Management of Ocean Transit Time Reliability and Visibility

Management of Ocean Transit Time Reliability and Visibility

by LSCMS Shippers’ Council

How would Logistics managers explain to their COO and Production group that inbound material will arrive on 23Dec but with 50% probability?

In this instalment of the series of articles written by the LSCMS Shippers Council, we strive to answer this and delve into the critical aspects of ocean transit time reliability and visibility within the supply chain. Supply chain visibility is paramount in today’s interconnected and globalized world, enabling companies to make informed decisions, optimize operations, and enhance customer satisfaction. However, achieving and maintaining visibility poses several challenges, including data availability and quality, technological limitations, and interoperability issues.

What is supply chain visibility and why it is important?

The global pandemic exposed how vulnerable supply chains are to disruptions. Companies had to survive the disruptions by obtaining visibility throughout their supply chains, some may have done so through large amount of manual effort rather than more automated solutions. Initially during the pandemic, supply chain managers held more buffer stocks to account for disruptions. but when demand slowed, the pressure to reduce inventory becomes a lot higher. 2022 ocean schedule reliability dropped to 30%. Although 2023 first half reliability has been improving to around 65%, the lead time variability is still high compared to other modes of transportation, and still below pre-pandemic levels.

Source: Sea-Intelligence

Source: Sea-Intelligence

The number of blank sailings are at the lowest we have seen since the pandemic started. Looking at the share of total weekly sailings being blanked on the Asia-North America West Coast trade, blank sailings clearly improved during 2023 and dropped below 10% in June with a slight uptick in early July., Companies still need to allocate working capital to build safety stocks considering the unreliable transit time.

Supply chain visibility provides the ability to view and track inventory in real-time or near real-time across all modes from raw materials to finished goods at the customers door. The scope of visibility includes inbound shipments from suppliers, inter-company shipments, outbound shipments to customers. End-to-end visibility encompasses the entire supply chain, providing a comprehensive view of the flow of goods from suppliers to customers. Companies may decide to prioritize on one segment of visibility over the others and deploy different strategies or programmes to manage the visibility of each scope.

In a recent survey by the Shippers Council the top two benefits to organizations of having visibility are to mitigate risk of disruption (73%) and increase customer satisfaction (62%). Followed by the benefits to reduce logistics cost of expedites, demurrage and detention (58%), increase cash on hand by improving inventory management (23%) and to optimize carrier performance (19%).

Supply chain managers require visibility to track the necessary components from a purchase order for production or to fulfill a customer order. Order and item-level visibility play a critical role for shippers in managing carrier performance, making inventory allocation decisions that ultimately impact cash position, and ensuring customer satisfaction. Currently less than 20% of the shippers surveyed have the ocean visibility at customer order and product level.

The challenges to achieving visibility?

Visibility solutions are gaining increased attention from not only shippers but also ocean carriers and visibility providers. Certain shipping lines are investing in the last mile companies. Similarly, visibility providers are investing or partnering with developers for last-mile solutions to bridge the gap of end-to-end visibility. Some major carriers announced plans to equip dry containers with tracking sensors that could provide large amounts of data that can affect shipper visibility, carriers dynamic pricing and more effective asset management. However, equipment location data alone does not provide the complete picture of key container milestones, as shippers still need to track data from the order and product level, and linkage with other factors including schedule, schedule reliability, cargo roll dates to fully understand the true arrival time. Obtaining ocean visibility can be challenging. Some of the common challenges were identified in the same survey.

Survey: The top 3 challenges shippers are facing to achieve ocean visibility

Capabilities limitation of visibility platform and shippers’ systems

Between various systems and platforms of all supply chain stakeholders, the lack of standardized communication protocols, incompatible technologies, and disparate IT systems can limit data exchange and connectivity. Shippers’ internal system infrastructure and processes must be ready for data exchange and connectivity with external providers.. Mapping and transforming data from different ERP systems require significant integration efforts that involve developing custom interfaces, middleware or connectors. Organisations need to streamline their ERP landscape, explore integration platforms or middleware solutions that facilitate data exchange between multiple ERP systems with the visibility provider.

Data quality and standardisation

Despite making substantial investments, shippers continue to grapple with the challenge of attaining reliable visibility. This struggle arises from the difficulty in maintaining the critical data quality obtained from various parties, including ocean carriers, truckers, rail and barge carriers, terminal operators.. To address the data quality challenges, visibility providers leverage diverse data sources, including carrier integration with steamship lines, GPS technologies like telematics and mobile applications. Advanced platforms utilize artificial intelligence, machine learning algorithms, and predictive analytics to enhance data quality by triangulating information. Even with sophisticated technology, visibility providers may still need to rely on manual input from drivers or field operators for certain data milestones of the container. The reality is that not all parties responsible for container milestones possess the same capabilities to ensure timely, accurate, and complete data transmission.

Integration of transportation mode and providers capabilities:

The level of technology adoption by carriers or service providers impacts visibility capabilities. Carriers can integrate their data with visibility solution providers, ERP systems, or other supply chain platforms, allowing for real-time data exchange and enhanced visibility across the supply chain. In contrast, traditional mom-and-pop carriers with limited technology adoption may rely on manual processes, paper-based documentation, or outdated systems, resulting in delays and reduced visibility. Often, shipment visibility is affected when first or last-mile delivery, are outsourced to local carriers. The lack of transparency and access to real-time data from these subcontracted services can create gaps in visibility, making it challenging to track shipments throughout the entire journey.

What are the approaches to achieve visibility

There are multiple approaches that shippers can explore to achieve ocean visibility

Visibility Platform Providers: Such providers offer several benefits including extensive carrier network through a single platform, advanced connectivity for data exchange, industry expertise and scalability., Some advanced platforms leverage machine learning algorithms to provide predictive insights, enabling organisations to proactively identify potential disruptions and take measures to mitigate risks. One provider can collect all data to track shipments throughout the supply chain, but the reality is that platform providers have its limitation in geographic and product scope coverage. Many shippers are still relying on its own staff to integrate data to provide complete visibility for the enterprise to make decisions.

Service provider collaboration and integration: Forwarders with customized order management programs or fourth-party logistics (4PL) can be an option to shippers. 4PL’s act as a single point of contact and coordinate for all logistics services, leveraging their expertise and technology platforms. They can manage relationships with carriers, service providers and other stakeholders, streamline processes and data exchange for visibility. They have the capability to handle fluctuations in demand and adapt to growth or new business requirements. This can however result in high dependency on external partners and long lock-in contract periods.

In-House Solutions: Shippers could develop customized software or applications internally to meet specific visibility needs, integrating data from carriers, ports, and partners to provide tracking, status updates, and reporting aligned with internal processes. The key advantage is full ownership, control, customisation, and flexibility. Very few shippers choose this as the only approach due to the high upfront investment, time and the lack of expertise.

Hybrid approach: combining aspects of different options to achieve a tailored solution, and determine the best fit for the organization’s visibility needs and strategic objectives. Choosing the most suitable option depends on the long-term objectives, budget, internal capabilities, and visibility requirements. Organizations should evaluate their resources, expertise, and the alignment of each option with their clearly defined business problems and requirements. From the survey respondents, less than one-third of shippers use visibility platform providers as the only approach, while almost half the shippers deploy a hybrid approach to achieve complete ocean visibility.

In summary, it is crucial to acknowledge the challenges discussed earlier and proactively develop strategies to overcome any potential gaps or limitations. By carefully evaluating these factors and implementing effective plans, organizations can make informed decisions to achieve successful supply chain visibility. Hopefully with the well-informed details, Logistics Manager can provide transparent visibility with high confidence level to articulate to COO when the vital Christmas stock can arrived to fulfil your customers’ demands.

This article and the views contained therein was prepared or accomplished by the LSCMS Shippers Council.
The opinions expressed in this article are strictly those of the LSCMS Shippers’ Council and not attributable to a specific individual or enterprise.