How to adopt cloud computing in freight forwarding
By Henry Huang, Hong Kong Computer Society 13-Aug-2012
Freight forwarders or NVOCC (non vessel operating common carrier) have to overcome a lot of challenges. It isn't just about the EURO debt crisis and the global economy issues, but also about the higher fuel surcharge, inflation and exchange rate which significantly increase overhead.
International trade regulations enforced in the past 10 years have also brought challenges. In 2003, the US Customs Security implemented the Automated Manifest System (AMS), followed by the Importer Security Filing (ISF) in 2009. In 2010, the EU implemented the Advance Cargo Declaration (EU24), and in January 2012, the Chinese government enforced the Value Added Tax (VAT) policy, selecting Shanghai as the first pilot city.
"Information security is still the critical factor to decide whether a freight forwarder should adopt private or public cloud."
-- Henry Huang, Hong Kong Computer Society
Customers are looking for better services embracing rates, information delivery and total supply chain solutions, which span from traditional export and import handling, logistics planning and repacking, warehouse and inventory management, customs brokerage to order management services.
Freight forwarders commit to deliver business needs and supply chain solutions in different countries to maintain service level consistency. Inevitably, these solutions will require information systems enhancements or upgrades to comply with legal requirements within limited time. Therefore, they have to formulate a longstanding IT strategy to allow the corporate information systems to react promptly to new business requirements.
Cloud services adopted
When freight forwarders plan to incorporate cloud services in their IT strategy, they will typically consider these issues:
- How to integrate with the existing business applications?
- How to manage business requirements in different countries?
- How can freight forwarders share information flexibly and promptly?
- How can IT resources be used across multiple platforms?
- Which cloud model should freight forwarders use? Public or private cloud?
First priority: Infrastructure-as-a-service
Most freight forwarders have their own offices operating in different cities or countries to manage their own cargo movement for end-to-end logistics solutions. They have defined the standard operation procedures to collaborate trading partners consistently.
Freight forwarders would normally choose to implement infrastructure-as-a-service (IaaS) first. Because IaaS can be achieved through consolidating the same IT infrastructure from their physical server environment to a virtualized platform. This enhances the system availability and reliability. In terms of system recovery policy and measures, IaaS provides a firm recovery capability from "days" to "hours," minimizing the impact on daily operation.
Virtualization is one IaaS solution that allows freight forwarders to set up private clouds by regions (depending on the budget and expertise) so as to build a robust IT infrastructure and reduce maintenance costs. It is also a strategic decision to select the best location(s) to achieve service level commitments when taking into consideration different time zones.
Figure 1. Private cloud setup in two major regions
Figure 1 above shows the private cloud setup in two major regions. Private cloud A is set up in North America to server the offices in North and South America. In Asia, another private cloud is set up in Hong Kong to serve the offices in South East Asia and China. For smaller offices with limited human resources and office spaces, they will not need to own their IT facilities. Instead, they will be able to connect remotely to the regional private cloud to process and document transactions.
From a corporate IT operation point of view, virtualization can flexibly allocate resources to meet the requirements of office dynamics, such as office relocation and office expansion. When business requirements change, virtualization helps maintain the reliability and scalability of IT resources. As such, the IT staff in remote offices can focus only on maintaining a stable internet connection, which requires much less IT support. As for regular IT security practices, such as deploying server patch, it will become an easy task for the technical service teams to schedule a regular server health check and maintenance.
Concerning IT management, virtualization also offers freight forwarders prompt response on delivering any special cargo project to be carried out within a short period of time, as it is only valid for a limited period according to the commercial contract. It is definitely a cost saving approach to the company without investing unplanned IT resources in the budget year.