This article is guest-authored by Thomas Westergaard-Kabelmann, a Founding Partner of QBIS consulting.
Until now, it’s been hard to put a finger on just how much money trade facilitation initiatives such as TradeLens could save shippers. A new study by QBIS provides new indications.
Using a recent study from the Global Alliance for Trade Facilitation (GATF) into the Total Transport and Logistics Costs (TTLC) for import and export containers transiting through the port of Nhava Sheva, India’s largest port, QBIS dove further conducted additional analysis.
QBIS estimates that improved document flows and supply chain visibility offered by digital solutions such as TradeLens potentially could save importers using Nhava Sheva up to $220 million a year and exporters up to $40 million in lower transport and logistics costs, notably from shorter lead time and less frequent delays.
Assuming similar potentials in other Indian ports as in Nhava Sheva, the savings nationwide could reach $860 million.
The TTLC is a methodology that assesses not only the direct transport and logistics costs such as trucking costs and terminal handling fees, but also the often overlooked indirect transport and logistics costs arising from delays (incl. long lead times and time variability) which translate to higher detention and demurrage charges, inventory costs, penalties for late delivery and losses from spoilage and theft of cargo. The TTLC study in India relies on interviews with 80 importers, exporters and forwarding and clearing agents.
40 percent of India’s containerized trade passes through the port of Nhava Sheva, making it an ideal test subject for the challenges facing shippers, carriers, customs authorities and other supply chain participants around the world.
Saving time on import documentation
The average time required for importers to obtain, prepare, submit and process all import documents by the authorities for finished consumer goods and machinery was 67 hours compared to 35 hours for all products in the study — and just three hours for automobile components.
TradeLens could help supply chain partners reduce average times through improved efficiency and timeliness in the creation and distribution of shared documents like commercial invoices, bills of lading and packing lists that routinely get generated and exchanged between trading partners.
Additionally, TradeLens could provide the transparency that lets importers identify opportunities to streamline their supply chain. Getting the documentation time for finished consumer goods and machinery down to the overall average of 35 hours could reduce import TTLC by up to 2 percent.
Shorter customs assessments for some products
The study found that chemicals, electronics, and automobile parts breeze through customs in 15 hours, while finished consumer goods and machinery could be in for a 32-hour wait. Customs delays are typically due to valuation, classification and forgery concerns, with regulatory authorities taking considerable time to validate the accuracy of documents and events.
Using TradeLens, customs authorities would have immediate access to secure and authentic documents and full, trusted visibility of shipping milestones from end-to-end. That could speed assessments for everyone — especially those trading general merchandise. In addition, customs could access documents up to three weeks prior to arrival, as opposed to 2-3 days, which is the average for today. If these improvements could bring assessments for general merchandise down to the 15-hour average, a reduction of up to up 4 percent in import TTLC could be achieved.
Customs inspection rates are much higher for some imports than others.
High inspection rates lead to increased direct and indirect costs. The study found that consumer goods and used machinery, particularly from China incur an inspection rate of 100 percent while the average for all products in the study was around 25 percent.
Document and transaction authenticity as well as, secure, immutable digital workflow provided by TradeLens would enable customs authorities to enhance risk-screening and thereby improve targeting and effectiveness of inspections without compromising compliance.
If risk-based inspections of consumer goods and used machinery could help bring inspections to the 25 percent average, a reduction of up to 11 percent in import TTLC could be achieved.
Faster, more frequent information could reduce high dwell times.
On import, dwell is the idle time a container spends between being discharged from the ship and loaded onto a truck or train headed for its final destination. The GATF study identified 49 hours dwell times for containers on direct port delivery (DPD) — India’s program for expedited clearance — compared with the average dwell time of 85 hours for other containers. Among others, delays related to information and document exchange between supply chain stakeholders led to high storage costs and other fees.
With faster and more frequent information sharing, TradeLens would facilitate greater accuracy and accessibility of Import General Manifests, quicker filing of Bills of Entry (BE) and faster BE payment of duties that could shorten dwell times and their related costs.
If dwell time was reduced from 85 hours to the average of 49 hours corresponding to the streamlined dwell time for DPD imports, a reduction of up to 10 percent in import TTLC could be achieved.
Some of Nhava Sheva’s export rollings are preventable.
At Nhava Sheva, 9 percent of export containers miss their scheduled vessel (they are “rolled” in industry jargon). Rollings contribute to indirect costs particularly through shut-out charges, ground rent in the container freight station and penalties for late deliveries.
The GATF study found that some of Nhava Sheva’s rollings are attributable to exporters’ failure to provide complete information or lacking contingencies that take into account deficient infrastructure along their supply chain. These failures lead to reactive management that causes its own delays and additional shut-out and ground rent charges.
If all rollings and their indirect costs were eliminated, a reduction of up to 23 percent in export TTLC could be achieved.
TradeLens would provide a shared, trusted ledger of events that could help identify shipments that are on the verge of rolling. Visibility indicators would help logistics entities proactively adjust routing, address service issues and improve inventory management.
After over two years of hard work, it’s exciting to see shippers from India, Canada, Saudi Arabia, and the United Arab Emirates putting TradeLens to the test. These leaders and their supply chain partners around the globe are leveraging the benefits of trusted end-to-end visibility of cargo movement and secure digital documentation flow — and the payoffs of streamlined processes and trade facilitation won’t be far behind.
Learn more about TradeLens in India, by contacting TradeLens Representative, David Ocholi, David.Ocholi@maersk.com or review our use cases for streamlining processes including the customs clearance process using TradeLens.
The Total Transport and Logistics Cost (TTLC) study maps all the import/export-related transport and logistics processes in a country and configures its survey tools based on these findings. Importers, exporters, clearing and forwarding agents, shipping lines and terminal operators subsequently complete surveys through structured interviews. Data are finally cleaned and analyzed before being validated by in-country experts and key stakeholders.
The cost and time estimates from the TTLC study of container traffic passing through the port of Nhava Sheva were used by QBIS to calculate the potential savings from using TradeLens to digitize supply chain events and documents in the import and export process. QBIS identified pain points that can be mitigated through a digital solution such as TradeLens and estimated the savings per container of realizing these potentials in a scenario where TradeLens is fully utilized by the trade ecosystem.