Cloud Solutions for Trade Security Implications for the Overall Supply Chain
Measuring or comparing the value of enhanced supply chain solutions remains, at best theoretical since hard quantitative comparative data is rarely available. So looking at trade security is a nice environment in which to look at the potential for cloud based supply chain technology solutions and their implications for management of a global supply chain and to compare it with current industry norms.
The United States implemented 24 Hour Security Rule a year after the 9/11 terrorist attacks in New York. Canada and Mexico followed a few years later and Japan implemented their version of the rule on March 1, 2014. Both the vessel operating carriers and the NVOCC / Forwarders are required to transmit the data on their bills of lading to the respective Customs organizations 24 Hours before the cargo loads on the vessel. That means that data at the origin has to be made available for review at destination before it can load it and then be visible in route. It is a classic supply chain management scenario but with security rather than economic consequences.
The ocean carriers and the NVOCC / Forwarders have, for the most part, deployed different solutions. The carriers with their larger, more established networks, have relied on their distributed server systems to comply with the regulations. The NVOCC / Forwarders being by and large smaller and less centralized, have relied on Cloud Based solutions. And, 13% of the Japan market, has opted for sending their documents in hard copy to their offices or agents in Japan where they are manually re-keyed into a system with local access to Japan Customs’ system.
Distributed server systems are a system solution designed prior to the development of almost free global telecommunications available on the Internet. Distributed server systems are a set of regional mainframe servers that collect information locally or within a limited geographic region and then transmit via EDI batches of data to the mainframe server located at the shipment’s destination.
Cloud based solutions use a single server located at a major telecommunications center and rely on the Internet and browser based technology to have all the users work on the same central system the same way that you shop online or book hotel and travel arrangements today.
The Japan Experiment
Japan’s 24 Hour Rule went live on March 1 and both the ocean carriers and the NVOCC / Forwarders were able to achieve the basic requirement of transmitting their data to Japan Customs on time. However, the differences between the two approaches started to become clear 45 days into the new regulatory situation when Japan Customs expressed its frustration with the quality of the data and asked the Trade to clean it up. Japan Customs, like so many importers and exporters, realized quickly that poor data consistency destroys their efforts to do sophisticated supply chain management. You simply can not do valuable analytics on inconsistent data.
The first, and biggest, issue points to one of the biggest limitations of the distributed server solution. Japan Customs requires that the ocean carriers and NVOCC / Forwarders clean up any data discrepancies and achieve a link between the data for both the ocean carriers’ and NVOCC / Forwarder’s bill of lading. The NVOCC / Forwarders are able to see from anywhere in the world the status of their bill of lading with Japan Customs in real time by directly triggering an amendment to the filing. The ocean carriers outside of Japan can not see the status in real time because the server they are working on capture the amendment changes, hold them for a period of time, then batch transmit them to the server in Japan, which in turn transmits to Japan Customs but doesn’t send the status reply back to the originating server.
The consequence is that the users at origin shipping with the carrier can not resolve issues with well meaning users at the ocean carriers because the ocean carriers’ simply can not see statuses in real time because they are not working on the server that got the response from Japan Customs.
This single directional flow of data is typical of systems deployed at all levels of the trade today. Rekeying of data at destination is also commonplace in international trade. Both don’t allow for the easy correction of errors or adjustments to changes in situation.
The Cloud Based solution allows users from anywhere in the world to execute changes and to get immediate feedback from servers and users located elsewhere in the world. It also allows other users, with the appropriate permissions, to see and work with, or collaborate with, other users located along the supply chain.
Cloud Based Platforms
Another aspect of Cloud Based server platforms is that the main server is, itself, connected via EDI to any number of other institutions and portals. Users around the world access the system via the Internet, the main server accesses other institutions via EDI. The advantage of the Cloud Based platform is that it handles hundreds of customers and thousands of users so the costs of setting up the EDI connections is borne by diverse group and paid for through access fees. In our case, we are connected to Japan Customs, US Customs, Canadian Customs, Mexican Customs, the US Rail Network, the main ocean carrier portals, and a variety of warehouses. Once customers sign up to use the platform, they have immediate access to the institutions and that are already part of the platform without the additional time and expense of setting these connections up.
These interconnections came into play in addressing the data inconsistencies between the ocean carrier’s bill of lading and the NVOCC / Forwarder’s. The NVOCC / Forwarder acts as a shipper in relation to the ocean carrier so it is up to them to provide the bill of lading instructions to the ocean carrier. Using our cloud based platform, NVOCC / Forwarders entered the shipping data either manually or via EDI, we ran checks to insure the data would meet all of Japan Customs’ requirements, and then transmitted the data to Japan Customs. We then automatically transmitted the same data, with the exception of the shipper and consignee data, to the carrier via the major carrier portals as the Bill of Lading Instructions. This ensured that the same data populated in our system was the same data driving the ocean carrier’s transmission.
The ocean carrier then sent back to our system the bill of lading with a file header that reflects their bill of lading number. We would then take that bill of lading segment and compare it with the master bill number that the NVOCC / Forwarder had entered in our system. If there is a discrepancy, then we replace the data with the ocean carrier’s correct data and automatically trigger and amendment to Japan Customs.
It’s easy to miss the implications of the cloud based supply chain solution in this case study by considering it as a one-off deployed by a single entity to address their specific needs. As a Cloud based solution, this is a commercially available platform for international trade that hundreds of NVOCC / Forwarders deployed in March with little or no modification or customization to address the supply chain requirements inherent in the new regulations in Japan. Many of them already use the platform for their US AMS and Canadian ACI needs and adding Japan was simply a matter of adding a few additional requirements to a core process already in place. In fact, in many cases, data used for Japan AFR is also used for filing US AMS or Canadian ACI when cargo transships in Japan going to N. America.
The next step is for importers and exporters to leverage these security platforms to gain accurate and early visibility to cargo movement and then to begin addressing how they can become an additional collaborator in the process. Easy first steps would be around coordinating on bookings and sailings, setting pick up and delivery arrangements, and arranging customs clearance.
A host of questions that have kept people from embracing cloud based supply chain solutions technology; Is it reliable? Is it fast enough? The answer is “If it’s worth gambling a year in jail on, then it’s probably just fine for the basic management of the supply chain”.
Transshipments: A case for workflow collaboration
Another requirement for the Japan 24 Hour Rule is that the NVOCC / Forwarder must manifest their bill of lading based on the actual vessel that calls Japan. A large percentage of shipments from Europe, S. E. Asia, South America, and the East Coast of the United States are not on vessels that call Japan directly. They transship in the new mega terminals in Pusan, Shanghai, Yantian, and many others. The actual connection vessel is not known with precision at the origin at the time of departure and even the transshipment port can change based on a variety of aspects the vessel operator faces. The ocean carriers resolve this by having the local port operations transmit the filing before departure after they have made all of the arrangements, but the NVOCC / Forwarders faced an issue of who would monitor and amend filings based on updated information that was neither at origin or destination where they had their main offices handling the cargo.
A cloud based supply chain solution has the inherent capacity to allow users anywhere in the world, with the proper permissions, to collaborate with other users since they are working off of the same server and data set. In short, what one person saves, the others can see and what others save the initial user can see. This is far more than just visibility. It is the capacity to work together. Our system takes advantage of a cloud based environment and structures shipments to be a set of events all of the way from origin to destination with a workflow aspect that assigns responsibility for defined users to handle or manage specific events. We set up a special template of events to drive a process for monitoring and amending each shipment that transshipped through a 3rd party service we set up in a low cost service center in Vietnam. Users in Vietnam accessed each individual NVOCC / Forwarder’s environment and monitored transshipment cargo on their behalf.
Users in Vietnam had specific dates by which they had to first confirm the shipment in the carrier’s web tracking site. They monitor for changes several days before the actual vessel arrival at the transshipment port and again on the day the cargo arrived at the transshipment port. Then either securing the vessel name through the carrier’s web site or by calling the carrier directly, they would enter the data in the system and trigger an amended filing.
This data, performed by a 3rd party, was visible and monitored by exception by both the origin and destination users the NVOCC / Forwarder client. This is a real world example of cloudbased collaboration in which several thousand shipments were managed in the first month alone.