The dynamics of document digitisation

By: Mikael Lind , Wolfgang Lehmacher , Andre Simha , Lutercia Porto , Henk Mulder , Dr. Ralf Huesmann , and Luiz Alman?a

Digitisation is the representation of information that we have traditionally recorded on paper as zeroes and ones in a digital file. Current examples of document digitisation in the maritime domain include Bills of Lading (BL), Statements of Fact, and various certificates.

The purpose of digitisation is to improve synchronisation and communication between parties, automate processing, and support fact-based decision-making. Processes are empowered by standardisation and protected by security measures – since digitised information is both more vulnerable and easier to access than paper.

Redefining and digitising traditional processes allowing us to reach a higher degree of synchronisation and resilience through better preparedness for forthcoming events along the supply chain. In this article, we will discuss the role of electronic documents using the eBill of Lading (eBL) as a real-life example that illustrates the opportunities and challenges that arise from the digitisation of documents.

Estimates suggest that the full implementation of the UN’s Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific, adopted in 2016, could boost Asia Pacific exports by as much as $257 billion annually, while the time required to export could fall by 44%, according to the United Nations Economic Commission for Europe (UNECE).

The impact of digitalisation initiatives can also be seen in places like Senegal, where the electronic single window reduced border preclearance and clearance processing time by 90%, from an average of two weeks to just one day.

To meet port call demands a captain must file a wide variety of documents, many of them including the same information but formatted in different ways. In international trade, customs processes require substantial administrative effort extending the time to get goods released.

In 2016, IBM and Maersk followed a test shipment of flowers from Kenya to the Port of Rotterdam, which required nearly 200 documents for communications between involved parties. The associated costs for processing and administration were estimated at that time to be up to one-fifth of the physical transportation costs.

The introduction of electronic documents offers potential benefits to create a connected maritime ecosystem and enable digitalisation across value networks. The ease of use of electronic documents and their speed of processing allows various stakeholders along the chain to achieve significant gains in time and reduce costs.

Current developments in transport document digitisation

The aviation sector provides a good example of the positive impact of electronic documents, in particular through the digitisation of the digital contract between the ‘forwarder’ and the ‘carrier’ (airline) – the so-called electronic Air WayBill (eAWB).

Since its introduction in 2010, the eAWB has become the default contract for all air cargo shipments on enabled trade lanes, while most other air transport documents have also been digitalised. The International Air Transport Association (IATA) notes that: “This key industry milestone has brought air cargo into a new era where digital processes are now the norm and paper is the exception,” which has led to numerous benefits, such as improved efficiency and reliability of the overall cargo handling process, faster delivery times, decreased handling errors and a positive impact on the environment through reduced paper usage.

More recently, electronic documents have gained some traction in the maritime industry. In 2021, MSC was followed by both Hapag-Lloyd and ONE in introducing electronic Bills of Lading (eBL) with technology provider WAVE BL to allow supply chain stakeholders to more easily exchange information. Beyond the Bill of Lading, there are also initiatives underway to digitalise paper-based certificates for ships (ship documentation) and crews (seafarers’ service book).

Expectations and challenges of the eBL

Proof of concept (POC) projects conducted between carriers and multiple platforms and customers are an important part of encouraging the implementation of electronic documents is. Other factors that assist adoption are actions that leverage existing networks and that help to promote the solution more widely.

Technological progress does not come without risks. Concerns about the potential hacking of digital systems have been raised, but these can be addressed. Blockchain-powered solutions may be a worthwhile technology to respond to such cyber security concerns. Australia and Singapore, for example, have concluded a trial of issuing and verifying documentation for cross-border transactions across the two countries’ independent systems using blockchain technology.

Parties that have recently introduced the eBL have highlighted various motivations, including the reduction of administrative costs and risk of document loss, increased speed in transactions, and the Covid-related benefits of reducing the number of physical interactions the need to take place.

Additional (direct and indirect) benefits that can be expected (as identified by container lines) include error reduction, easier access to documents, a reduced number of actions in overall supply chain operation, faster amendment processes, stronger relationships among stakeholders, improved customer support, and more effective system integration.

A particular barrier identified by some shipping companies is the lack of a legislative framework with a worldwide scope. Almost every jurisdiction has its own regulation.

Local practices and laws as well as ‘legal grey zones’, namely, locations without clearly enacted laws that validate the use of electronic documentation, pose challenges to adoption. As maritime transport occurs in a global context the benefits can only be realised when all parties can legally accept the eBL and other electronic documents.

Banks also need to cooperate, as current common practice is to demand paper documents for transactions based on a Letter of Credit. The necessary changes in practice to support digital documents could be incentivised by the Banking Standards Association and the International Chamber of Commerce (ICC).

Also, the ‘first-use-barrier’ remains quite high. There are two main reasons: the lack of awareness of the solution and a perceived ‘all-or-nothing’ limitation, in other words, the need for every party to ‘buy-in’ to avoid parallel processes and the costs that come with them.

Finally, communication and efficiency require interoperability which is hampered by a lack of standards. However, several regulatory bodies and law enablers are working on this, such as: The International Group of Protection and Indemnity Clubs (IGP&I) that covers liabilities regarding the carriage of cargo and approving solutions; BIMCO for the next generation of charter parties; and the Digital Container Shipping Association (DCSA) that has recently launched eBL standards and is now working with its members to implement those standards.

The expectation of pioneers is to see a steady move towards adoption and usage of the eBL, gradually removing the complexities of paper-handling activities. While the transformation has just started the feedback received by the carriers from customers and offices alike indicates that adoption is now a matter of ‘when’, not ‘if’.

Data for visibility and automation

There are many advantages to the introduction of electronic documents such as the eBL, but there are also some major issues still to work on. Industry-wide buy-in and further standardisation is essential.

The introduction of electronic documents is not just a question of reducing administrative burden and costs. It is also about creating additional opportunities in improved decision-making and the synchronisation of processes across the maritime supply chain network. Bringing forward the necessary new standards to unleash the opportunities that digitalisation provides is critical, and a key aspect of Maritime Informatics.

Shipping lines are introducing electronic documents to access the benefits of digitalisation. The introduction of electronic documents is a major step forward; but electronic documents are still regarded as documents and de facto the same operational processes are maintained. In the future, full digitalisation will occur when the same information moves from e-documents to true data.

The move towards electronic documents elicits two thoughts. First, a call for action for everyone to participate in the effort is required, which includes those involved in creating legislative frameworks. Second, industry-wide adoption will allow the maritime sector to advance towards the exploration of automation in ways that will enable the refinement of transactions and the creation of new processes.

The following, more advanced move from a document-driven to a fully data-driven approach will then allow the maritime industry to achieve large-scale digitalisation and increased asset productivity.

Other industries have demonstrated that the success of leading e-commerce players is rooted in their data-centric approach. Paper order forms, confirmation letters, invoices, delivery or receipt documents do not exist. The winners in the digital age are operating based on data and links to data on their platforms. By introducing electronic documents, the maritime sector is taking the first step towards a similar and more efficient digitalised future. The big question is – how long will it take?

This article was published by the Smart Maritime Network.