With ships carrying over 90% of all merchandise trade, maritime transport is an essential but vulnerable component of the global economy. A new report by the World Bank and the International Association of Ports and Harbors (IAPH) shows that digital technology could greatly enhance the performance and resilience of maritime supply chains, and proposes a concrete roadmap to support the digitalization of the industry. Given the strategic role of the maritime sector, the digital transformation envisioned in the report could bring wide-ranging economic benefits, especially for developing countries.
Maritime transport is the backbone of the global economy. The sector carries over 90% of global merchandise trade, totaling some 11 billion tons of cargo per year.
The COVID-19 pandemic has only underscored the importance of the maritime industry: over the past few months, shipping and associated logistical chains have played a key role in delivering essential supplies, bringing food to our tables, and keeping economies afloat.
But the crisis has also laid bare the many vulnerabilities of the sector. Now more than ever, enhancing the resilience of the maritime sector must become a top priority in order to ensure business continuity and improve the reliability of critical supply lines. This is where digitalization comes in.
The case for digital transformation
Harnessing the power of digital technology would boost the performance of the maritime sector and help address many of the critical challenges it is currently facing. Based on evidence from across the globe, the new World Bank-IAPH report shows that broader and better-coordinated use of digital technology would result in significant efficiency gains, safer and more resilient supply chains, and lower emissions.
In particular, the creation of an efficient digital ecosystem would go a long way in streamlining operations and facilitating the exchange of data between shipping lines, port services, cargo handling operations, clearance agencies, and with other transport networks. In the context of COVID-19, digital technology also has the advantage of minimizing the need for human interaction, and could help protect the sector against future shocks.
The impact of digitalization would extend far beyond the maritime sector. Given the strategic role of the shipping industry, digital transformation has the potential to bring wide-ranging economic benefits and contribute to a stronger, more sustainable recovery, especially in low and middle-income countries.
Despite the many benefits of digitalization, progress has been slow and uneven.
Even though the International Maritime Organization (IMO) has made it mandatory for all its member countries to exchange key data electronically (the FAL convention), a recent IAPH survey reveals that only a third of over 100 responding ports comply with that requirement. Interestingly, the main barriers to digitalize cited by the ports were the legal framework in their countries or regions and persuading the multiple private-public stakeholders to collaborate, not the technology.
In the short term, countries that are left behind may experience shortages of essential goods and higher prices, as was illustrated at the start of the COVID-19 pandemic. In the medium to longer term, delaying the digital transition of the maritime supply chain could lead to higher trade costs, lower competitiveness, lower economic growth, and lower employment.
More broadly, the situation could widen the gap between developed and developing economies, and exacerbate the isolation of the poorest countries.
To support countries and maritime stakeholders on their journey to digitalization, the report proposes a concrete roadmap with several successive stages:
- In response to COVID-19, the authors describe how countries can leverage digital technology to enforce social distancing across the maritime supply chain, control the temperature of workers, and coordinate crisis management more efficiently across agencies.
- Besides COVID-19 emergency measures, the first order of business for many ports is the establishment of a functioning port community system (PCS)—a platform to optimize, manage, and automate port and logistics processes through a single submission of data in the transport and logistics chain.
- The next stage consists in the development of Port Management System (PMS), which enables the port authority to control all port traffic through a single digital interface, and manage port infrastructure such as port calls, dues, journal, incidents, waste, dangerous goods, planner, cargo, inspections, permits, services, security, and assets.
- Ultimately, ports with advanced technical and institutional capacity should consider transitioning toward a smart port model. Smart ports use emerging and disruptive technologies such as artificial intelligence, advanced analytics, internet of things (IoT), fifth-generation technology (5G), autonomous systems, digital twinning, and distributed ledger solutions as well as other smart technology-based methods to improve performance, economic competitiveness, and environmental sustainability.
To work through the various stages of digitalization, actors across the maritime supply chain need to do a lot more than just invest in technology and digital infrastructure. A successful digital transition requires sustained political commitment, adequate regulation, effective collaboration between the public and private sectors, along with a concerted effort on education and skills training.
Finally, it is important to acknowledge that the digitalization of the maritime logistical chain does not come without risk. Between February and May 2020, cyberattacks increased 400% in the maritime industry—a trend that is likely to continue. The report formulates a series of practical recommendations to help port communities strengthen cybersecurity, drawing on case studies from the ports of Antwerp (Belgium) and Los Angeles (United States).