When container shipping revolutionized the shipping industry in the mid-20th century, it was probably hard for anyone at the time to imagine what innovation would turn the industry on its head next. For the five decades that followed, very little did.
Today, container shipping lines (CSLs) operating at ports around the United States are grappling with the implementation of the next disruptor to the transportation of goods around the world: automation.
Mankind has been moving cargo over water for centuries. The efficiency of shipping cargo has always been affected by the human capability to handle cargo at the destination ports where it arrives or departs. At receiving ports, human hands have unloaded ships and controlled the flow of freight once on the dock. Transferring goods from the dock to the hands of distributors on the ground, via raw labor or gantry cranes used to lift containers from ship to stockpile, is controlled by human elements such as longshoremen and site foremen.
But in the late 1990s, automation began to creep into the shipping industry, displacing jobs in the name of efficiency, as companies find new ways to combine information management and automation to deliver reliable service at fair rates.
Whether it’s robots carrying goods from boat to processing points or enterprise resource planning systems processing invoices and billing statements in office operations, the world’s largest container shipping lines are capable of doing more with less human influence than ever before.
The ability of American shipping companies to keep up in a highly competitive industry is a major driver of change. Ports such as Rotterdam in the Netherlands have gone to fully automated processes and seen improved efficiency to the tune of production increases of 80%.
Customer satisfaction with ports lacking automation has suffered as a result. In a whitepaper from market research firm Frost and Sullivan, front-office operations ranging from order management to quoting, booking and shipping documentation were listed as areas in which increased automation in information management could improve operational efficiency and thus, make the lives of back-office administrators that much easier.
The whitepaper points to the example of booking processes full of unstructured information requiring transcription to create a bill of lading, a document with detailed information on a shipment, including ownership and receiving information. Manual transcription leads to errors, which has opened the door to competitors, such as freight forwarders who have automated the process, to take business away from CSLs as they have essentially eliminated transcription errors from the list of items that lead to dissatisfied customers.
Automation is needed in order to re-organize and streamline front- and back-office operations into a coherent structure at many ports, as well the physical operations of cranes and container stacking, to decrease the amount of time ships spend in port and increase the revenue a CSL can generate.
According to the Wall Street Journal, automated cranes and robotic cargo handlers that move containers from boat to crane loading areas are becoming more common at ports around the world, but are still relatively rare in the United States. That, however, is expected to change as American ports see an increase in demand for CSL service from international trade partnerships. For companies to remain competitive in getting goods from ship to truck bed or other ground transportation in an efficient and transparent manner will require significant boosts in productivity, something that investing in technology may provide.
Implementing automation in a port is an expensive undertaking. Incorporating the machinery necessary to fully automate a port terminal comes with a price tag ranging between $500 million and $1 billion.
In order for an investment in automation to make sense, terminals need to be handling around one million TEUs (20-foot equivalent units, the standard measurement for cargo containers) per year, according to an estimate from Priceonomics. If new trade partnerships push terminals over that tipping point, implementing automation to allow for 24-hour operations while avoiding having to pay workers overtime may be worth the investment.
Currently, only four cargo terminals in all of the U.S. use automated cargo carriers. Container shipping lines looking to automate will get a clearer view of its domestic potential to pay dividends as the Port of Long Beach in California opens a fully automated terminal.
Studies looking into automated port terminals show the need for longshore labor is reduced by 50%, effectively cutting costs and eliminating the human error and risk element.
The human cost is where things get complicated. Labor organizations such as the International Longshore and Warehouse Union, which represents dockworkers on the west coast, have long held political influence and a strong position at the bargaining table. The ILWU’s reach spans from Seattle to San Diego, thanks to a deal carved out in the 1930s that linked all the ports along the Pacific coast under one contract.
Since then, the union has negotiated deals with the ports that have allowed it to benefit from what little automation has occurred by demanding more pension benefits and free healthcare for its members when new technologies are implemented. The power the union wields is significant, as its members handle more than 50% of the cargo coming into the United States. A west coast dockworker strike lasting just five days could cost as much as $2 billion, according to USA Today.
The latest round of automation could threaten thousands of jobs, positions with significant salaries for their members that unions have negotiated. To say the least, the union will want to negotiate compensation to members who will likely have a difficult time finding other work or may resist being forced into retirement.
As unions fight with ports over implementation policies, training on automated equipment and minimum standards for man power, shipping companies themselves struggle with the amount of time it takes to see a positive return on investment from installing automated terminals.
Apprehensiveness over automation is indeed justified. In the case of Portsmouth, Va., a slow economy following the adoption of automated technology at the terminal caused poor returns in 2009, which led the CSL, APM Terminals, to lease the facility back to the port authority and eventually sell it in 2014, according a Wall Street Journal article.
Given the current trade climate, container shipping lines are likely to be looking closely at implementing automation in the coming years.
Some argue that in the long run, technology creates new opportunities and better paying jobs all around. But the short-term impact combined with the initial investment is enough to make implementing automation a daunting task for CSLs. However, in looking at their competition, it appears to be more a matter of when, not if, automation becomes a top priority.