The cost of physically moving a container is less than 50% of handling the information related to this transport. Improving information flows can reduce the cost of trade for shippers as well as for carriers.
A very fragmented and grossly ineffective information exchange infrastructure is costly and risky for Maersk Line customers.
Thomas Emil Jensen recently did an industrial PhD study with Maersk Line IT. He counted 30 to 40 “different actors” involved in trading avocados from Kenya to Netherlands, all exchanging information with each other. The high number surprised him, since global trade usually is considered to involve mainly the importer and exporter.
“The physical transport of the fruits and vegetables is a chain of various processes with different means of transport and barriers by authorities. Some of the reasons for the variation in lead time are error prone information, missing communication, and lack of coordination due to lack of precise logistic information,” reads the paper, titled “Avocados Crossing Borders: The Missing Common Information Infrastructure for International Trade.”
Fragmented landscape of information
Jensen, who wrote the paper with co-researchers Professor Niels Bjørn-Andersen, and Ravi Vatrapu, collected data in Kenya and Netherlands where there are 300 Dutch importers.
Aside from barriers in moving the goods from one place to another, Jensen et. al said the “information and documentation” in exporting fruits and vegetables from East Africa to [the] European Union (EU) “shows a fragmented landscape of information and documents.” This ranges from telephone calls, faxes, e-mails to physical papers.
“Lead time is critical for movement of fresh fruit and vegetables from farmer via exporter to importer and to the consumer. Too long lead time decreases the quality of the fruit and vegetables. This makes the business risky for the importer who might lose a shipment with several containers of fruit and vegetables (e.g. a shipment of five containers holds ½ million avocados),” the study continues.
“Green corridor” in East Africa
Based on their findings, they suggest the implementation of a common integrated information infrastructure (a Shipping Information Pipeline) which could “significantly contribute to reducing costs especially by speeding up processes, by providing transparency in the flow and reducing the lead time for international trade of fruit and vegetables.”
As part of a larger effort aimed at improving the overall trade environment in East Africa – a project sponsored by the Group Sustainability Council and Maersk Line in East Africa –the concept of a green corridor for perishable products from East Africa to Europe is being piloted.
In practical terms, this means enabling all actors in a flower trade lane from Kenya to Rotterdam to exchange digital information and thereby bring down the administrative costs of trade. If successful, the pilot will demonstrate the potential impacts of reducing administrative barriers to trade in an economy like East Africa where the costs of trade far exceed those in other, more developed economies.
“Initiatives that can help reduce the costs of trade in a developing economy like East Africa are important for the continued economic development of the region,” says East Africa Cluster Top Steve Felder. “By collaborating with customers, authorities and other organisations on a green corridor solution we have the potential to help our East African customers become more cost competitive and, down the line, contribute to the continued growth and resilience of the East African import and export business.”
Author: Henrik Hvid Jensen, Senior Enterprise Architect, MLIT Technology Innovation