Article 4: Port Community Systems and EDI in the future

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1 Making EDI Work in India Stephen Vincent Page 1 of 7 Making EDI Work in India A series of articles by Stephen Vincent*, from the EU-India Maritime Transport Project. In the final article of this series, Stephen looks at opportunities to integrate together the different systems involved in implementing EDI, and actions needed now and in the future. *Note: This article has been written with financial assistance from the European Commission. The views expressed herein are those of the author and therefore in no way reflect the official opinion of the European Commission. Article 4: Port Community Systems and EDI in the future Looking to the future In the first three articles of this series I have covered the basic principles of EDI. Today, in my final article of this series, I am going to look at the potential for setting up an integrated port community system in India, and also the actions needed now and in the future for India to get increased benefits from the use if EDI. Adding value and improving efficiency First, I want to emphasise that in the first three articles of this series I have been able to present all of the main principles of implementing EDI without any mention of the need for an EDI service provider or a port community system. At my first meeting with the port community two years ago, the lack of a suitable EDI service provider was raised as one of the major obstacles in implementing EDI. It should now be clear that the basic elements of the container message scenario described in the previous articles are being implemented successfully without waiting for such a service provider. So, a port community system, and the EDI service provider that would provide it, is not an essential requirement for using EDI. A port community system is all about adding value and improving efficiency, making everything easier, faster, and more cost effective. There is no need to wait for an EDI service provider. But an EDI service provider could provide many benefits to the port community, and if properly set up could reduce costs and simplify EDI communications. An integrated approach the Port Community System In Europe, where Electronic Data Interchange (EDI) has been in use for over twenty years, a further stage of the evolution of EDI solutions has taken place with the

2 Making EDI Work in India Stephen Vincent Page 2 of 7 development of port community systems. Similar solutions have also evolved in other countries. The principle is quite simple. EDI involves exchanging messages between many different parties, sometimes sending the same message to several different organisations. These data exchanges may use different data formats and data transmission methods, all adding to the complexity of exchanging information. A port community system simplifies all of this. At first sight, the solution seems fairly obvious. Why not just have a single EDI service provider for the whole port community, as shown in the diagram. Each member of the port community then only has to sort out one interface, their own interface with the EDI service provider. The service provider then takes responsibility for forwarding each message to other members of the port community, as appropriate. Port Community System Port Authority Container Terminal(s) Container Freight Stations EDI Service Provider Customs Shipping Lines & Agents Banks Custom House Agents Solutions of this type have existed in Europe for years, why has this not happened in India? There has been lots of talk about this in India, many presentations and discussions about the benefits of this approach, even several years of localised pilot trials, but still nothing is operational yet. Customs have made some important steps in this direction, but Customs only covers part of the whole EDI picture, as has been illustrated in my previous articles. Shipping agents have to exchange information with many other parties, as well as Customs. One of the major obstacles to implementing a port community system in India is the cost of setting up and running such a system. Case studies in Europe and elsewhere talk of systems costing millions of dollars and taking two years or more to set up!

3 Making EDI Work in India Stephen Vincent Page 3 of 7 In Europe the savings in time and effort can easily justify such expenditure. Time is expensive in Europe, pay rates are sufficiently high that any significant saving in time and effort can be quantified and used to justify investment in such systems. In India, the situation is very different. Computer hardware costs just the same as in Europe, but pay rates are much lower. It doesn t cost much in India for a messenger to travel from Mumbai to JNPT at Nhava Sheva carrying paper forms or a diskette, and then to wait all day to collect other papers to take back. The potential savings in the cost of people s time are not nearly as significant as in Europe. There are other advantages which result from implementing a port community system apart from savings in labour costs, but these are more difficult to quantify. With the spectacular growth in container traffic currently taking place in India, everyone could be much better prepared to handle the rapidly increasing volume of associated communications. Service to customers can be improved with more efficient handling of shipments, and with more sophisticated EDI it will become easier to implement more advanced and integrated freight handling and logistics solutions in the future. Revenue models who pays for what? So, the key to implementing a port community system is to work out how everything will be paid for. In different international ports, different solutions have been found. In Europe, for instance at Felixstowe or Bremen, the port community save enough money by using the port community system that the members of the port community themselves have paid to develop and operate the system. Other major ports, for instance Singapore, see the port community system as essential to making the port competitive, hence the port authority has set up and run the system. In India, there needs to be some agreement on the revenue model that will apply before a port community system is set up. Will the government, or the ports, pay to set up and run the system, just as they already provide the physical infrastructure of most ports? Or should the system users, the port community, pay for the system, and if so on what basis should payments be made? Should there be an annual fee, based on the size of the organisation using the system, or should there be a transaction charge on every single data transmission? Without some clarity on what payments will be expected from members of the port community, and whether they will be prepared to pay, it is difficult to move forward. Commercial services development and competition Next, let s look at the potential for EDI service providers in India. One advantage of developing systems later than other countries is the opportunity to observe what had been done elsewhere and then to develop new solutions more appropriate for India. It is important to realise that solutions from other countries cannot simply be re-used without

4 Making EDI Work in India Stephen Vincent Page 4 of 7 modification in India, there are too many differences in procedures and responsibilities. There is no standard port community system solution. Existing port community systems in other countries are generally each centred around a particular port. Developing a system for Indian ports today, it would be more appropriate to look at all of the ports in India; the solutions needed at all ports are similar, and economies from developing a single system should reduce costs. It is well worth observing the Customs model of the ICEGATE system, with a single gateway interface on the Internet in Delhi for the whole country which then forwards messages to the relevant Custom House. This was described in my second article. The danger, though, is that a monopoly develops, and it becomes difficult to get proper competitive pricing of services for customers. I have been a little concerned since I have been in India that some potential service providers may seek to get approval at high levels to operate such a monopoly, in the hope that they can make good profits from a captive market. Hopefully, if this danger is understood it can be avoided. If such a monopoly is considered, the means of ensuring proper transparency in how costs and profits are determined must be acceptable to all members of the port community. Some possible models for organising and paying for a port community system are outlined in the table. Examples of models Advantages Disadvantages Port community system, paid - Straightforward to set up. - Costs difficult to control. for by government or ports. - Benefits without costs should - May not be designed from Port community system, set up by government but paid for by users. Port community system set up and run by system users. Free competition between several commercial service providers encourage widespread use. the user point of view. - Straightforward to set up. - Costs difficult to control. - May not be designed from the user point of view. - Difficult to ensure transparency in determining charges. - User resistance because of costs. - Designed by the users for the users. - Commercial pressure to get the system and pricing right. - Commercial enterprises may be prepared to provide initial investment against later returns. - Port community needs to get together and invest. - May take time to organise and set up. - Will take time to agree how it should be done. - Will only implement services which will make profits. - Will require regulation to ensure quality of service. There is certainly a great opportunity to set up a port community system in India, but great care is needed to ensure that it really will be to the benefit of all of the users of EDI. As soon as there is any talk of requiring everyone to use a particular system, there will be well justified concerns about over pricing and inadequate service. In an ideal situation,

5 Making EDI Work in India Stephen Vincent Page 5 of 7 port community members will have a choice, and making use of the port community system must have commercial benefits to every user of the system which outweigh using EDI without the assistance of the port community EDI service provider. Strategy, leadership, teamwork and maintaining standards Over the past three years, the EU-India Maritime Transport Project has been working to assist with the implementation of EDI in India. As I have mentioned before, the problems with implementing EDI are more in management and leadership than in the technicalities of how EDI works. The role of the EU project in the implementation of EDI, particularly over the past two years, has been mainly as a facilitator of progress; bringing people together to address problems more rapidly, organising meetings, and improving communication about what is happening. The EU project has also developed implementation guides for UN/EDIFACT messages, to assist in their implementation, and these will need to be maintained and updated in the future. The EU project will end this month, at the end of December 2003, and it is essential that the momentum is maintained, and coordination continues. I would like to make an appeal for all members of the port community to work together and take responsibility for maintaining progress rather than assuming that someone else will take care of things. From the support that the EU project has received, I know that all of the key players want EDI implemented, and I hope that they will support such activities as far as they can. I would also suggest that all possibilities must be considered when looking for solutions. When looking for expertise to discuss and implement EDI solutions, the private ports and container terminal operators may also be able to contribute constructive suggestions, with their extensive experience of port operations in other countries. When considering the membership of any committees or discussion groups, it is essential to include the best expertise available, wherever it comes from. Driving changes forward a customer focus I would make a suggestion that progress should be driven more directly by the customers for EDI. The EDI core working group at JNPT, with operational level representatives from the shipping agents (MANSA), the shipping lines (CSLA), the Custom House agents (BCHAA), Customs, JNPT, NSICT and the CFSs has proved an excellent forum for resolving issues and driving progress forward. In particular, suggestions for improvements have come from the port users, the shipping agents, shipping lines and Custom House agents. Bombay Chamber has also played a positive role in supporting activities and encouraging progress. An appropriate forum must continue to operate, and leadership is needed to ensure that progress does occur.

6 Making EDI Work in India Stephen Vincent Page 6 of 7 Next steps actions needed now and in the future I would like to conclude this article by summarising a number of the most important actions which need to be addressed to accelerate the implementation of EDI. Party/Topic Customs The port and container terminals Standards EDI service provider Port users Leadership Action needed 1. Complete implementation of the ICEGATE Internet gateway. 2. Review Customs procedures, together with the port community, to minimise paperwork and achieve the full benefits of EDI. 1. JNPT to implement software for CALIND, COPRAR and COARRI UN/EDIFACT messages as soon as possible. 2. Shipping agents to implement UN/EDIFACT interfaces with their inhouse systems. UN/EDIFACT standards and implementation guides need to be maintained and updated at national level for all ports. An objective assessment must be made of whether a port community system with an EDI service provider is needed in India, and if it is needed an appropriate organisational model and revenue model must be agreed. A single EDI users association or support group is needed to promote the full implementation and effective use of EDI in India. Appropriate leadership must be decided to ensure that progress continues and is coordinated effectively. EDI can work in India, let s make it happen! I hope that this series of articles has been useful. The key message is that there is absolutely no reason why India should not get the full benefits of EDI, just the same as many ports and countries in Europe, all that is required is a little determination, practical

7 Making EDI Work in India Stephen Vincent Page 7 of 7 insight and coordination. I hope that members of the port community will respond positively to this challenge! A few words of thanks I would like to express my thanks to all of the members of the port community who have assisted me and other members of the EU project team while we have been working in Mumbai. There are many people at JNPT, Customs, and in the port community members of MANSA, CSLA and BCHAA who have provided extensive support to our activities, without whom our work would not have been possible.

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