By Dag Sundén-Cullberg, Chinsay CEO & founder
According to global consultancy IHS, the worldwide projections for shipping in 2017 are 10.3bn tonnes, a rise of 121% since 1997. The estimated value of the global commodity markets is over $8 trillion, with 90% of this trade carried by ship. Clearly, the shipping industry plays a pivotal role in helping charterers and cargo owners to optimise the optionality in their supply chains and balance supply and demand for commodities, whilst maximising profits.
There has been a steady growth in the demand for commodities, driven by booming urbanisation, population growth (primarily in Asia and Africa) and the increasing demand for goods from the middle classes in the developing economies. With world population estimated to reach 8 billion by 2020 competition and demand for resources is unlikely to slow down any time soon. This rising demand is changing the dynamics of commodity and shipping industries. Trade volumes are shifting towards new ASEAN counterparties and new dominant players are emerging, so some of the relationships are relatively new. This, together with the complexity of dealing with a multitude of country-specific and region-specific rules and regulations makes it essential to have more formalised and transparent ways of doing business. Tighter regulation of financial markets in general and of the commodity markets in particular means that being in control of and having clear visibility of trading activities are becoming not just desirable but essential. This requires fast, flexible and accurate operational systems to ensure that they get the greatest value from the supply chains.
At the heart of all trading activity are contracts and the associated documentation, which ensure that the right commodity, with the correct specifications, is delivered on time and to the right port. As it stands, the majority of the millions of contracts exchanged globally every year are created and managed using email, spreadsheets and documents stored on various systems. Ensuring that all the terms are met and contracts are executed correctly often comes down to individuals spotting errors and proactively managing them. This is a process which can be slow, laborious, and prone to error and it is, of course, made more difficult by the increasing number of contracts being exchanged.
Having manual systems and processes introduces contract and operational risks which are complicated by the shifting dynamics of the commodity markets. More and more, firms engaged in freight trading are turning to technology to help them manage these risks through greater control, visibility and company-wide collaboration, both within the organisation and with counterparties.
With increasing complexity, volumes and regulation, technology is becoming a vitally important part of being in shipping. It can facilitate the shipping industry in continuing to build on the excellent levels of service they have traditionally provided to cargo owners and charterers. While technology is not the whole answer it can contribute to secure, efficient and accurate freight contract management, bringing control and visibility to complicated and dynamic markets.
We look forward to meeting and discussing this with many of you at Smart Solutions in London on 16 June. Our thanks goes to the Baltic and Navigate Events for bringing the market together to showcase the solutions and services available.