Monday, February 18, 2019
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Digitization and buzzwords like Blockchain, Internet of Things and Artificial Intelligence are becoming part of our everyday media consumption – but what are the implications and what does it really mean to us as an industry?
Land based logistics have come a long way in many industries, with autonomous trucking and rail technology, but industries that rely largely on sea-born trade are lagging behind. Around 90% of world trade is carried by the international shipping industry. Ocean shipping is still the most energy-efficient mode of transporting raw materials, but is highly vulnerable to unexpected events leading to delays and potentially widespread supply chain disruption.
The current regime for sourcing and managing the supply chain is still largely manual and disconnected – from production planning across locations to the sourcing and transportation of raw materials via different modes of transportation. Due to the unpredictable and vulnerable nature of sea-based logistics, companies sourcing raw materials as part of their supply chain rely on significant amount of working capital tied up in large inventory buffers – to avoid potential stock-out situations and disruption to production.
With the latest advances in technology, this way of managing and thinking about the supply chain will change dramatically over the coming years. Digitization and buzzwords like Blockchain, Internet of Things and Artificial Intelligence are becoming part of our everyday media consumption – but what are the implications and what does it really mean to us as an industry?
Connectivity and technology should enable all cargo owners to reduce the costs and risks of their logistics by making better informed decisions. The industry needs to move from manual and error-prone processes to a real-time decision-making process, supported by updated and complete information pertaining to inventory and material flow.
Spreadsheets are powerful and versatile tools, but they are not cut-out for real-time decision making. Planning and managing a company's global shipping and raw material requirements is a major task with costly implications. The digital supply chain should give complete, end-to-end visibility, allowing all stakeholders to take early preventive action and reduce total logistics costs from fuel, freight, demurrage and storage.
Eye-opening case study
One company focused on the shift from a traditional supply chain to a digital and real-time supply chain is the Norwegian technology company Klaveness Digital, which was born out of the 70-year old shipping company Torvald Klaveness. Three years ago, Klaveness conducted a case study on Aluminium smelters in the Middle East and Arabian Gulf that showed that substantial savings can be made through improved collaboration, increased transparency and access to real-time data.
The case study showed that many companies in the aluminium industry – from miners to refineries and smelters – manage their shipping and inventory situation using spreadsheets, often in combination with complex ERP systems. Moreover, emails and phone calls are exchanged regularly between stakeholders to share operational information such as cargo and vessel nominations, or notices of vessels’ ETAs. As a result, managers are often forced to undertake the time-consuming and error-prone task of piecing together information from various sources – that by the time completed, is often too late to take proactive measures to avoid costly events such as demurrage, last minute spot shipment and low or high stock situations.
What started as an eye-opening case study, gradually developed into a vision of a digital logistics platform capable of changing the way stakeholders in the industry interact by replacing manual processes and spreadsheets with real-time collaboration and actionable insight.
In close collaboration with a selection of companies in the Aluminium Industry, Klaveness initiated project “CARGO” to try and come up with a solution to its customer’s challenges and pain points. Together with the companies involved, Klaveness meticulously mapped and evaluated key work processes from initial supply planning all the way to delivery of the raw material at discharge port. Customer workshops made it clear that digitizing and automating manual processes related to sourcing, shipping and inventory management would create significant value for the companies and their stakeholders, reducing the overall logistics costs from fuel, freight, demurrage and storage.
From experiment to dedicated technology company
After testing the concept with clients in the Aluminium industry, Klaveness established a dedicated technology company to spearhead the development of the logistics platform comprised of software engineers, data scientists, shipping, and logistics specialists. The company set out to develop a platform that would provide users with a complete overview of their scheduled and ongoing material flow, directly linked to their inventory situation, across all terminals and commodities – always updated with actionable information allowing them to take preventive action early to respond to unforeseen events and avoid costly knock-on effects. A virtual representation of the value chain, with end-to-end visibility from planning to production, utilizing advanced satellite tracking and algorithms to ensure that decision-makers have the latest information available.
Platforms such as CargoValue by Klaveness Digital will enable real-time collaboration, not only across internal stakeholders, but across players in the industry. Digital platforms will let users collaborate on the same shipping schedule and inventory in one place. Unlike a spreadsheet, all changes are instantly updated across everyone’s devices giving users greater confidence in the accuracy of the information. Planned and ongoing shipments are linked to destination inventory levels, giving a more accurate representation of how the stock levels across operations are expected to develop. Existing business systems can be integrated through Application Programming Interfaces (APIs). Everyone involved can see the latest updates in real-time, allowing stakeholders to quickly realign plans without spending time on manual updates.
The future of the supply chain in Aluminium
With the speed of technological advances in automation, data collection and analytics, the future of the supply chain in the Aluminium industry holds a lot of promise.
Seamless collaboration, not only inside each company but across external stakeholders such as suppliers, agents, brokers and different modes of transportation. A truly connected and real-time supply chain will spur new business models and ways of procuring commodities and freight.
The future, digitalized, supply chain will offer a new degree of resiliency and responsiveness, enabling companies to react to disruptions, anticipate and adjust in real-time as conditions in the chain changes. A virtual representation of all freight and inventory, eventually enabling a whole new way of thinking about logistics with sharing and swapping of cargoes, possibly disintermediating the supply chain we know today.
Platforms and solutions such as CargoValue will become smarter every time users interact with the system, providing users valuable insights in the planning and scheduling process. Adaptive learning and data analytics will reduce the amount of time spent on repetitive tasks, allowing users to spend their time on value creation opportunities.
Data security and reliability will be a critical aspect in choosing the right technology solutions to support the future supply chain. The transformation is not an easy task, and it is not just a matter of choosing the right technology. It will require both process and cultural changes in the organization. It is not a task achieved over night, but all players in our industry need to start looking at their current processes and embrace the opportunities that technology brings to the table. Establish a roadmap and identify low hanging fruits first. The industry cannot wait until the perfect future state of the supply chain is achievable.