Lockdowns, stranded containers, ships waiting several weeks for a slot outside the world’s biggest terminals—that’s been the reality of global trade since early 2020.

The pandemic triggered record consumer demand, overwhelming supply chain capacity, creating port congestion and causing a lack of truck drivers and warehouse workers. Supply chain congestion issues and international sanctions have pushed the already disjointed supply chain beyond its limits. As a result, companies across the globe have dealt with delayed goods and empty shelves.

The pandemic created a massive increase in consumer demand for electronics, furniture and building materials, which accelerated our customers’ online presence and need for omnichannel solutions. As a result, more than $38B USD worth of bookings are now placed through the Maersk.com platform, which makes it one of the world’s largest B2B websites. This monumental shift made it apparent that the global supply chain needed to be restructured to streamline the flow of goods to consumers.

That’s why we’ve taken a huge leap in our digital transformation over the last 12 months, putting us well ahead of our planned progress.

Our digital transformation enables us to better serve customers by optimising and integrating their supply chains. It also releases resources in our customers’ supply chain, so they can focus on their business and create greater value for their commercial pipeline and shareholders—instead of spending time on supply chain management.

Today, customers can book a container with a few taps on their smartphone or tablet. This was unheard of a couple of years ago—when confirming an order took several touchpoints via email and phone.

A breakthrough

Covid-19 has also changed the priority of logistics in the business community. Before the pandemic, supply chain management was a question of “just in time,” while stock management evolved around having just enough supplies to match demand. The trend was a cost-cutting manoeuvre, but ultimately made companies vulnerable to the slightest disruptions in their porous supply chains like bad weather, accidents and the pandemic.

Supply chain management has historically been a task shared between procurement, logistics and even finance. Besides an extensive amount of time and lengthy decision-making processes, this also led to a lack of flexibility, agility and manoeuvrability in the supply chain.

The consequences of Covid-19 and other unforeseen events over the past two years have turned the supply chain upside down. Today, security of supply and stock management are amongst the main priorities in executive management and are part of quarterly reporting in most companies. Supply chain strength and confidence shapes earning potential and the response of financial markets.

Even though the business community has embraced supply chain digitisation to a large extent, there’s still a lack of artificial intelligence and data utilisation.

There’s a good reason for that. Operating a manual compounded supply chain makes it almost impossible to collect relevant data, since it’s spread across up to 30 different parties. On top of that, collecting data is an immense task when the ability to make fast decisions is crucial to secure the flow of goods.

At A.P. Moller – Maersk, we collect and receive feedback from more than 100,000 customers which gives us unique insights into their needs and movements of global markets.

We’re investing massively in the development of new digital tools and products that better integrate logistic solutions and makes it easier for our customers to reroute or find alternative means of cargo transportation when supply chain disruptions occur.

The current widespread congestion and lack of capacity has underpinned the need for rethinking and optimising global supply chains. The rise of e-commerce and online shopping, where consumers expect day-to-day delivery, has increased the need for a broader and longer-term relationship between logistic companies and their customers. Consumers have a choice, which means they will shop elsewhere if they don’t have visibility or an ETA when they shop online.

That is why we’re in the middle of a historic breakthrough. One as big as the containerisation of the shipping industry in the 1960s.

Cultural transition

The new reality demands a lot from stakeholders across the industry. It’s no secret that shipping and transportation has long been branded as conservative and analogue. Shipping a container can involve 100 different documents!

Six years ago, A.P. Moller – Maersk embarked on a new journey where we divested our energy companies to focus on becoming the integrator of logistics. The process included rethinking our culture and starting new ways of doing business.

Since 2016, we’ve more than tripled our number of tech employees. Many of them have backgrounds in the start-up community or in some of the world’s largest, most successful tech companies. Back in the day, tech was a support function in Maersk, but today it’s an integrated part of daily business.

The pace of technology is reshaping the world. Every company needs to keep up. Just like our customers, we need to embrace change and digitisation to avoid falling behind. We’re well on our way, but we’ve only just begun the journey. As the world’s leading container and logistics company, we’re creating a global supply chain that operates efficiently at scale and can handle inherent disruptions that will always surface in unexpected ways.

Source: https://www.maersk.com/news/articles/2022/08/22/manual-control-halts-global-supply-chains

Italian shipbuilding group Fincantieri said it has secured a contract to build up to three “ultra-luxury” cruise ships for an unnamed international buyer.

The €1.2 billion deal is for one vessel to be delivered by the end of 2025, with options for two additional vessels, Fincantieri said.

Fincantieri did not share any specifics about the cruise ships’ size and technical details.

The cruise ship order is one of only a handful placed since the cruise industry was derailed by the COVID-19 pandemic, but marks a sign of confidence for the badly hit sector.

Fincantieri, which last week signed a memorandum of agreement (MOA) with MSC Group’s luxury travel brand Explora Journeys for the construction of two cruise ships, has been ramping up build activity after agreeing in 2020 to reschedule deliveries for many of its cruise customers.

Some of the business’ biggest names, including Royal Caribbean and Norwegian Cruise Line, are rumored to be contemplating new orders.

Source: https://www.marinelink.com/news/fincantieri-bags-ultraluxury-cruise-ship-498023

According to a document released by China’s Ministry of Transport, Ministry of Foreign Affairs, National Health Commission, General Administration of Customs and National Immigration Administration, before sailing for domestic market, the quarantine period for international trading vessel is to be reduced from 14 days to seven days from when the vessel arrived at the port of entry. All the crew members on board the vessel will need to have five Covid tests during the seven coming days upon arrival.

Once the vessel completed the process for adjusting oceangoing routes to domestic routes, the crew members’ health monitoring period will be shortened from 14 days to three days, and will be required to take a covid-test on the third day.

The policy adjustment could shorten the waiting time of the vessels transferring from international to domestic market reducing operation costs for the owners and provide a stronger support for transportation demands.

China is continuing to maintain a zero Covid policy, however, has relaxed some its most stringent quarantine measures for international arrivals.

raffic and revenue were up from the previous fiscal year for BC Ferries, but down from pre-COVID-19 pandemic levels, according to the British Columbia transportation agency, which released its year-end FY results Friday, June 24.

For the 2022 fiscal year ending March 31, 37% more passengers (17.9 million) and 26% more vehicles (8.5 million) rode BC Ferries than the year before. However, passenger traffic was down 20% and vehicle traffic down 5% compared to the pre-pandemic 2019 fiscal year.

Revenue was up 12% to $965.4 million, a $100.1 million increase, from the previous year due to higher traffic and net retail sales, which were helped in part by lower Safe Restart Funding, a federal effort to aid provinces and territories reignite their economies, BC Ferries data show.

However, BC Ferries saw a net loss of $68.2 million before recognizing Safe Restart Funding.

“As we emerge from the pandemic, we are grateful to our employees for their commitment to put safety first, operate in the public interest, and ensure reliable ferry travel,” BC Ferries’ President and CEO Mark Collins said. “We are excited to see people (traveling) with us again and are adding staff to meet the increase in demand for our service.”

Source: https://pacmar.com/covid-19-impacted-bc-ferries-year-end-results-says/

COVID-19 measures in China, a surge in consumer demand and the invasion of Ukraine have all been factors in ongoing unprecedented port congestion.

Congestion at the US ports of Los Angeles and Long Beach reached record levels in November 2021, with 116 container ships either in port or at anchor, while in March 2022, Los Angeles recorded its third-busiest month ever [10] as work continued to clear marine terminals of cargo and reduce the number of ships waiting at sea. At the same time, repeated outbreaks in China, resulting in the staggered lockdown of Shanghai in March/April 2022 for example, and Russia’s invasion of Ukraine is compounding ongoing supply/ demand pressures for shipping, which have resulted in port congestion, higher freight fees and longer transit times. Overall, port congestion globally is running above the levels seen last year, with specific container fleet congestion trending towards previous highs, Clarksons Research [11] noted in March 2022, while the impacts of the invasion are likely to create further inefficiencies across the maritime transport system.

Port congestion puts crews, port handlers and facilities under additional pressure, increasing risk at a critical stage of a ship’s journey, according to Captain Anastasios Leonburg, Senior Marine Risk Consultant at AGCS.

“Loading and unloading vessels is a particularly risky operation, where small mistakes can have big consequences,” says Leonburg. “Busy container ports have little space while the experienced labor required to handle the containers properly is in short supply. When you add in fast turnaround times and port congestion, this may result in a significantly heightened risk environment.”

Port risks are already increasing with larger ships, which concentrates large volumes of trade into the fewer larger ports that have specialist infrastructure. Accumulations of cargo exposures at mega ports have been rising, while commercial pressures increase the risks of mistakes and accidents. Ports are also increasingly reliant on technology, where an outage or cyber-attack could effectively close a port.

“Commercial pressures are already a contributing factor in many losses that resulted from poor decision-making,” says Captain Nitin Chopra, Senior Marine Risk Consultant at AGCS. “The pressure on vessels and crew is currently very high. The reality is that some may be tempted to ignore issues or take shortcuts, which could result in future losses.”

AGCS analysis shows that 75% of shipping incidents involve human error.

Ports and shipping face heightened cyber threat

As geopolitical risks rise, so does the prospect of malicious digital disruption.

The shipping industry continues to fall victim to cyber-attacks. In February 2022, a container terminal at Jawaharlal Nehru Port Trust, India’s busiest container port [12], was hit by a ransomware attack. It is just the latest to be affected, following ransomware incidents at US and South African ports in recent years. Earlier this year, a number of European oil terminals were also affected by a cyber-attack.

Cyber criminals have also targeted shipping and logistics companies. US-based freight forwarder Expeditors was hacked in February, 2022 [13], while Hellmann Worldwide Logistics [14] suffered a ransomware attack in December last year that disrupted operations for weeks. In recent years, some of the world’s largest shipping companies – Maersk, Mediterranean Shipping Company, COSCO and CMA CGM have all been targeted.

According to a recent industry survey [15] just under half (44%) of maritime professionals reported that their organization has been the subject of a cyber-attack in the last three years. Of these, 3% agreed to pay a ransom, which averaged at around $3mn. It also found 32% of organizations do not conduct regular cyber security training while 38% do not have a cyber-response plan.

“Cyber risk is a major concern and we do see more and more incidents involving non-marine operations, such as ports,” says Régis Broudin, Global Head of Marine Claims at AGCS. “As the industry becomes more reliant on technology and automation, the potential for disruption from a cyber-attack or technical failure increases. And with the increased connectivity of ships, it is only a matter of time before it will also affect vessels.”

Security agencies have warned of a heightened cyber risk due to the conflict in Ukraine. NATO warned vessels in the Black Sea faced the threat of GPS jamming, Automatic Identification System (AIS) spoofing (prior to the Ukraine invasion there had already been a number of these incidents, reported in the Middle East and China), communications jamming and electronic interference. The US Cybersecurity and Infrastructure Security Agency also warned the maritime transportation sector could be a target for foreign adversaries.

“There is concern that shipping assets and ports could become collateral damage if the conflict in Ukraine results in an increase in cyber activity,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting, AGCS.

Email: lesiba.sethoga@allianz.com

BY Lesiba Sethoga