News / The downside for carriers and terminals of a digital supply chain

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While every shipping company in the world appears to be developing some form of digital strategy, a leading industry academic has warned that digitisation could result in some unforeseen and unwelcome consequences.

Speaking at last week’s TOC Americas Supply Chain Conference in Panama, Jean-Paul Rodrigue, from the department of global studies and geography at New York’s Hofstra University, argued: “Digitisation could be a really bad thing for the shipping industry, but perhaps not in ways that you would expect.”

Dividing digital solutions into upstream and downstream – between the way the industry operates, such as the use of automation and robotics in cargo handling; and the way it interacts with its customers, such as adopting digital processes to handle bookings and invoicing with shippers – Prof Rodrigue said: “Automation has created a new business model for terminal operators – an automated terminal is way bigger than a partially automated terminal, which is a lot bigger than a manually operated terminal.

“This is explained by the fact that automation has mostly taken place when a terminal has reached the limits of physical expansion but wants to continue to grow volumes, and as such there is propensity for big transhipment hubs to automate,” he said.

However, he claimed, this posed a number of issues for container supply chains, including the possible evolution of a two-tier system of shipping networks and the increasing possibility that the adoption of automation could push some terminals out of business, leading to reduced competition within ports.

A similar adoption of automation is taking place in manufacturing and logistics, which could also have a great impact on shipping as geographic location becomes less important.

“Manufacturing and distribution will shift to places that have a high level of connectivity rather than access to cheap labour, which could make places such as Panama a big winner, because who cares about labour costs once manufacturing is automated?” he asked.

He claimed digitisation developments under way connecting shippers, forwarders and carriers would face similar challenges.

“The first challenge is standardisation – we do not yet have the “open source” element that comes with containers; we need standardisation and that has its own challenges.”

Prof Rodrigue argued there would also be an issue with partners trusting each other.

“The shipping industry is like a gigantic social network, and works mainly because the people in it know each other – can this be replicated in an automated system?

“Of course there is the argument that blockchain provides a solution to the question of trust, and while there is some truth to that, it also means there is going to be a lot of problems with sensors and cyber security.

“Blockchain provides the unchangeable ledger – but what happens if my blockchain password is hacked?” he asked.