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COVID 19 dominates the News

It would be impossible to not include something on the coronavirus as it frankly dominates the news cycle and consumes almost all our thoughts and prayers. There has been a lot of talk about the world’s preparedness, or lack thereof, to the Covid-19 but let’s look at how prescient individuals who are at senior levels of business, academia or politics were.

The World Economic Forum in its Global Risk Perception Survey 2018-2019 to rank the Top 10 Risks in terms of Likelihood and Impact. The Spread of Infectious Diseases ranked as number 10 in impact and did appear at all in likelihood. Axa’s 6th Annual Future Risk report released last October did place Pandemics and infectious diseases in the 8th spot of Emerging Risks for 2020.

So, if you did not see this coming you are clearly not alone but it is hard to take comfort that people who should be in the know missed it.

Truck drivers in the USA are essential

Earlier this month the United States Department of Transportation as part of the government’s national emergency declaration provided relief to interstate truck drivers moving emergency supplies in response to the Covid-19 outbreak. Essentially this means drivers are not bound by the Hours of Service (HoS) restrictions.

From a pure cargo perspective, suspension of the HoS covers transportation of:

  • Medical supplies and equipment related to the testing, diagnosis and treatment of Covid-19
  • Supplies and equipment necessary for community safety, sanitation and prevention of transmission of the virus such as masks, gloves, hand sanitizer and disinfectants
  • Food, paper products and other groceries for restocking of distribution centers or stores
  • Raw materials such as paper, plastic or alcohol needed for the manufacture of items in the first two categories
  • Fuel
  • Equipment supplies and persons necessary to establish and manage temporary housing, quarantine and isolation facilities related to Covid-19

The full directive can be read at: https://www.fmcsa.dot.gov/sites/fmcsa.dot.gov/files/2020-03/FMCSA%20Emergency%20Declaration%203.13.20.pdf

Transport Canada issued an almost identical directive 10 days later. Notable differences included the requirement that carriers must notify in writing its intention to operate under this exemption and provide detailed information regarding the vehicles and drivers. Also, shippers are encouraged to indicate on the bill of lading that the supplies and equipment being transported are in direct assistance to the emergency relief efforts.

Third Party Logistics Importance

Third party logistics providers (3PLs) are critical transportation intermediaries and whether they take the form of international freight forwarders or NVOCCs, choosing one is an important business decision especially given the growing complexity of our supply chains and the volatility of the marketplace. Here are 5 selection considerations from “Inbound Logistics”:

  • Strong reputation and knowledge of your industry
  • Logistics management from start to finish
  • Market presence
  • Security and technology
  • Covers all modes

You may notice that rates were not part of the equation; looking solely at lane costs and other tactical elements as opposed to strategic ones such as system integration, real-time visibility and total cost analysis may be shortsighted. Unless that is a shipper is simply searching for a transactional partner, someone to arrange transporting and storing goods. A 3PL aligned on purpose, value and culture is a much better long-term fit.

Airlines change of business

With airlines continuing to slash passenger flights because of Covid-19, an increasing number of them are redeploying their passenger (pax) aircraft to maintain a cargo offering, with United, LATAM and Turkish joining the likes of Cathay Pacific, Korean, Delta, IAG (British Airways & Iberia Air) in redeploying some of their traditional passenger aircraft to cargo-only services.

Here are some examples: United Airlines will use some of its Boeing 777 and 787 fleet to, at least initially, operate a schedule of 40 weekly cargo charters targeting international destinations with a focus on vital shipments such as medical supplies. The first of these freight-only flights departed late last week from Chicago O'Hare to Frankfurt.

American Airlines is also utilizing its currently grounded passenger aircraft to move cargo between the US and Europe. A B777-300 operated two round trips between Dallas Fort Worth and Frankfurt last weekend, carrying medical supplies, mail for active US military, telecommunications equipment and electronics to support people working from home, and ecommerce packages.

Delta Cargo is also launching charter operations from 13 US airports.

Cathay Pacific Cargo released a schedule which includes normal passenger services as well as cargo-only passenger flights between Hong Kong and mainland China, Taipei, Tokyo, Osaka, several destinations in south-east Asia, Sydney, Delhi, Los Angeles, New York, Boston, Vancouver, London, Manchester, Paris, Frankfurt and Zurich.

Meanwhile, Latin America’s largest cargo airline LATAM will uses passenger planes to augment their existing freighters. The two first international flights operated using this strategy took place in the Santiago (Chile) – Mexico City (Mexico) route, using Boeing 787-900 aircraft, totaling more than 80 tons of cargo – primarily salmon. It has also increased the freighter frequencies of its 11 B767-300 freighter aircraft.

All said IATA, the International Air Transport Association still projects a 20 percent drop in air traffic this year. Additionally, note the 80-ton payload is equivalent to just 4 ocean containers; certainly, planes can make daily trips but still this volume represents the proverbial drop in the bucket.

Port Management System

The British Ports Association and the Port of Rotterdam have recently published a joint smart ports paper examining port digitalization.

A Port Management System at Rotterdam supports the administrative and financial processing of vessel calls and has shortened ship turnaround times by 30 minutes. Also, the use of AIS technology onboard ships and sensors in the port along with big data and artificial intelligence can improve efficiency. For example, Rotterdam achieves savings of five to 10 percent in dredging costs by bundling the routes sailed with information on silt deposits in the port basins.

Thinking globally, communication between a port and the inland areas it supports could be expanded to other ports around the world, with these, in turn, linked to their own hinterland. This way, an integrated door-to-door digital logistics chain is created making optimum use of different transport modes.

Since vessels make several calls, a delay at one port can affect the available capacity at the next one unless ships increase speeds and therefore emissions. By keeping each other informed of sailing routes and any divergence from their schedule, ports are able to make better use of their capacity and achieve shorter, reliable transit times. The ability to respond in real-time can mean a seamless cargo flow from the production plant to the customer; ideal for Just-In-Time manufacturing.

There are benefits to be had for all links along the supply chain. Shippers and transportation companies can plan with greater accuracy. Warehouses and distribution centers can maintain their stocks with smaller safety margins. Ports and terminals can forecast the arrival and departures of ships more precisely and use their dock space and resources more effectively. This is meaningful given that currently around 30 percent of oceangoing vessels still arrive more than 24 hours late and time is indeed money.

The added value of a worldwide network of connected ports can facilitate the active exchange of data, both within port communities and between individual ports. The paper is available at:

https://connect.portofrotterdam.com/portforward-digital-maturitybpa?utm_source=Press+Release+Lst&utm_campaign=fa134197b9-EMAIL_CAMPAIGN_2019_08_06_10_17&utm_medium=email&utm_term=0_1c633fa315-fa134197b9-146559909

Another Blockchain initiative

In another port technology initiative involving Rotterdam a paperless, instantly financed and fully trucked door-door container was recently shipped from South Korea to the Netherlands. This Proof of Concept provided end-to-end visibility for multi-modal transport via ocean carrier, inland barge and truck.

The shipment was handled on the blockchain platform DELIVER and it reached a warehouse in Tilburg via the Port of Rotterdam with Barge Terminal hauling the cargo from there to the destination.

The goal is an open, independent and global cargo shipping platform linking an average of 28 parties making for a far more transparent and efficient network.

Security in Ports

Cargo security continues to be a priority for virtually all ports and their associated inland transport routes in the world with some notable “hot spots.” The International Maritime Bureau has identified over 280 different ways to breach a container while leaving conventional security seals intact.

There is a relatively new device, the Eye-Seal internal breach detection technology that is designed to monitor any intrusion (door opening) into the box. In addition to the door opening capability, there are a series of incorporated sensors that focus on the type of breach, location (with a time stamp) as well as variations in light, temperature, humidity and dew the last one could be useful in better understanding the buildup and cycling of condensation in certain trade routes principally from Asia.

The Eye-Seal is installed inside the container with no visible exterior components, can handle maritime and land transport routes and has an active battery life of 120 days.

The Florida-based company was founded by people involved in the international trade of nonferrous scrap who also had experience with theft and pilferage. Reportedly the device has been tested on over 90 countries. Even though any breach when detected triggers an alert to a “user interface” it does not appear to afford the beneficial cargo owner the ability to have someone respond to the event in real-time. Knowing that the container was entered has some valuable but just not that actionable so more of a recovery (subrogation) tool perhaps than prevention. Here is a short video that just illustrates the ease of installation. https://eye-seal.com/video1.htm

By the way we cannot envision that many ways to breach an ocean container

IoT technology

Staying on sensor technology, using the Internet of Things (IoT) is one of the most prevalent trends in the maritime sector with “smart containers” giving shippers, marine terminal operators and ocean carriers the ability to track the equipment and do so much more.

Smart containers consist of a series of telematics that provide real-time positioning as well as certain levels of environmental monitoring that can lead to minimization of lost or damaged cargo.

Even though the uptake has increased in short period of time and the pace of adoption is expected to accelerate over the next 5 years, according to a report (“Container Census & Leasing Annual Report 2019/20”) from Drewry Shipping Consultants, this breed of containers accounts for just about 2.5% of the global fleet.

The information for much of the content was taken from a number of public sources that, to the best of the undersigned’s knowledge, is accurate. The views expressed in this document should be regarded as the personal opinion of the undersigned and not necessarily of the Chubb.

If anyone wants additional information on any of the topics covered contact the authors.