COVID-19 TO ACCELERATE DIGITALIZATION, AUTOMATION OF CONTAINER SHIPPING AND PORTS
Introduction
According to Rajendram (2020), the current business and financial world are experiencing turmoil more than ever before, with the fact that COVID-19 has taken the whole world by surprise. A period of the great recession is feared among economists, and such controversies are prevalent and still roll up in their minds every day. These sectors always anticipate that normalcy will soon prevail while staring blankly at an unpredictable future (Rajendram, 2020). Several insights provided by most businesses indicate that the critical focus currently is to protect the container shipping supply chain from safeguarding the world economy from another period of economic depression as experienced in the past several decades (Prokopowicz, 2020).
It is quite evident that the current industrial volume has recessed to 20% globally and is presumed to go lower if the situation on Coronavirus remains adamant on supply and purchase processes (Berti, 2020). Prokopowicz (2020) compares this situation to the 2008-2009 global economic downturns, which registered the same percentage in reducing the container volumes at that time. Among the accompanying impacts of COVID-19 is a decrease in factory output and consumer demand, which was only positive at the beginning of the outbreak (Berti, 2020). However, the current situation does not promise to keep any company afloat. Loss of the spring selling season has also been experienced alongside a reduction in the supply of human resources for these industries. Alternatively, the only option for shipping and logistics firms is to adopt automation to keep their industries alive and preserve the world economy from pragmatic fallout that will take years to recover.
Trends in Port, Terminal and Smart Containers Systems and the Need for Digitization
According to Kim and Shin (2019), it is estimated that 90% of world trade is conducted through the international shipping industry. Though, Mishra (2020) indicates that there exists complexity in the operations of these shipping firms mainly conjured by conflicting interests and other common frictions such as application of different tracking systems that undermine an increase in the anticipated Global Domestic Product (GDP). Research indicates that the implementation of efficient approaches that would increase efficiency in logistics will significantly impact the world economy and improve the GDP by 5%. Report from Tradeshift indicates that the overall world trade transactions have flattened to about 9.8% since March 09thas they were affected by the lockdown(Kim and Shin, 2019). This was illuminated by a decline in invoices and orders, mainly resulting from the lack of faster trends of payments. Figure 1.1 presents the drop in transactions caused by the rising impacts of COVID-19, which calls for necessary measures to combat this decline, such as digitization. At the same time, Figure 1.2 illustrates the current trend in the shipping industry, where a decrease in shipping activities is evident (Lin and Lanng, 2020). It compares the past shipping behaviour with the current events illuminating a lack of consistency for the shipping operations.
Fig. 1.1: Decline of Week by week Transaction Volume in UK, US, and Eurozone (Lin and Lanng, 2020)
Fig 1.2: Comparison between containerized freight and weekly departures (Molinuevo, 2020).
Studies indicate that the above impacts are yet to hit the world businesses and, more particularly, the shipping industries in the next months to come. In this light, enterprises need to implement lucrative measures to combat this trend and curtail the incoming economic recession (Lin and Lanng, 2020). Digitization is an ample method that has been prescribed to lessen the frictions prevailing in the current logistics firms like tracking and tracing shipments, custom collaboration, and transportation management (Berti, 2020). Digitization includes the application of technologies such as blockchain, automation, electronic certification and verification, and smart containers. According to Tijan et al. (2019), since the inception of blockchain technology in 2008, blockchain technology has revolutionized the shipping spectrum while barricading the currency sector with other more accessible and less obstructive methods such as the use of cryptocurrency known as Bitcoin. The advantages of blockchain technology come in handy, especially with its application in logistics (Tijan et al., 2019).
The current logistic sectors are manually mandated; therefore, cases of inefficiencies are more prevalent. For instance, firms often rely on manual data entries to adhere to custom processes, which makes it time-wasting and rigid, complicating the provenance of goods being shipped and their status as they move along the supply chain (Molinuevo, 2020). As a perverse technology, blockchain can help abort these frictions the logistics industries face and, consequently, help them realize substantial benefits from the efficient processes it creates. Among the features of blockchain is data transparency, where a single source of truth is established, thus easing the access of information (Issaoui et al., 2019). Data transparency ensures traceability of shipments by amassing data regarding the origin of goods, how they are made, and their respective management. Through this feature, companies are in a position of establishing the legitimacy of multiple shipments and the authenticity of luxurious goods. Also, Tijan et al. (2019) note that consumers can access the applicability of the products purchased as well as tracing their originality and ethical conditions about the same. The tech may also help companies achieve cost-saving processes by employing leaner, automated, and less error-based approaches (Kim and Shin, 2019).
The application of automation will help in realizing flexible, accurate, and agile supply chain logistics. As the cases of decline in the workforce take their toll, companies need to adapt to more extensive and sophisticated methods of information and product transportation to ensure clients are retained alongside providing stable supply rates (Molinuevo, 2020). Automation incorporates better practices such as robotization and automated tracking that will help replace the declining labour force and ensure increased outcomes. Also, the availability of augmented reality and improved machine learning are aspects that will enhance efficiency while enabling machines to keep up with the complexity of the supply chains (Molinuevo, 2020). Besides that, digitization avails smart containers or rather intelligent containers, which are presumed to revolutionize the logistics industries. These containers are embedded with sensor mechanisms that will help shipping industries meet their customers’ requirements through convenient container tracking services. Another potential advantage of smart containers is the ability to enable shipping firms to detect and avoid potential risks (Duinkerken and Lodewijks, 2015). A construct feature of smart containers is that it has TRAXENS equipment, which enables them to detect shock, doors opening, and fluctuations in temperature and humidity. This helps ports and terminal systems to be informed of the real-time container condition before transportation. Studies explore that smart containers enable businesses to gather data for business decisions (Duinkerken and Lodewijks, 2015). For instance, when clients order smart compartments, the shipping industries know the source, nature, and volume of the goods which form practical business intelligence that firms use for precision marketing decisions.
It is worth noting that the current ship industry is on the verge of complete revolution ranging from developments like paperless ship to 24/7 internet connectivity to automation. An apt example of such updates is the electric certification and online verification, which all aimed at increasing the efficiency of the shipping operations (GREENPORT, 2020). Due to the current shorthand of human labour, logistics companies are tremendously implementing stake strategies to step in place of the physical energy of humans alongside increasing operational efficiency. A recent report from the UK Maritime & Coastguard Agency (MCA) indicated the existence of susceptibility of paper certificates to fraud with a statistical implication of 60% of fake documents and 30% of falsified records (GREENPORT, 2020). Lack of inconsistency in certification format establishes complications to port authorities to verify and determine the authenticity of these documents. In this light, e-certificates and online verification will play an impactful role in curbing such problems (GREENPORT, 2020). Studies indicate that some maritime companies have already taken the lead in the enactment of the e-certificates with the Danish, Norwegian, and Singapore naval authorities at the forefront to exercise this policy. At the same time, this digitization comes along with the electronic signature, which has two keys, a private and public key (GREENPORT, 2020). The certifying authority uses the private key as a form of encryption, while the public key is used by the reader to decrypt the signature. This simple technology has been linked to easing the process of verification and validation of custom documents, speeding up the shipping processes (GREENPORT, 2020). This digitization will also reduce the costs, especially in the administrative sector, thus increasing the efficiency of port operations.
Associated Challenges in the Implementation of Digitization Pre and Post COVID-19
Ideally, extreme conditions require extreme measures for productive and profitable outcomes to be realized. De Mello and Ter-Minassian (2020) observe that the COVID-19 pandemic has denied industries a reliable workforce to carry out their operations successfully. Labour turnover is an existing predicament in most firms, especially those in which digitalization was not yet imparted (Berti, 2020). Studies indicate that firms that are likely to survive the crisis are those that do not need to digitalize or those that can digitalize fully (Prokopowicz, 2020). It is worth noting that most industries rely on direct human labour, for example, the hospitality field and healthcare sector. Despite the urges for a digital upgrade, they cannot entirely digitalize.
The firms which had not implemented digitalization actions will find it challenging to adopt and enact digital policies with the current apt conditions in the market. Consequently, the output of these firms will eventually decline and may significantly lead to their closure (Rajendram, 2020). Additionally, even after digitalization, when the pandemic is over, some industries may find it difficult to sustain the digital sector since, despite its simplicity, it also comes with high costs and expenses.
How Digitalization Helps Ports avoid Disruptions in Containerized Shipping
Berti (2020) highlights that a report by the United Nations Conference on Trade and Development (UNCTAD) indicates that the sea transits close to 80% of the world goods, and China are the home to the busiest global container ports. Giant shipping companies such as Maersk and Hapag-Lloyd are reducing their number of vessels due to the COVID-19 crisis (Berti, 2020). Also, reports indicate that some countries like Australia have banned the entry of ships deemed to have called at China ports until the crew has been declared virus-free. These are among the challenges faced by the logistics companies as a result of the Coronavirus, which essentially is turning out bad for the shipping business (Berti, 2020). According to Mishra (2020), attempts to counter these challenges have led to ideas such as digitalization and automation of the logistics industries to meet the demands of their goods as well as lift their declining firms.
Lin and Lanng (2020) note that digitalization of maritime transport through blockchain, internet of things, and automation will significantly assist in averting the already established complications by the Coronavirus. The integration of these digital platforms will help increase connectivity between the shippers and the global supply chain, thereby providing better visibility of the shipments at this time (Mishra, 2020). Also, automation, such as in the cases of forklifts and cranes, will assist in replacing the already lost labour force in which loading and off-loading are dependent on (Lin and Lanng, 2020). Research establishes that the application of artificial intelligence will enhance system analysis of the growing volume of data from the automated identification systems and the tracking devices for cargo containers, which will be stored through blockchain technology. However, the failure of digitalization will negatively impact the shipping companies, especially in terms of operations (Mishra, 2020). Mishra (2020) states that these firms were initially dependent on manual approaches to enter data and make custom clearance activities that have already been made leaner by digitalization. In this light, the current COVID-19 pandemic, which has declined the incumbent labour force, will continuously result in a drop in productivity of these firms. Lin and Lanng (2020) indicate that digitalization is anticipated to take up at least some if not all of the activities performed by humans, but the reluctance of such companies to adopt these approaches will cultivate a chunk of failure that may drag the world along.
Future Perspectives on Post COVID-19-to accelerate or Decelerate digitization.
Reports based on recommendations from shipping company executives and managers on the future of logistic firms indicate that digital automation will be the only solution. This reflects on the fact that COVID-19 has dramatically accelerated the desire for firms to digitize more than ever (MARITIME, n.d.). For instance, the situation is featured by a lack of human labour to move bills of lading and sign custom documents due to the COVID-19 pandemic prompts digitalization. When the epidemic ends, priorities for most industries will be to be on the forefront and retain volumes in the shortest time possible. This means that all these developments will range from a period of 12 to 18 months, which is entirely dependent on how fast people will recoup their jobs. More so, these goals are dependent on the economic stimuli whose strength will determine how fast people will get back to working (MARITIME, n.d.). The pandemic is presumed to cause a need for automation technology, which will replace the special human force currently unavailable. Automation will help serve the increased supply chain while reducing dependence on individuals to come back to work after the situations they have faced. Research indicates that it will be a key to establishing stronger and smarter supply chains that will last long, even amid the occurrence of such a virus.
Conclusion
While the COVID-19 takes its toll in the current global economic sector, firms are worried about the subjective measures to combat their declining operations. The major challenge remains the decline in labour turnover, which is a poignant issue, especially in the maritime industries. Fervent researches have provided digitization as an alternative to meet the demand on supply chains and avert the declining trade percentages, which may take a big chunk of the world down. In this light, digitization reflects the application of technologies such as blockchain, the internet of things, automation, and artificial intelligence, which are believed to have long-term and short-term effects on these firms. On a short term view, these techs will help in filling the gaps already created by the loss of human labour, allowing firms to pick up faster. These industries will incur more costs as they implement digitization. However, after implementation, the long term impacts will be felt with a reduced reliance on human labour, ease of work, increased profitability, and efficiency of operations.
Consequently, there will be reduced demand for employment in the market, thus rendering most people jobless. It is empirical to note that both positive and negative implications accompany digitization. Still, the positivity is more robust, and hence, companies should base on these beneficial impacts as they make decisions to digitize.
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