November 2000

Can the Internet bring the elusive international trading standards that EDI promised, but in many ways failed to deliver? Chris Lewis finds exciting developments, but warns against exaggerated expectations

The abiding memory of anyone who has spent time in a shipping office or export department is of reams of paperwork. Yet ironically, most discussions of supply-chain automation seem to miss the opportunity to improve this situation, and centre instead on domestic logistics operations. The potential rewards in the more complex international shipping process are even greater.

In the view of one expert, Peter Scott, commercial director of Internet trade initiative bolero.net, the Internet has the potential to shorten the traditional shipping "paperchase" from 25 days or more to 24 hours or even less.

But while the rewards may be greater, so too are the complexities of the problems that must be overcome. International shippers have to cope with many more players ­ freight forwarders, groupage operators, warehousekeepers, shipping lines, the trucking companies that shift consignments to and from the ports, the customs men and, possibly, government departments and health officials. The issues surrounding title and transfer of ownership are much more involved than in domestic logistics.

The shipping community, mindful of the fact that it was in danger of disappearing under this paper landslide, has made efforts in the past to automate at least parts of the shipping process. The industry made a brave attempt to develop Electronic Data Interchange from the 1980s onwards ­ although the system, and the "Edifact" messaging standards it spawned, never lived up to their earlier promise.

There were several reasons why EDI never quite got off the ground, according to Peter Scott ­ among them the fact that there was no proper, coordinated attempt to control the messaging standards used by companies. "Also with Edifact there had to be very complex 'mapping' tools in place to ensure that the different parties in the chain could decipher the data."

Really, EDI was dependent on closed-user loops ­ something that could be difficult to achieve given that a single shipping line, for example, could have hundreds or even thousands of customers, and each customer could use a dozen or more different shipping lines.

Yet despite the difficulties, the shipping community did do quite a lot of work with EDI, and one of the talking points in the industry is what happens to this "old" technology in the Internet age.

A kind of "crossover" of standards has been made possible through an initiative called ebXML ­a joint development by the UN Centre of Trade Facilitation and Electronic Business and OASIS, the US organisation for advanced standards. In simple terms ebXML allows the "mapping" of EDI messages on to the Internet. Bolero's Peter Scott says this does not in fact present a great problem, and indeed it can be much simpler than setting up an old-style EDI system from scratch.

One organisation that has been following ebXML developments with keen interest has been P&O Nedlloyd, the shipping giant, which has been closely involved in the work of UN CEFACT. Despite its input into this process, P&O Nedlloyd remains cautious about the potential of such "translation". According to a group spokesperson: "There will be opportunities for documents to be exchanged using these new XML standards, but it should be borne in mind that this exchange is in principle between PCs, rather than between in-house applications."

According to P&O, EDI via Value Added Networks will therefore continue to exist side by side with document interchange via the Internet for some time to come, even after the creation of international XML standards.

 

Perhaps so; but ideally the international logistics industry will need to switch to the new XML or Internet standards in the end. Peter Scott of Bolero is predictably emphatic. "We cannot stick with the old EDI standards indefinitely," he says. He recognises, though, that participants will need time to make the switch, and give the industry enough time in which to adopt consistent, uniform standards ­ in effect, avoiding some of the mistakes of the EDI era. The Edifact organisation is in fact currently looking into the whole issue of transitional standards, and is due to make its initial report next March.

People in the shipping industry are themselves convinced that XML standards are the future. "I believe that XML will become the standard method," says David Whitehead of Europe-West Africa operator OT Africa Line. A spokesman for worldwide carrier Evergreen adds that while EDI over the Internet will be the initial way forward, "XML is the future since its function is interoperability for machine and human."

The Evergreen spokesman points out also that Bolero has already drafted 54 trade standard documents in XML format, of which the BoL is of particular interest. Fully paperless electronic trade will come when all parties involved "accept and use a common, standard and Internet-based electronic format for data transaction."

It's also important to avoid forcing the pace, recognising that there is inertia and resistance to change in some quarters. "We like to employ a 'viral' marketing strategy," Mr Scott explains. The thinking is that a few successful examples of dramatically-reduced supply cycles in one industry will encourage ­ even force ­ other companies to follow suit.

Much initial thinking on the automation of international trade was centred on the production of electronic versions of the standard documents used in international trade ­ namely the letter of credit (LoC), which is one of the main methods of payment used in international trade, and the bill of lading (BoL), a document whose origins are lost in history, but which essentially proves that the goods have been loaded on to a ship.

As well as proving to the importer and exporter that the consignment is on its way, the BoL is important in that it indicates transfer of title to the goods. When the exporter receives his copy of the BoL from the shipping line, he can take it, together with the LoC, to the bank, and obtain payment, even though the goods have not yet arrived at destination.

These methods of carrying out transactions are tested by time, but they are slow, cumbersome and expensive. "BoLs have had a vital function, but in many ways they are hopeless," says Peter Scott of Bolero. What his organisation has done is to create a completely new instrument that is a cross between an electronic waybill (a waybill is essentially a ticket for freight) and a BoL. The LoC also has to be rethought. Bolero has posted on its Web site standard settlement instructions spelling out exactly how transactions can be executed, marking out the protocols of who sends what to who and so on. In fact, a large part of Bolero.net's activities have been devoted not to devising software, but to conducting the most comprehensive legal study ever of the international trade process.

Much is made of the security issue in electronic transactions, but in fact they have advantages over paper-based transactions. For instance, one party cannot deny sending a message (or pretend sending one when he didn't) because everything is recorded. Bolero is in fact operated by the same organisation that runs the SWIFT network for the banks.

Another example of this new "joined-up thinking" is in air freight. Bolero, sensibly, has concentrated on international transactions based on sea freight, but many traders use a mixture or sea and air freight ­ along with road and rail.

The air freight industry has in general never had the equivalent to a document of title like a BoL; the commonly-used document, the airwaybill, is simply the freight equivalent of a ticket. This is mainly because air freight moves too fast for a slow-moving paper document to be of any use. But, Peter Scott says, "we're finding that Bolero could work very well in the air freight environment as it could give more control over how goods are released."

Will all these initiatives ever result in a truly paperless international supply chain? P&O Nedlloyd for one has reservations. "Truly paperless shipping, like paperless international trade, is still an illusion for the majority," its spokesperson told us. The company points out that the authorities in many countries still require all sorts of documents to be provided in an authenticated and signed paper format. Many customers and financial institutions take the same line, it adds.

Nevertheless, like many organisations in this field, P&O Nedlloyd is already moving steadily towards a world of online transactions, and says it attaches great value to the work on global trade facilitation. And that perhaps sums up the current position in this complex market. There will be no quick fixes, but the move towards automation is now well under way, and can only gain strength over time.

The Bolero XML initiative is a cross-industry standard that allows all parties involved in international trade to interact, seamlessly and securely, using standards that are simple to use and implement. These are all criteria that existing data interchange standards are considered to fail to meet.

Bolero has seized the initiative by developing a set of simplified electronic trade document definitions known as Bolero XML document definitions (BXDD). Over 70 definitions are being released, representing the most widely-used pieces of paper in international trade ­ items such as purchase orders, commercial invoices and packing lists. Around 50 had been released as of October, and a further 20 were expected by the end of the year. The organisation has also set up a discussion forum to ensure that the definitions meet the needs of the world trading community.

Bolero has also developed an "Analyzer" software application to provide a non-technical presentation of the BXDD definitions in Microsoft Windows.

Bolero has elected to base all definitions on a single common business model, and has decided to limit their scope to a core 80 per cent that it says all parties can agree on. It also distinguishes between automatable and non-automatable information. The former, if properly structured, could be used as the basis for automated processes while the latter would still require human intervention. It will also adopt "best of breed" from existing EDI standards.

Bolero has also outlined its development and ratification process. This starts with preparation of a draft definition, which is then made available to the Bolero community and then "validated" through Bolero's validator. This allows Bolero to support ongoing electronic trade implementations, in advance of the document's final ratification by the community. Comments are solicited through the discussion forum and through other correspondence channels, leading, eventually, to agreement and release of a "final" version. The latter is not completely irreversible, although any changes will be subject to the full process again.

There is also a "fast track" process which allows trading partners to develop a document definition quickly. This is validated only by the parties directly concerned; then the full validation process follows later in the normal way.

The organisation fully accepts that there are scenarios that BXDD will not support, and to cover these it has developed the concept of "private extensions" that, subject to certain rules, allow users to extend the standard information provided by BXDD. This is an important difference between BXDD and EDI, which suffered from trying to be too inclusive.