54% BCOs say carriers present obstacles to digitalisation!! Analysis of DCSA 2024 report

Global trade is facing several challenges and pressures as we approach the last quarter of 2024.. The shipping industry which is a key enabler of global trade, and particularly the container shipping industry, is undergoing a digital metamorphosis..

While on the one hand, this transformation includes the advent of several initiatives, software, platforms, and key industry bodies pushing the agenda of digitalisation, on the other hand, there still seem to be several barriers and challenges to the adoption of these digitalisation options..

The “DCSA State of the Industry Report 2024” by the Digital Container Shipping Association (DCSA) released today, sheds light on the critical role of digitalisation in the industry, the importance of transitioning to digital solutions, the barriers that must be overcome, and the opportunities to meet the growing demand for efficiency, visibility, and sustainability in the industry..

In the foreword of the report, Thomas Bagge, CEO of DCSA says “Technology is part of the solution – but change starts with people. Collaboration between cargo owners, carriers, freight forwarders, technology logistics providers, terminal operators and ports is paramount”..

At its core, digitalisation is the use of digitisation and digital technologies like Blockchain, AI, Machine Learning, and Automation to convert a business in to a digital business..

It is also about replacing outdated and redundant manual processes with technology-driven solutions that automate workflows, especially the repetitive ones, provide real-time visibility and enhanced communication, and enable a more efficient and quicker global trade ecosystem..

Key findings

One striking statistic from the report is that 88% of digitally mature BCOs (Cargo Owners) believe that digitalisation leads to higher customer satisfaction and is a driver of efficiency, compared to just 70% of less digitally advanced cargo owners..

This finding underscores the impact digital tools can have on improving the customer experience, which drives loyalty and business growth..

The report states that in this competitive industry, early adopters of digital technologies often find themselves in a stronger market position, as they can offer more efficient, transparent, and reliable services..

On the bright side, the value of standards seems to be widely recognised, with evidence suggesting that it drives efficiency..

While familiarity with standards varies between supply chain participants, about 85% of BCOs agree that digital standards are crucial for seamless operations across the supply chain..

41% of BCOs see supply chain visibility and access to real-time data as top operational priorities..

As per Niels Nuyens, Chief Product Officer of DCSA , “It is no surprise that our research shows shippers ranking real-time tracking and visibility of their cargo as their number one priority – in a world where disruptions have become the new normal, we all need to prepare ourselves and ensure we have the data needed for effective decision-making.”

25% of BCOs rely on email for shipping activities..

As per Kshitij Parashar, Program Lead, DCSA “Enhanced data quality and standardisation will shift more activities to automated, system-to-system communications, thus improving efficiency and reducing any overreliance on traditional communication channels which can be error prone.”

This is a reflection of the growing demand for transparency and data-driven decision-making, particularly in an era of frequent supply chain disruptions..

This will be discussed in detail in a webinar by Beacon, moderated by yours truly, featuring Kshitij Parashar, Fraser Robinson, CEO of Beacon and James Hookham, Director of Global Shippers Forum..

The DCSA report outlines a range of benefits that BCOs and other stakeholders attribute to digitalisation which goes beyond simple cost savings and includes operational efficiency, enhanced customer satisfaction, and competitive advantage..

Barriers to adoption – the long walk to freedom

The industry’s digitalisation journey is not without its obstacles and challenges..

While a few industry players have embraced available digital tools, many others face significant hurdles whether self-created or externally imposed..

These hurdles include resistance to change, technical limitations, costs, and interoperability between digital platforms seen as blockers in adopting key digital initiatives such as electronic trade documentation such as electronic bills of lading..

While the report identifies outdated infrastructure, a lack of investment, and resistance to change as key challenges, barriers to adoption differed by stakeholder group..

1. BCOs cited a lack of visibility into their supply chains and technological limitations as barriers to adoption..
2. The barriers to adoption by carriers related to job security and system complexity
3. Banks were worried about security concerns and also cited a lack of support from leadership to achieve digital strategies..
4. Logistics service providers like freight forwarders had technical issues to integrate new tech with their legacy system also due to insufficient investment..
5. Like Carriers, Ports & Terminals also had job security concerns sparking pushback from unions..
6. Insurers who provide insurance coverage to cargo owners cited a lack of cooperation among other stakeholders mainly in terms of sharing data..
7. Although the last group, the technology service providers naturally had limited barriers to adoption, I would have thought they would cite interoperability as a current barrier as that is being cited by..

BCOs often face technical limitations that prevent them from fully integrating digital solutions into their operations, and many are hesitant to make the necessary investments without clearer proof of return on investment.. Only 2% of cargo owners stated that they have no barriers to adoption..

Surprise surprise surprise !!!!!

Surprisingly though, 54% of cargo owners have identified shipping companies and carriers as external stakeholders that present an obstacle to transitioning to fully digital processes.. While this illustrates the need for closer dialogue and collaboration to break down barriers, I find this number quite surprising..

I tell you why it is surprising for me.. Shipping lines and carriers along with the technology service providers have been at the forefront, trying to push electronic trade documentation like electronic bills of lading for a good few years recently accelerated by COVID-19.. For example,

1. 9 of the 10 members of DCSA who are among the top 10 container shipping lines in the world have committed to converting 100% of bills of lading to electronic bills of lading by 2030..
2. On the bulk side, a significant number of carriers have committed to moving at least 25% of their cargo volumes for at least one commodity to electronic bills of lading by 2025.. This 25 x 25 pledge has already been surpassed as per information by BIMCO..

What is even more surprising for me is that Cargo Owners are perhaps the only stakeholders in the end-to-end value chain who have the power and potential to dictate or demand the use of electronic bills of lading..

Whether with a bank or carrier or their counterparts, cargo owners can ask for an eBL to be issued..

Around 48 million bills of lading are issued around the world every year and while eBL adoption tripled between 2021 and 2023 (from around 1.21% to 3.8%), it still only accounts for a small fraction of all Bills of Lading..

As per the report, cargo owners have identified freight forwarders, insurance companies, statutory authorities, “customers”, and banks as other parties who present obstacles for digitalisation.. Only 9% of cargo owners have suggested they have not been presented with any obstacles..

As noted in the report, leadership dynamics within companies play a role in slowing or accelerating digital adoption.. Many BCOs are led by an older demographic who can be resistant to technological change and this generational gap in leadership is one of the cultural barriers that must be addressed for the industry to move forward..

The role of digital standards

The report underscores the importance of digital standards in driving the industry’s digital transformation.. Standards provide a common framework that enables seamless data exchange and interoperability between different stakeholders, from BCOs to ports, carriers, and technology providers..

The DCSA has made significant progress in developing open-source standards, but more needs to be done to achieve widespread adoption..

Currently, 85% of BCOs agree that digital standards are crucial for seamless operations across the supply chain.. The report draws a geographical contrast that varies significantly across regions and industries, with U.S. BCOs reporting lower levels of awareness than their European and Asian counterparts reflecting regional differences in the pace of adoption..

The DCSA has published several key standards, including those for electronic Bills of Lading (eBL), Track & Trace, IoT-based container tracking, and operational vessel schedules..

Sustainability to the rescue..??

The report also highlights the growing role of sustainability in the container shipping industry.. While global shipping is one of the lowest transport modes in terms of emissions considering the volume of cargo it moves, it is still responsible for approximately 2.9% of global greenhouse gas emissions..

There is increasing pressure on the industry to reduce its environmental impact and BCOs are responding to this challenge by prioritizing energy efficiency, waste minimization, and carbon emission reduction..

It is encouraging to see 65% of BCOs prioritise sustainability and energy efficiency as their top goal.. Additionally, 43% are committed reducing environmental impact through more efficient logistics, and almost 32% have taken steps to reduce paper use..

What should be done to accelerate adoption..??

To accelerate the adoption of digitalisation, the container shipping industry must take several critical steps:

1. Increase awareness: In my view which in parts is supported by the findings of the report, awareness or lack of awareness of the digital solutions available is a key issue hindering the adoption and this needs to be addressed at all levels and as much as possible..
2. Invest in Infrastructure: Companies need to make proactive investments in modernizing their infrastructure to support digital solutions.. This includes upgrading legacy systems that currently hinder the integration of digital tools..
3. Embrace Digital Standards: Adoption of digital standards must be accelerated across all regions and sectors.. The DCSA’s open-source standards provide a foundation for seamless data exchange, but companies must actively implement these standards in their operations..
4. Address Resistance to Change: Leadership must foster a culture of innovation and be willing to embrace new technologies.. This may involve generational shifts in leadership or targeted education and training programs to ensure that all stakeholders understand the value of digitalisation..
5. Collaborate Across the Supply Chain: Digital transformation cannot happen in isolation. All stakeholders, from BCOs to carriers, ports, and solution providers, must collaborate to overcome technical and operational barriers.. Collaboration will also help address regulatory and legal challenges that may slow the adoption of digital processes..
6. Leverage External Support: Many companies are ready to go digital but need external expertise and support to implement new technologies.. This is particularly true for smaller players who may lack the internal resources to manage a digital transformation on their own..
7. Promote Government and Regulatory Support: Governments and international regulatory bodies play a crucial role in creating the legal framework for digitalisation.. The DCSA report calls for more harmonized regulations to support the use of eBL and other digital processes across borders..
8. Focus on Sustainability: Sustainability should be a driving force behind digitalisation efforts.. The industry must prioritize solutions that not only improve operational efficiency but also reduce environmental impact..

Conclusion

The “DCSA State of the Industry Report 2024” is a comprehensive call to action for those looking to digitally transform their business and the container shipping industry as a whole..

While significant progress has been made in technology, standards, testing, POC, legal frameworks etc, the road ahead for digital adoption is still long..

Despite the benefits of digitalisation—greater efficiency, enhanced customer satisfaction, and improved sustainability—being clear, to unlock these benefits, the industry must overcome the barriers that stand in its way..

Through investment in infrastructure, education, creating awareness, enhancing collaboration and cooperation, embracing available digital standards and addressing the resistance to change, the container industry and by extension, global trade can accelerate its digital transformation..

Every stakeholder in the chain must be made aware that digitalisation will not just reshape how we do things, but also make it more efficient, resilient, sustainable and future-ready..