Can the cloud lift global trade?
Published by John Churchill on 25 May 2015
For every container shipped overseas, a maze of processes and paperwork threatens its journey with lost or inaccurate information that is a costly drag on trade. An industrial PhD working in Maersk says there is a far simpler way – and he is building it.
Clogged ports and congested roads are its visible signs, but one of the costliest barriers to global trade is the documentation that follows – and threatens to stop – every container of goods traded across borders.
The cost of physically moving a container is less than half the cost of handling the information related to its transport,” says Maersk Line’s Thomas Emil Jensen, an industrial PhD specialising in IT infrastructure.
This is not an Africa or Europe problem. Documentation is a costly and complex process for all trade.THOMAS EMIL JENSEN, MAERSK LINE INDUSTRIAL PHD SPECIALISING IN IT INFRASTRUCTURE
“The physical infrastructure of trade is actually pretty efficient; it is the information infrastructure that is a mess,” says Jensen.
“A digital infrastructure built on the Internet – a ‘cloud’ where all of this information could be shared and accessed – would make it a lot simpler and the benefit to trade will be significant. We call the one we’re working on a ‘Shipping Information Pipeline’."
Jensen began researching the paperwork and processes gumming up cross-border trade more than two years ago as part of project between Maersk and TradeMark East Africa, a not-for-profit organisation focused on enhancing prosperity in the region through trade. Jensen’s research focused on two of Kenya’s most important exports, avocados and flowers.
What he found shocked him: To reach customers in Europe, the containers of avocadoes and flowers had to go through a jungle of nearly 30 people and organisations, consisting of private companies and public authorities on both continents, and more than 200 different interactions and communications between them all.
Elizabeth Kimani, Massai Flowers: “The way things are now, the sharing and transfer of information about a container involves a lot of repetitive steps.”
Equally surprising, was the fact that at no point did any supply chain partner or authorities have all the information about the shipment (location, owner, contents etc.) and the information they did have was often wrong or incomplete, the result of information being rekeyed multiple times in the process.
“Various studies have estimated that, in general, the average border related administrative costs of trade are 21% of the total cost, compared to 8% for transportation. What we’re aiming for is to remove as much of that 21% as possible with the Shipping Information Pipeline, in order to slash the cost of international trade in the region,” says Jensen.
Accurate and timely information
“The way things are now, the sharing and transfer of information about a container involves a lot of repetitive steps. It’s complex and bureaucratic and makes mistakes very likely,” says Elizabeth Kimani.
If all countries improve border administration and transport and communication infrastructure to even half of global best practice, it could mean a $1 trillion increase in global exports.WORLD ECONOMIC FORUM, ‘ENABLING TRADE: VALUING GROWTH OPPORTUNITIES,’ 2013
She is the general manager of Massai Flowers, a 40 hectare farm just outside Nairobi, Kenya, that employs 800 people and sends 45–50 million roses overseas each year, primarily to Europe. The specific details of Jensen’s research are new to her, but the impact of the current mess on her business is clear.
She says one container of Massai roses worth nearly $100,000 was shipped to Holland, but ended up in Sweden. She does not know how, or why, but is confident that a Shipping Information Pipeline would help prevent such mix-ups.
“If everyone in the supply chain could be sure that the information in the Pipeline was from the source, i.e. not copied or rekeyed information, and we could see the progress of the information and documentation through the Pipeline that would be valuable. We would have a reliable and transparent supply chain,” she says.
A shared interest in efficiency
For authorities, for whom insufficient or inaccurate information related to a container is a security risk (because they do not know what the contents are) and a challenge for revenue collection, the Pipeline concept is equally appealing.
“Authorities want to facilitate trade without losing focus on security, compliance with rules and revenue collection, while the private sector wants to move and clear their goods quickly and at the lowest costs. A Pipeline could support both public and private sector interests,” says Kenneth Bagamahunda, Director of Customs, East African Customs Union.
He points to the boom in intra-East African trade since the region began similar efforts to make trade easier by integrating the five nations’ customs systems. “Intra-regional trade has risen to USD 6 billion this year from USD 1.5 billion in 2005,” he says.
Public-private partnership a must
Jensen is careful to point out that he is still identifying the scope of the problem and that the Pipeline is still in its concept phase. “The next step is to carry out a pilot project to test the Pipeline, followed by analysis,” he says.
Alban Odhiambo, TradeMark East Africa: “Technically, the Pipeline is not hard to build. There is no hardware required or massive data centres, just some basic coding.”
One of the most important parts of the process will be buy-in from the authorities. To introduce and discuss the Pipeline idea, TradeMark East Africa hosted a full-day workshop in Nairobi in April for more than 35 guests representing different organisations, such as government agencies from each of the five East African nations. The consensus at the end of the day was that it was a good concept and possible to build, but not without challenges.
“Technically, the Pipeline is not hard to build. There is no hardware required or massive data centres, just some basic coding,” says Alban Odhiambo, Director, ICT for Trade and Transport Facilitation TradeMark East Africa and Jensen’s counterpart on the project.
“Once we have the proof of concept, the incentive to succeed – lower costs and more trade, which creates jobs and tax revenue – will be a powerful motivation for everyone to make it happen.”
Shipping information Pipeline
A Shipping Information Pipeline or Trade Logistics Information Pipeline is like an Internet for shipping. It provides a digital infrastructure (think Google Drive or Twitter) in which supply chain partners and authorities can share and access original information required for a trade, creating supply chain transparency and a flow of information that facilitates the flow of goods.