Data accuracy is utmost critical to keeping containers and payments moving.
By Eric Johnson
If you’re looking for excitement in container shipping, documentation accuracy isn’t exactly the most goose bump-inducing topic.
But it may well be one of the more critical aspects of a shipment.
Incorrect bills of lading or other documentation can lead to over- or under-billing, customs holds, surcharges, and payment delays. Any of those can force a shipper to have to increase inventory to account for stock that’s held up.
In short, getting the cargo data entered correctly the first time is the surest way for the shipper, freight forwarder and carrier to cut costs.
Liner carriers are increasingly looking at things like documentation accuracy as ways to reduce unneeded expense in an environment where rates are barely covering the costs of operations.
For instance, MOL (America) has stepped up its pursuit of reducing documentation errors, and is now regularly reporting its performance to shippers as part of a list of key performance indicators it tracks on a monthly basis.
MOL’s goals are high – it strives for 99.5 percent documentation accuracy on its side. Considering its rate has been in the 98.5 to 99 percent range, that’s not much room for improvement.
“We thought our numbers were pretty aggressive,” said Stephen Ryan, vice president of customer service in North America for MOL. “We’ve been measuring it for some time, and the rate was pretty solid. We’ve had a good accuracy rate for a while. We wanted to make sure we could do it with confidence before we rolled out the performance KPIs.”
The errors MOL encounters typically come down to something as simple as typos during the data-entry process, whether it’s from the shipper, forwarder, or carrier side. For the purpose of its reporting metrics, MOL does not include shipper or forwarder documentation errors.
“Shipping instructions come in lot of different formats, so we do a lot of cutting and pasting so there’s no deviation from what shippers have entered,” Ryan said. “There are some systems limitations, so if we have to retype some things, there will be some typing errors. It could be something as simple as spacing.”
Another liner carrier, OOCL, said typical errors revolve around cargo weight, piece count, consignee or notify party addresses, ocean freight payment party (i.e. prepaid or collect), and which party is responsible for the charges.
“Close to 50 percent of our bills of lading have some change or amendment due to either shipping instruction error or changes made by the shipper,” OOCL spokesman Frankie Lau said. “But OOCL bill of lading accuracy is 99.9 percent as an end product released to the customer.”
Both MOL and OOCL tackle the issue of accuracy through data audits.
Ryan said MOL has set up a second layer of auditing to determine where the errors were generated.
“That second level audit team is going through the fields on the bill of lading,” he said. “We believe that second level of audit should help. Our people take it very seriously.”
He said the errors are broken up equally between customer and the carrier.
- Attempt to determine the bottom-line impact of inaccurate or delayed ocean shipping documents.
- Work diligently with primary liner carriers to understand where documentation mistakes occur and how to avoid them.
- Majority of bill of lading errors come from data entry, not incorrect information.
- Push carriers and other service providers to develop an industry-wide EDI and documentation standard.
“Overall accuracy is pretty high,” he said. “The data integrity from our customers is pretty solid as well. It’s a shared responsibility. The quality of docs we receive are pretty solid.”
Ryan said the process has not yet evolved to the point where MOL will ask shippers to provide standardized information.
“We haven’t yet worked with shippers to submit it in a more standardized format,” he said. “It’s been talked about, either through EDI or the (booking) portals. We’ve come up with some templates. But our customers use multiple carriers, so it’s a lot to ask them to use our template.”
But perhaps standardization is what the industry needs.
Brian Conrad, executive administrator of the Westbound Transpacific Stabilization Agreement, said his organization is working with its shipper advisory council to explore possible documentation and EDI standards among various ocean carrier booking portal providers, to help reduce booking and documentation errors.
He said 70 percent of WTSA carrier documents (which cover U.S. export shipments to Asia) are still being produced manually, with just about 11 percent generated through the traditional booking portals, like INTTRA, GT Nexus and CargoSmart.
“Why is that?” Conrad said. “A lack of standardization.”
Indeed, trade software developer GT Nexus told American Shipper
that data entry is the most common root cause of errors, but that missing data from smaller ports and facilities is also significant. For data flowing through its system, the errors tend to come from shipper partners, not from the shippers themselves.
Ryan said the point of MOL publicly releasing its performance metrics on documentation accuracy and other processes is to better engage shippers.
“From our side, it’s a reputation and credibility issue,” he said. “I started in documentation long ago, and it’s the last piece of the puzzle on the export side. If there are problems and errors, it delays the documentation process.”
For instance, Ryan said the documentation that supports a letter of credit has to be “very precise or banks will kick it back.”
Richard Langer, managing partner at the consulting firm Quetica and creator of Visa’s Syncada (formerly PowerTrack supply chain payment networks), agreed the impact on letters of credit is huge.
“If the shipment bill of lading documents something different than what was actually lifted or shipped in the container, it is going to create an exception and delay when making payment for the letter of credit,” he said.
Langer also noted these delays force shippers to incur higher inventory carrying costs to account for goods held up by documentation errors.
“The shipper has an expectation that a certain quantity of materials is being shipped per the bill of lading, but what was actually shipped can be different,” he said. “This impacts the inventory level and safety stock that a company has to carry to accommodate for this variability.”
Beyond simple data-entry errors, documentation can be inaccurate simply because shipment details can change from the time a purchase order is made to the time when goods are delivered.
“The booking is the least accurate because it’s like a reservation for forecasted transportation capacity, versus the actual need or demand when the shipment is actually created,” Langer said. “The bill of lading tends to be more accurate because it is based on the actual information generated based on one or more shipping requirements from purchase orders combined into a container.
“The problem is a lot shipments are containerized at the port and don’t necessarily follow the bill of lading, so there can be inaccurate dimensions, weights, partial delays, customs, etc. Generally the most accurate is the ‘lift’ information (what was actually loaded and lifted on to the vessel) generated by the carriers or port, as that was actually what was shipped in a container,” he explained
The reconciliation of this different information is where errors can crop up and delay shipments and payment.
“Open account purchases are the same,” Langer said. “Basically the purchase order is the document used to verify what was shipped. Again, what was ordered, what was on the bill of lading, and what was lifted is different. Reconciliation of these differences can create significant delay. The carrier will invoice on lift data (what actually shipped) and the shipper will match on bill of lading data and the mismatches will also cause payment delay.”
On the import side, documentation errors on the original bill of lading or sea waybill can delay the release of cargo, meaning demurrage costs can mount.
“This issue ranks very high with shippers, especially with those with original bills of lading,” Ryan said. “The quicker they get them they can go to their bank and move along without disruption with their partners overseas.”
OOCL’s system also relies on checks and balances to first determine the errors, and then find out which party was responsible.
“We have system-generated weekly reports that track documentation accuracy,” OOCL said. “Bill of lading changes are recorded as either customer-requested amendments or corrections, which are internal input errors. Internal errors are reviewed with the team for quality improvement and future prevention. Our separate auditing departments, on a spot-check basis, review rates and bill of lading release timeliness.”
If charges on the bill lading are under-billed or over-billed, the bill of lading is updated accordingly and a refund issued or additional charges collected. But errors run deeper than mere billing updates.
“Incorrect or incomplete documentation can result in cargo not loading on the intended vessel or cargo loading for the incorrect destination, resulting in re-routing costs and wasted ocean freight charges, amendment fees, demurrage or detention, or possible customs penalties,” Lau said. “If it’s a customer error or oversight, then that’s the carrier’s cost in man hours in reworking documents. If it’s a carrier error or oversight, the customer would possibly lose confidence and not choose the carrier for repeat business.”
Despite its importance, there appears to be little research on the actual cost to shippers and carriers for improving documentation accuracy. Neither MOL nor OOCL said they had calculated the cost of say improving documentation accuracy by 1 percent, while GT Nexus similarly said it was not aware of research on the topic.
“I haven’t done the calculations but it is not uncommon to have a 15 percent-plus documentation mismatch for ocean,” Langer said. “This means the cost of delayed payments for the goods and transportation charges, as well as higher inventory carrying costs because of the variability. If you think about that across the whole ocean supply chain it is significant.”
Meanwhile, Ryan said he encourages shipper feedback.
“I’m sure there will be customers who will challenge our wait times, and from my perspective, I welcome the challenges,” he said. “I like to talk to those people and identify where those problems lie. It makes us better.
“What we’re measuring is data integrity, what the customers give us and what we give back to them. Whatever they ask us to change, we will help them,” he said. “Once we start rolling these numbers out, I suspect we’ll get some customers to talk about where we might have failed them, and go over some of the challenges we have.”