Bean Counters Be Gone
Who’s Looking At Ocean Transportation Payment Processes?
The container liner shipping industry carries about 60 percent of the goods by value that are moved internationally by sea. To do so, container shipping lines deploy about 5,100 containerships worldwide and provide approximately 400 scheduled liner services, most of which sail weekly.
Drewry estimates that in 2017, the global containerized trade of 207 million teu of ocean containers required around 1.26 billion freight invoices to be issued, verified, paid, and reconciled. With the current low levels of automation of payment processes among shippers, forwarders and shipping, we estimate a total process cost of $34.4 billion annually.
The impact of the costs and inefficiencies on each stakeholder diminishes as the stakeholder gets larger in size. Smaller stakeholders tend to be more reliant on spot markets where more of the processes are manual, freight rates and supplier bases are most volatile and most of the invoice errors occur. Larger stakeholders tend to rely more on long-term contracts which allow for IT solutions to be developed that, after the initial setup cost, provide for nearly frictionless freight invoicing, checking and settlement processes.
Regardless of the size of the stakeholder, the prevailing inefficiencies in invoicing and reconciliation processes pose a significant market opportunity for technological disruptors, provided they address the underlying industry issues by offering simplified and/or automated invoicing and payment practices; and creating sufficient guarantees so that market participants can drop the antiquated practice of “cash against documents.”
In a new white paper (“Invoicing and payment processes in global container shipping: ready for disruption?”), sponsored by Mastercard, Drewry examined the current payment practices and the reasons why they exist. The paper concludes that the prevailing inefficiencies pose a significant market opportunity for technological disruptors. In particular, the paper posits that tremendous efficiency gains can be achieved through technological solutions that: support the simplification and/or automation of invoicing and payment practices, especially for small and medium sized shippers and forwarders; create trust or provide payment guarantees between stakeholders so that cash-against-documents practices are no longer required; and streamline and solidify the end-to-end workflows of quotations, booking, and fulfillment of the transportation service as booked, in alignment with invoicing and payments across the transportation chain without errors and re-work.
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