Looking back to when digital processes started taking hold in shipping
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FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.
In this week’s edition from the August 1982 issue, we step back in time to when shipping first began to handle paperwork electronically.
Electronic paperwork
Computerized tariff systems hold the promise of long-term cost savings to users, which can be achieved only if the minimum requirements of the shipper/user are met by a system that:
Does not require skilled computer personnel;
Allows clerical staff rather than highly trained freight clerks to select the correct bill of lading classification;
Presents timely and accurate historical, current, and forthcoming rates;
Eliminates reliance upon carriers and freight forwarders to calculate freight charges or freight bill auditors to determine freight overcharges; and
Feeds internal corporate systems to accelerate invoicing, auditing, accounts payable, and other accounting functions.
Manalytics recently performed a study for six major shippers to determine the technological, operational, and economical feasibility of developing and operating a shipper-oriented, shared-user, ocean rate information service.
The study located and evaluated 13 companies purporting to offer or having the capability to develop a computerized rate retrieval service. The computerized tariff services operate on a variety of computer systems from as small as the IBM System/34 and Univac 90/30 for stand-alone systems to as large as dual IBM System/370-168 computers for time-share systems. There were still batch systems operating on elderly IBM System/360 computers.
Basic approaches
There are several basic approaches to developing computerized tariff systems. These vary in terms of carrier or shipper orientation, the basic software/hardware configuration, the level of automation, and the scope of service.
All of the rate retrieval systems are carrier-oriented in that they provide complete tariff information about all the commodities within a given tariff. Carriers are interested in knowing the rates their competitors are charging for every commodity in their tariffs. Shippers are interested only in rate data for the specific commodities they export, but they want the data from all the tariffs they use. The voluminous carrier-oriented files combined with the sophisticated retrieval and rating routines required by shippers could lead to expensive systems without significant cost advantages to either shippers or carriers.
Generally, the rate retrieval systems are configured about one or more large mainframe computers. Access may be in either interactive (real-time) or batch mode.
Levels of automation and thus scope of service vary between systems. All existing systems, however, require skilled tariff analysts to identify the correct tariff, access the correct bill of lading classification, retrieve the associated rate and information, and calculate the shipment charge.
Interactive systems
The interactive systems have four basic software characteristics, with increasing automation and service:
Word processing systems;
Word processing systems with keyword access capability;
Condensed databases with custom software; and
Condensed databases with new database techniques.
The most widespread and least automated approach stores and retrieves tariff data in a word processing system environment. The total tariff page is usually stored, complete with punctuation, without regard to specific data fields. The word processing environment requires large storage capacity, and the systems in place operate on large IBM mainframes with extensive disk storage.
Since it does not fully automate the retrieval function, it still requires interaction by a rate clerk to select the desired tariff and the correct bill of lading classification for each shipment. It does, however, provide electronic access by computer terminal to a tariff page, which eliminates a great deal of the library function and of the associated paper handling on the part of the subscriber. Not only do automated tariff users have faster access to rates, but they realize cost savings through the elimination of tariff subscriptions and the subsequent manual filing and retrieval costs.
Key words
More sophisticated word processing software can recognize keywords, which permits commodity access by generic terminology as well as by tariff item number. Generic access allows users to retrieve all tariff items that comply with specific naming conventions.
For example, the software can recognize the word “resin” and return all tariff items in a specific tariff using that word in the bill of lading classification. One approach to developing a tariff retrieval system in a word processing environment is being considered by a large publishing company that is evaluating the development of a tariff system utilizing sophisticated typesetting and retrieval software already in-house. This system could also operate on a large IBM mainframe.
Access by tariff item
A further enhancement of the word processing environment could build a database of only rates, surcharges, and pertinent rules that can be accessed by tariff item number. This enhancement reduces the storage requirements and speeds retrieval but has the same limitations of the word processing environment, vis-a-vis automation. There is little advantage — only in the reduction of time (and cost) — in substituting an electronic library for a paper library.
FMC’s manual system
While these word processor systems fall short of the shipper requirements, they offer opportunities to carriers who wish to have electronic access to their own and their competitors’ complete tariff data and who are not so concerned with automation.
One benefit of the word processing approach to carriers and conferences is the electronic tariff page mailing service provided by Computerized Shipping Services Inc. utilizing Microcom microcomputers and a sophisticated printer at the offices of the Federal Maritime Commission. However, even this excellent approach to a segment of tariff automation is stifled short of its natural and beneficial goal by the manual filing system of the Federal Maritime Commission. The benefits of electronic mail are not matched by electronic filing at FMC.
Inadequacy of custom software
Manalytics evaluated small proprietary tariff systems managed by custom software. There was little potential for expanding these systems since the custom programs severely limited growth. Implementing a new tariff database system of the magnitude required by a full range of tariff users was economically unfeasible using custom software.
Database systems
The only economical approach was to base the system upon modern sophisticated database management software available from any one of a number of vendors.
Recently, the TRG, Washington Group, has converted their manual tariff-watching service to a computer using this approach. Today, TRG offers an electronic tariff surveillance service, which can be accessed by computer terminals anywhere in the world.
Major transpacific import and export tariffs are currently electronically available, and additional tariffs are being added on a trade-by-trade basis. Manalytics observed the system in operation at the offices of a major transpacific carrier and found it a valuable tool for the carrier to conduct rate analysis of his and competing carriers’ base rates and surcharges. The TRG system is operating at a time-sharing facility using dual IBM System 370/168 computers. The database management software is called ADABAS.
Need for automated rating
Shippers require a database of rates, surcharges, and pertinent rules. However, they require more sophisticated access to allow retrieval by computer terminal operators unskilled in either tariff analysis or computer operation. They need automated rating, not just rate retrieval. Further, some shippers require access by their in-house computers.
Operators
The approach was to develop a procedure by which the tariff rate and pertinent charges could be retrieved by the shipper’s product codes. In other words, the computer terminal operator or the retrieving computer itself would have to know only his own familiar internal product code to access the correct bill of lading classification in any tariff between a given origin and a given destination.
Managers
Skilled rate people would still be required in the operation, but only at managerial levels to control the linkage between product code and tariff classification. The shippers require secure control of this linkage and the exclusive right to change the linkage between a specific product code and a specific classification within a given tariff should a rate change or addition favor another appropriate classification.
Through software and hardware security, this exclusive control can be placed in the hands of the key manager within the shipper organization.
In order to determine whether or not an advantageous rate differential exists for a specific classification within a tariff, the shippers require two more attributes from an automated rate retrieval system:
The ability to electronically browse through public tariff data; and
Electronic notification of any changes or additions to a tariff.
Access via keyword or tariff item number to the public tariffs, as opposed to the subscribers’ private files containing product code tariff item linkage, must be provided to the user. Updates to the tariff file must be transmitted electronically on a daily basis to each subscriber according to the tariffs and commodities (not just commodity codes) they want watched.
Selection of carrier
Shippers require the system to provide them with enough information to decide between alternative carriers (or conference and independent carriers). This requirement will be met if the system provides the base rate and surcharge data for each tariff filed (and linked to the subscriber’s product code) between two geographic regions. If so, only the product code and the origin/destination ports are required to be input to the system to return the necessary rate information required for carrier selection.
Once the carrier is selected, the shippers require the system to calculate the freight charge, including port charges to the account of the cargo. The computer terminal operator or the inquiring computer should be able to input only the key shipment parameters (product code, weight and measure, value, packaging information, ports, date of shipment) for the system to calculate the total charges for the shipment. This pre-audit function provides accurate cost data for document preparation, invoicing, and freight payment.
Telephone hot line
No computer system can be expected to understand all of the complicated tariff nuances, especially when one considers some of the more complicated tariff terms and conditions. Therefore, any computerized rate retrieval system should be supported by a staff of competent and knowledgeable tariff analysts. Through the use of a telephone hotline, users must be able to contact an analyst who will have access to the printed pages of the electronically filed tariffs to discuss any aspect regarding the application of a specific classification or the calculation of any charge or surcharge.
The elements of an automated rate retrieval system are necessarily complex since sophisticated shippers require a system compatible with their own sophisticated internal systems. Simply replacing paper with terminals does little to assist potential shippers who are already competent users of today’s computer technology. It is important that vendors understand these requirements and that shippers make sure they are met by any system under evaluation.
Clearinghouse at FMC?
The Shipping Act of 1916 requires that tariffs be filed at the FMC. Whether or not this provision will be withdrawn as part of the forthcoming Maritime Regulatory Reform Bill, the needs of the shippers to have access to accurate and timely rate data will not change. The data will still be required.
The data probably will continue to be filed at the FMC as before and available to anyone who wishes to collect copies of the 1,500 changes filed daily at the FMC. The shippers still require a system to provide them prompt knowledge of those changes, unskilled access to the rates, and a fully automated rating system.
If the data will no longer be filed at the FMC, the carriers will still be required to publish their rates, but the central clearinghouse function performed by the FMC will no longer be available. Then, not only will there be a need for an automated system to provide rate data, but there will be a need for a central clearinghouse as well. Manalytics believes that tariff users should take this opportunity that any alternative to the manual filing system at the FMC be electronic. There should be an electronic clearinghouse in place even at the FMC.
The first vendor to offer shippers a truly automated, shared-user, shipper-oriented rating service will be warmly met.
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