The digital imperative — an interview with Bryn Heimbeck

Bryn Heimbeck has long been a proponent and participant in the digitalization of international shipping. And few in the industry have contemplated and deliberated more on the digitalization of the supply chain more than Heimbeck. And in many ways the digitalization of international commerce has been both a passion and a career. In 1997 he co-founded Issaquah, Washingtonstate-based Trade Tech Inc., a company specializing in cloud-based solutions for international logistics.

Although over the last decade the supply chain has made great strides in digitizing its processes, the industry still lags behind other sectors like FinTech in adoption of cloud-based digitalization.

Machine and Man

But ironically for a technology based on sameness and handling repetitive tasks, digitalization means greatly different things to different people. In a conversation with the American Journal of Transportation (AJOT) Heimbeck was asked “What’s your version of digitalization?” His answer was a nuanced explanation of how digitalization fits in the succession of industrial revolutions, “Mechanization of a “service” delivered by humans. It's exactly the analogy of producing products that used to be made by man, by hand, and [later] replaced by machines in the first, second, and third industrial revolutions. Doing that for services has been elusive until now.” (Editor’s Italics)

The “now” Heimbeck is referring to is what has been dubbed the “Fourth Industrial Revolution” — the integrating of digital and physical technologies based layered with new wrinkles such as IoT (Internet of Things) and AI (Artificial Intelligence).

And “services” particularly as they relate to international shipping and the supply chain are all the “backroom functions” necessary to satisfy the regulatory and procedural information enabling the movement of freight, such as a Bill of Lading (BOL), customs forms along with payment information and other related documents. These backroom functions have always been a vexing activity fraught with potential errors largely introduced by the human hand.

But as Heimbeck explains by using digital computing, “the outcome will be far more efficient, far more consistent, far more predictable. The outcomes will be exactly what man realized by moving to machines in the production of physical goods. We will get services that are equally efficient, consistent, and predictable. And the reason that happens is because software behaves just like a machine…. Humans are unpredictable. We're creative…. Our sense of what's right varies person to person and situation to situation. Not so with computers, not so with software.”

Heimbeck views the three exemplary skills that a computer exhibits as “memory, math and following a defined set of processes.” And additionally, the computer has the ability “to exploit these skills at inhuman speed.” As Heimbeck remarks, “Humans can't even begin to keep up…. Humans don't split seconds. We split hours.”

And as the old adage goes, ‘time is money’ and the demands for accuracy and speed in international trade transactions is placing a greater burden on the systems keeping the supply chain intact.

The Digital Imperative

Currently the supply chain is experiencing multiple forces that are pulling and stretching it beyond anything we have experienced. Geo-political forces like the tariff blitz, and ongoing trade wars paired with an emerging tech environment punctuated by the emergence of AI, are testing the capacity and strength of the supply chain.

When Heimbeck was asked by the AJOT if this current international trade eco-system calls for a more aggressive approach to the digitalization of the supply chain, he answered a resounding “YES”.

As Heimbeck explains, “Where digitization really kicks in is that memory, math, and following a logical pattern… [And] when we apply that to this growing complexity of regulations, regulations play off the word rule. There are a set of rules relative to the application of tariffs. [Computerized] Systems …. follow rules better than humans. They can do it faster because they have better memory, and they never make mistakes in math.... That’s where digitization really is going to kick in. The more complex the rules become, the more that the playing field shifts towards the machine, and away from the human doing it manually.”

Customs and the 24-Hour Rule

The various customs authorities worldwide are the prime architects and administrators of the regulatory system in international trade. And equally have a major voice in the digitalization process. While there are inputs from the industry, the regulatory authorities often take the lead as Heimbeck illustrates, “An example would be implementing …. a national freeway system, but at the same time putting in place a regulation that said everybody in the United States must drive on the right side of the road…. That regulation is what gives us the efficacy of the freeway system. Without that regulation, we'd have chaos…”

US Customs and Border Patrol (CBP) has pushed for the adoption of “automation” in filings and digitalization is the next logical step. And the CBP has the built-in tools [and more importantly the authority] to speed up the adoption of digitalization process.

Back in 2002 the CBP implemented the so-called “24-hour rule” requiring ocean carriers and NVOs with ships destined for the US to electronically submit detailed cargo manifest data at least 24-hours before the cargo is loaded. The rule was part of a number of security regulations like Importer Security Filing (ISF 10+2) compelling the submission of accurate data from the shipper/consignee on cargo descriptions, weights, and container numbers. The security regulations were rapidly implemented by Customs and adopted by the trade. And Heimbeck believes this precedent could provide a blueprint for digitalization of the trade.

As Heimbeck explains, “You could argue, what's the precedent for that? And my answer would be the 24-hour rule. When we determined that we needed to have knowledge of the shipment before goods onboard the vessel for a national security function, customs put the 24-hour rule in place and said, "If you don't meet my requirements, you may not put the cargo onboard, and if the carrier does put the cargo onboard the ship, that ship will not be allowed into our ports, period.”

Advancing the Process

From Heimbeck’s perspective digitalization of the supply chain begins with customs as they are the informational and regulatory hub from which everything else can be distributed. And as Heimbeck says, “And let me just point out, you cannot continue the supply chain movement until goods are customs cleared. That's a hard stop. Not cleared, no go. When we remove that hard stop, we immediately pick up efficiencies.”

But the great barrier to digitalization and the creation of greater supply chain efficiencies is the data siloes that exist within current shipping practices. And the fastest way to eliminate the siloes is to bring Customs into the equation.

What Heimbeck would like to see is all the shipping data forwarded five-days before vessel arrival in the US followed by data sharing among all the parties. As Heimbeck outlined from previous experience, “Customs can push [this concept] forward. They can project our regulations across the ocean when they decide that it's in the nation's best interest. If they followed that same precedence and said it's in the nation's best interest that the cargo also be customs cleared prior to that vessel's arrival, we would see the market respond. The market would find a way. They did the last time in very short order. The market said it would be impossible prior to 2002. When the market found out that it was a requirement, they were in full compliance by May of 2002. [It] took them six months.”

With CBP backing, the initiative would go global. Heimbeck has already seen this happen with the 24-hour rule and with a 5-day rule, “Every large importing country would adopt a best practice because they face exactly the same situation.”

Admittingly, with the current anti-trade political climate an initiative like Heimbeck’s 5-day rule is not likely to happen soon. But the logic of creating a more efficient system of processing international freight merits at the very least discussion. Because ultimately the greater efficiencies in the supply chain will be reflected in savings in everyone’s wallet.