As supply chain resilience becomes a priority for maritime stakeholders, container telematics could underpin a robust and transparent global logistics network.
Over the past three years, global supply chain resilience has been severely tested. The pandemic, the war in Ukraine and extreme weather events have disrupted both production and transportation of goods, driving up inflation across the world as supply chains struggle to adapt. According to a recent survey of global CEOs by Boston Consulting Group, this situation will continue to be a business risk throughout 2023, with 73% of respondents highlighting macroeconomic uncertainties as a key challenge.
Seen through this macroeconomic lens, the response of the maritime industry has been unrelentingly ‘macro’. When the UN Conference on Trade and Development (UNCTAD) launched its 2022 Review of Maritime Transport last November, it epitomised the direction of focus. At the time the report was written, there were surges in freight rates, congestion and critical interruptions to global value chains, it urged maritime stakeholders to prepare ports, shipping fleets and hinterland connections for future global crises.
Spelling out the organisation’s recipe for resilience, UNCTAD Secretary-General Rebeca Grynspan said: “This includes enhancing intermodal infrastructure, fleet renewal and improving port performance and trade facilitation.”
The need for resilience is no less valid today, although market instability is making itself felt in different ways. As pent-up demand from the pandemic waned, the container market found itself with surplus inventory. As a result, rates dropped markedly from those recorded at the height of the boom in September 2021. Analysis by freight data specialist, Xeneta, reported that long-term freight rates have crashed, sinking to a two-year low in July 2023.
Resilience means the ability to respond quickly to customer’s needs whether that demand comes in floods or droughts. Industry efforts to boost resilience have therefore focused on improving agility and increasing visibility and transparency between elements in the supply chain. The emergence of just-in-time arrivals, where vessels communicate estimated arrival times with ports at longer range to enable traffic flow to be optimised, is one example. Greater cooperation between ports across ‘digital corridors’, offering expedited customs and security clearance as well as optimised arrivals planning, is another attempt to deliver a supply chain that is both robust and flexible.
While those initiatives aim to connect ships and ports more efficiently, perhaps less focus has been afforded to the ‘micro’ elements of the supply chain; the actual units of transportation. Container shipping, representing around 16% of world seaborne trade volume but close to 60% of its value, is an ideal place to start.
Carrying the fresh food, consumer products and medicines that are essential to daily life worldwide, resilience is arguably more critical in this sector than any other. According to Christian Allred, ORBCOMM’S Executive Vice President of International Sales, using telematics to track the location and monitor the condition of containers should be a key building block of supply chain resilience.
Transport plan compliance
“Telematic devices can make a huge impact on transport plan compliance,” Allred says. “Where you have a container moving from point A to point B, a missed connection can mean a delay of days or weeks. Telematics can keep all supply chain stakeholders informed of delays in a timely manner so that they can plan further distribution in a different and better way.”
Responding to disruption is more critical in the fresh produce supply chain, where a week can make the difference between unripe, ripe or spoiled. Visibility of delays means that distributors know in advance whether the cargo will be destined for a warehouse on arrival, or be market-ready.
Container telematics has already been widely adopted in the ‘reefer’ sector, where the emphasis has been on monitoring the temperature and condition of containers to minimise spoilage, as well as ensuring that refrigeration equipment is operating effectively. But as supply chain resilience comes to the fore, Allred anticipates that it will increasingly become a requirement in the dry container sector as well.
“Several major lines have already made declarations to European countries that they intend to track all containers,” he notes. “There’s a number of reasons why container owners would benefit from the tracking of all their assets – part of this is due to concerns around the potential tampering or damage of their assets; part due to being able to monitor temperature or humidity due to varying types of cargo being transported; and part to do with the need to detect intrusion, or determine, when a container has suddenly been pulled out of its normal flow to be filled with contraband or other dangerous goods”.
Allred continues, “it’s easy to imagine that with the way the world is today, within five to ten years authorities will require lines to be able to document exactly where each container has been throughout the supply chain.”
That expectation chimes with the findings of industry analyst Drewry, which in a recent report noted its expectation that the global telematics-enabled container fleet is forecast to grow eightfold over the next five years. Driven by wider uptake in the dry container fleet, the researcher projects that smart containers will account for 25% of global capacity by 2026.
With container tracking comes the ability to adapt supply chains. There is also an element of enhancing security, another important component of resilience. Telematics can highlight many aspects of container condition, including incidents that may damage the container or its cargo, performance anomalies that may cause potential spoilage, and occurrences that may indicate theft, cargo interference or the introduction of contraband. Monitoring containers in this way can reveal locations where risks are high — enabling rerouting or other countermeasures — and act as a deterrent.
Investing in telematics brings further operational advantages to ship operators beyond reducing liability for spoilage and cargo loss or damage. Automated monitoring can dramatically cut down on the resources needed for manual checking of reefer containers and, applied on a fleet level, enable better inventory management and utilisation of container stock. Both those elements also bring indirect resilience upsides, freeing up resources that can be directed to other stress points in the supply chain, as well as generating operational cost savings, for example by reducing the number of containers shipping lines lease during seasons of high demand.
Recent threats to the integrity of the worldwide logistics network have naturally drawn responses that focus on the big movers and connecting nodes in the supply chain. Improving operators’ ability to respond to delays and to optimise container utilisation based on demand should also be part of the solution. With connectivity and sensor technology becoming increasingly cost efficient, a focus on the smallest units of world trade, the containers themselves, could present the biggest gains for cargo owners, end consumers and ship operators.
