associations (FIATA). “Often this kind of switch toward digitization is requested by customers as they are moving toward paperless processes. Globally, there is hardly any freight forwarding company left who does not have a computer system able to send/receive electronic messages within their [transportation management systems],” FIATA stated. In other words, one advantage of EDI is happier customers. Another is the enforcement of a higher standard of data quality. “Any time you go into the electronic data exchange, you’re already enforcing some higher standards or better rules,” said CHAMP’s Werginz. “One of the primary functions of an EDI system is to do quality data checks.” EDI isn’t without drawbacks, however. The cost and cooperation it necessitates remain two potential obstacles, according to Universal Logistics’ Glionna. “EDI is a great way to gather information and connect with our clients, but it’s expensive.” EDI requires programming and mapping from both the forwarder and shipper, he said, requiring shippers to make a financial investment they may find hard to swallow. Yet another option is optical character recognition (OCR). “EDI requires all parties to coordinate, and there’s a cost for everybody, whereas OCR says, ‘no, we’re going to take the onus on us, and we’re going to find a better way to read your data,’” Glionna said. OCR helps solve another problem caused by EDI: Documents exchanged by shippers and forwarders often contain large sections of data that must be copied. In the past, forwarders have had to copy that data — sometimes thousands of lines of it — by hand, which invariably leads to error. Last month, Descartes partnered with IT solutions provider Windmill to introduce OCR tech capable of quickly reading and copying relevant portions of PDF documents. “Multipage commercial invoices that previously took hours to complete are now done in 10 minutes,” said Glionna in a release. Descartes’ OCR solution is targeted at customs clearance documents, but the same technology could also be repurposed for forwarding operations. Automated processes like OCR are good for forwarders, not just because they increase overall efficiency but because they automate manual tasks, allowing employees to focus on “more meaningful work,” Glionna said. While it may be a heftier investment for the smaller forwarders, he admitted, “the reward can be just as big.” Freight forwarders, tech followers Both the existence of gray spaces and the debate over how to digitalize the forwarding process are due in part to forwarders’ tendency to be followers in the tech world, rather than leaders. One reason is that customer demand drives digitalization, as FIATA indicated. Forwarders are waiting to see what their customers want before pursuing technological investments. “Customers are going to always end up dictating where you invest — and sometimes it’s reactive,” said Descartes’ Palanacki. “You might lose a customer because you don’t have that engagement platform where they can quote and book themselves.” Smaller and mid-size forwarders fear investing in a new technology that may not ultimately prove beneficial. “If the forwarder wants to file something digitally with an airline that doesn’t accept those documents in that fashion, it doesn’t work,” said Rodgers, citing blockchain as one technological investment some forwarders pursued eagerly at first — and which still has not paid off for them. Universal’s Glionna cited that same example. “From a forwarder perspective, it’s sort of a sit back and wait,” said Rodgers. “These technical advances cost a significant amount of investment on the behalf of these organizations and you don’t want to make a mistake.” How widely a platform is likely to be accepted is a key factor in these decisions, as are the kinds of efficiencies likely to be gained. A lack of information about available technology may be another reason forwarders are slower on the digital uptake. “I don’t think they’re informed of what the technological advancements are,” said Rodgers. Forwarders are used to manual processes, and prefer to follow the lead of airlines and ocean carriers, when it comes to digitalization. Some forwarders do successfully buck the trend of being technological followers, however. Multinationals are actually driving change, Rodgers noted, saying, “they have been well ahead of the curve,” leaving small to medium-sized businesses to play catch-up. That strategy presents its own risks, however. “We know some of the large multinationals who have invested significantly in software platforms, only to take a write-off three years later, where it’s just been a significant hit to them financially,” Rodgers added. Not all forwarders are prepared to take that hit. “A really interesting correlation between the larger and more successful forwarders and customs brokers is that they are spending more money in technology, to do things like automating or [implementing]a customer engagement platform,” said Palanacki. “They’re pursuing these initiatives so that they can focus on what makes them unique to their customers.” For the larger forwarders that can afford write-offs if a new piece of tech turns out to be a bust, the potential benefit of a sharper edge in the market may be worthwhile. Looking forward Digitalization in the forwarding world is moving slowly. “I believe we’re still in the infancy stages of widespread adoption. There’s a lot more work that needs to be done,” Rodgers said. But increasingly, shippers are booking shipments from their smartphones, according to Palanacki, a scenario that would have been unthinkable a decade ago. “We’re seeing that [COVID] accelerated a lot of these conversations, and what we’re seeing now is a lot of [requests for quotation] that people are putting out, they’re making some of these engagement layers digital first,” Palanacki said. “They’re making them mandatory.” Effective digitization may also be a way for small and mid-sized forwarders to escape acquisition. With Kuehne+Nagel acquiring Apex Logistics and JAS Worldwide soon to acquire Tigers Global Logistics, according to a January press release, the forwarding space is increasingly becoming one of mergers and acquisitions. Small forwarders wishing to stay independent must remain competitive, and staying abreast of digital trends is one way to remain attractive to customers. The roadblocks to digitalizing, and to eventually eliminating gray spaces, are not what they used to be, said Werginz. “There’s really no excuse anymore not to do it.”

Gray spaces, tracking and EDI, oh my! Some forwarders fall behind on digitization

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