UK – Smart Containers.
In a recent article, we highlighted the benefits of container tracking. This follow-up article deals with smart containers.
It may come as no surprise that the use of smart containers is gaining traction. A report from UK consultancy Drewry in July 2023 predicted that the global telematics-enabled container equipment fleet will grow six-fold over the coming five years and account for 30% of global box inventories by 2027.
Major container lines have made significant investments in relation to smart containers. For example, Hapag-Lloyd has committed to equipping its entire dry box fleet with smart containers within 2024. Other top 10 container lines such as Ocean Network Express and ZIM have also joined the race.
Smart containers belong to the liner and once the container is converted, the tracking can be used repeatedly. There is no need to repeatedly install and remove trackers. In addition to showing the positioning of containers, smart containers can be fitted with sensors to provide timely alerts of the following events:
- Deviation –if container routing deviates from predefined routing, or if actual container arrival or departure is X hours behind predefined trip plan.
- Unexpected door opening – in case of door opening or any kind of tempering in an unexpected location, based on pre-defined trip plan.
- Temperature – when the measured temperature exceeds a predefined threshold or even earlier when the power source fails.
- Shock and vibration – in case the measured shock exceeds a predefined threshold.
- Early detection of these events can reduce or prevent loss. Door opening detection has successfully alerted authorities and helped to recover stolen consumer electronic goods. It has been reported in Uganda that this type of technology has reduced attempted robberies of goods in transit by more than 50%.
- Furthermore, early intervention may save the cargo for example where there is temperature deviation. In any case, the time and place of the detected event will help to determine who is the responsible party.
Wider benefits of smart containers
Customs clearance
Customs clearance is often perceived as a bottle neck. It is anticipated that physical data collected by smart containers can be communicated to various cross-border agencies. The individual authorities can therefore perform a detailed risk assessment of the container before arrival and determine whether inspection is required. The improved data quality and visibility has the potential to speed up operational clearance and reduce unexpected delays.
It is also worth noting that certain countries already require containers to be trackable. To combat duty evasions, the regional electronic cargo tracking system was introduced by the revenue agencies of Kenya, Uganda and Rwanda, to electronically monitor the movement of sensitive cargo.
Cargo insurance
The ability to monitor the execution of any journey at cargo level will speed up the resolution of claims. Actual trip data (time and routing points passed) will allow insurers to check the physical transport execution: did the container enter political risk areas, excepted countries, piracy risk areas? The use of smart containers has the potential to reduce disputes in relation to coverage issues. For example, time-stamped events recorded by the smart container will provide clear evidence of whether the loss occurred during transit in order to determine whether the cargo policy should cover the loss.
Data generated by smart containers will also provide insurers with further insights to evaluate price risks more accurately.
Receivers
Just-in-time inventory may become a possibility thanks to the increased door-to-door visibility. Receivers can utilise smart container data to make optimal decisions relating to warehousing, stock levels and production scheduling. This will generate savings by reducing the stock-levels without compromising the ability to meet orders.
In the longer term, analysing historical smart container data will help receivers to identify operational patterns and inefficiencies. For example, it will be possible to identify negative trends in a particular supply chain or transport route, average turnaround times or damage rates of different ports, yards and routes or haulage companies with a higher-than-average incidence of damage or loss.
Cost
A minor disadvantage is that the cost of converting such containers could be passed to the customer via price, however the benefit of tracking versus an untracked container is something the customer has considered and has therefore decided is worth paying for. In any event, the costs involved appear to be relatively modest as it has been reported by The Loadstar that equipping smart containers with tracking devices costs approximately USD 100 per container. It is likely that the costs will decrease as the technology matures and mass production would generate further savings through economies of scale.
As shown by the uptakes of smart containers in the container trade, it is in the liners’ interest to invest in these technologies to add value and stand out from competitors. Furthermore, liners also benefit from the increased visibility. The use of smart containers will help liners to better manage the repositioning of empty containers where they are needed, avoid blank sailings and reduce empty containers on deck.
The reasons for increased interest in tracking are not only commercial but environmental. The International Maritime Organisation’s (IMO) Maritime Safety Committee has identified container loss prevention as a priority. The concern is not only over the clear danger they pose to maritime safety, but also an obvious danger to the environment if they are lost.
Tracking initiative are clearly an appropriate method by which to identify and resolve the issue of any lost containers but the priority should be strategic loss prevention in the first instance.
Challenges
To maximise the benefits of smart containers, data sharing amongst various stakeholders in the supply chain is crucial. To do this effectively, standardisation is required so that data can be shared seamlessly with various stakeholders regardless of the model used.
Most smart containers are owned by the shipowners who also have control over the data. However, in the claims context, shipowners are not motivated to disclose data adverse to their interest. When dealing with reefer claims, it is not uncommon for cargo interests to face difficulty in obtaining the temperature records which are under the control of shipowners.
Cargo interests may therefore face a similar issue when trying to obtain smart container data that is needed to evaluate whether they have a claim against the shipowner following a loss. It may be necessary for cargo interests to commence legal proceedings to obtain disclosure of such data. Shippers and receivers may therefore be incentivised to collect their own data at pallet level, rather than relying on shipowners to relinquish the relevant data in the event of a fire, or damaged cargo.
Conclusion
Smart containers have a lot of potential. They can reduce time and costs incurred in relation to cargo loss/damage, investigation processes and back orders/cancellations orders due to late delivery whilst increasing cargo security. Smart container data, if utilised correctly, will increase the profitability of the consignment as well as customer satisfaction.
For further information, please contact:
Richard Allingham, Partner, Hill Dickinson
richard.allingham@hilldickinson.com
