TT Talk -Electronic bills of lading - delivered?
The advent of electronic bills of lading (e-bills) has been promised for around a quarter of a century. The pinch points encountered through the pandemic doubtless have catalysed development and acceptance, together with a drive for business efficiencies. Are they now poised to play an important role in shaping the future of the transport industry?
It is widely accepted that, while the paper bill of lading has served the industry well, an electronic version would alleviate a number of frustrating inefficiencies. The evident increase in focus to deliver globally accepted e-bills has not only been influenced by practicality through uncertain times and cost efficiency, but also recognised as collaterally delivering on the journey to net zero emissions. As businesses review their carbon emissions with increasing purpose, a useful starting point is operational efficiency.
Pre-pandemic, many organisations were already embracing developments around e-bills. Recognising the need for standardisation, the Digital Container Shipping Association (DCSA), established in 2019 by several of the largest shipping lines, aspires to be the de facto standards body for the industry, including setting the technological foundation for interoperable IT solutions.
While clearly the shipping lines are integral to the widespread adoption of e-bills, TT has long recognised that the freight forwarding and NVOC communities comprise key counterparties. As a result, TT Club undertook a LinkedIn poll campaign, supported by a number of influential organisations, to gain greater understanding of freight forwarder and NVOC perceptions. Here are conclusions from the poll results.
Speed and security of transaction appeared as the most prominently perceived benefits of e-bills. Every industry nowadays seeks to deliver transactions at speed, but recent experience of bottlenecks, delays and general inefficiencies, has heightened focus on a convenient, expedient electronic alternative to the traditional paper bill of lading.
Speed was considered in terms of not only the average shipping process, but also when amendments are required to rectify mistakes. Similarly, where cross-border procedures were concerned, accurate pre-checks and cargo information could be more readily available, leading to operational efficiencies.
The issue of security probably is less about comparison with the paper equivalent, where failure is infrequent, and more a need for assurance. Cyber risks are high concerns for all industries – not least any potential e-bill solution providers. Mindful of the likely loss in confidence in the event of failure, platforms underpinning e-bill solutions could be considered amongst the most cyber secure.
Cyber risks are high concerns for all industries – not least any potential e-bill solution providers.
Cost savings from adopting e-bills are anticipated, but due to the increasing variety in revenue streams, this remains a complex debate. Despite operational efficiencies, a charge for transacting with e-bills will necessarily be incurred and passed through the entire supply chain, making the benefits for any given actor less clear.
However, given that e-bills will be more expedient and reliable, collateral savings could be expected such as a reduction in demurrage and detention costs arising from delayed documents.
While safe operations were not directly considered, greater levels of transparency derived through e-bill transactions inevitably create audit trail capabilities that could influence future decisions, from booking and due diligence processes, through to cargo stowage and segregation decisions.
What are the obstacles?
With multiple strong benefits of e-bills, why are they not widely used? A lack of customer demand was cited by some. However, understanding this and how it might influence adoption is not straightforward, particularly considering the complexity of the global supply chain and that the customer for the bill of lading issuer could be the beneficial cargo owner, or a freight forwarder or NVOC. Where businesses have to be customer centric, it begs the question of who is the customer.
It might be argued that the most effective approach would be for the most influential actor to deploy a market-leading solution based on accepted industry standards and simply stop offering paper. However, who is the most influential actor? Recent experience might suggest that the shipping lines have assumed this position. But are they best equipped to develop a solution that is objectively beneficial for the entire supply chain?
The poll evidenced that global legal acceptance of electronic records remains a concern. This has historically been tackled by e-bill providers through contracts or ‘rulebooks’, but a number of jurisdictions are seeking to address the issue more holistically, with trail-blazing work in England and Singapore, among others.
Implementation costs may deter some, although this is another complex matter as individual experiences would vary greatly. Economies of scale may afford opportunities for the largest businesses to be early adopters, while small to medium-sized businesses (SMEs) may struggle to justify the expenditure. De-risking change management challenges all businesses, particularly when needing to operate concurrent systems until the paper equivalent entirely disappears. Further, it is vital to ensure accessibility for all counterparties and potential customers.
Another impediment to be addressed is the need for other trade documents to be digitalised. While e-bills offer efficiencies, benefits could be nullified if reliance remains on other documents held in paper form, prevalent for certain trades or commodities, such as dangerous goods.
It should not be overlooked that there are other interests in play where bills of lading are concerned, not least the banks. Banks will doubtless recognise the benefits of e-bills, not simply from the pure transactional cost reduction, but also mitigating eroding expertise in processing complex paper documents effectively.
Currently available systems and platforms have capacity to operate at scale. Convincing customers (whoever they might be) to adopt the technology however might rest on proving its capability to handle those outlier shipments: the complex, the problematic, those requiring other paper documents.
Providers strive to make their systems and platforms frictionless and accessible both from a cost and process perspective, though arguably need to be even more customised to attract SMEs.
Broader discussions following the TT LinkedIn poll have indicated that the apparent slow adoption of e-bills, despite having been cited as having the potential to save billions of dollars a year across the industry, may be founded in the complex inter-relationships and a series of misunderstandings. Undoubtedly, greater engagement with SMEs to educate could be a prudent strategy to adopt.
Greater engagement with SMEs to educate could be a prudent strategy to adopt
Despite all else, nearly three quarters of respondents believed that e-bills would supersede their paper equivalent within the next five years. Whether simple inevitability or confidence in the model, experience suggests that reaching that point will not be straightforward and will require further buy in from all counterparties.
If you would like further information, or have any comments, please email us, or take this opportunity to forward to any others who you may feel would be interested.