Ports can now lead the digital revolution in trade and logistics

PORTHINK, the only Latin American media outlet present at the World Ports Conference
2024 held in Hamburg from October 8 to 10, exclusively interviewed Mr. Vineet Malhotra,
Co-Founder and Director of Kale Logistics Solutions, a technology company for trade,
logistics and ports based in India.

How does KALE view the evolution of the different markets for Port Community
System (PCS) and Maritime Single Window (MSW) technologies in the continents
where it participates?

It is a very interesting question, since KALE has been in these markets for the last seven
or eight years when we started our first PCS projects in India, but there are 5,000 ports of
all sizes in the world, the vast majority of which do not yet have this type of technology at
the service of their trade communities and logistics operators. We could say that PCS has
been a European phenomenon, where we find ports such as Hamburg, Rotterdam or
Barcelona, ​​with PCS projects since the end of the last century, with more than 30 years of
maturity. Our estimate is that around 100 ports in the world have technologies at the level
of a PCS, which reflects that there is a large market to be developed on all continents.

We believe that there are a number of factors that are allowing these business concepts
and technologies to gain strength at a global level. The first and most obvious is that there
is per se a market with still a low development, and therefore technological providers such
as us are very interested in addressing it in a systematic and professional manner. As
KALE, for example, we have around 40 active projects between PCS and MSW in various
ports around the world.

The second is that the Internet and telecommunications networks are much stronger today
than they were 15 or 20 years ago. The greater the connectivity, the better the prospects
for transactional and collaborative technologies such as PCS and MSW, and this means
that ports that previously had difficulties can now have these technologies, such as where
island countries in the Caribbean and Africa already have PCS.

Thirdly, there is a re-boost of global initiatives from the IMO with maritime single windows,
the WTO with foreign trade single windows and most recently the World Bank with the
recent report on lessons learned from PCS projects, which disseminate recommendations
on best practices for harmonizing documents, processes, technologies and business
models based on public-private partnerships to implement digital platforms.
And last but not least, general digitalization is an issue that arises in the post-COVID era
and is on the minds of most senior executives as the way forward. So, given all of this, I
think we have a lot of supply and demand momentum in this market, which is reflected in a
number of proofs of concept that KALE is currently involved in.

Going back to that last point, how does KALE approach business opportunities with
its clients? How are new projects promoted?

I think we have a very unique way of approaching these types of technological projects
because the concept is relatively new in much of the market. We usually do a very quick
feasibility study, where we simply identify whether it is feasible to go ahead and size up the
potential impacts in terms of a business case. As a second stage, we move forward with
what is called a Proof of Concept in collaboration with the port community. For example, in
Bogotá Colombia, we have begun to work on a project with El Dorado airport, which in the
future will become its Port Community System platform adapted to the air cargo business.

Proofs of concept move forward with the definition of scopes regarding which documents
to exchange, what kind of information, and which public and private actors should be
better synchronized. These steps are fundamental, because it is not only about
technology, but also about intelligently combining change management actions.

One of the aspects that accompanies PCS projects in ports is the choice of an
appropriate business model that leverages economic sustainability. How does KALE
address these types of challenges?

Indeed. The organized port community and/or the corresponding port authority needs
certainty regarding the investments and expenses necessary to sustain a PCS project and
its subsequent continuity of services over time.

In our experience, KALE has on certain occasions assumed the initial investments to start
PCS projects, which are subject to future recovery based on income from the collection of
fees from logistics operators and/or foreign trade users. The important thing is to
understand that the investments during the life cycle of the project to improve the
technology are made by the technology provider, with the objective of keeping the PCS
functionalities up to date for the user community.

The above scheme leads us to comment that a PCS project requires a long-term contract
or concession between the port authorities and the PCS provider. In this regard, there are
different public-private partnership schemes for construction and operation, which must be
adapted to the legal and operational reality of each country and region.

For example, we have experimented with financing models based on the fact that port
stakeholders, shipping lines, terminals and other private parties can pay a small fee, which
is decided in a transparent manner based on the benefit they will obtain. In addition to this,
our model can also consider that part of the income be returned to the port.

If preliminary studies find significant benefits for direct users of foreign trade such as
importers and exporters, a PCS fee associated with transactions such as containers or Bill
of Lading (BL) could be suggested.

What suggestion and approach do you think could mean an increase in the adoption
of PCS projects in Latin America?

The region has a large number of ports, many of them small and medium-sized and with a
multipurpose category, where cargo in containers, liquids, solids, machinery, automobiles,
etc. are transferred in the same facility. In addition, they generally have a low budget for
new investments in infrastructure or digital transformation. The challenge is to identify the
potential of PCS in a business case and, depending on this study, define a realistic
schedule and a legal proposal that ensures protection, either in a direct deal or a tender,

and that allows the PCS provider to invest at the beginning for its implementation, helping
the port financially, and being a strategic partner in the medium and long term.

The value of the PCS in use for foreign trade is a very marginal logistics cost item, which
can range from 5 to 20 dollars per container, granting in return total transactional control
over operations, and with the potential to improve productivity by favoring decision-making
in an informed and transparent environment.

The last question is what ideas from this conference does KALE take away to work
on its technological solutions? For example, the benefits of using artificial
intelligence within technological solutions and environmental impacts.

I think this is a very unique conference where both directors and executives from the port
industry as well as suppliers meet. It is difficult to find in the world a meeting of so many
people in one place at the same time, listening to and analyzing many proposals and
lessons learned from different places around the world.

This allows us to gain a perspective of what is being thought and in particular regarding
the journey of digital initiatives that are undertaken from different ports around the world,
where knowledge, awareness and understanding of how technology helps operational
productivity is growing.

From a trends perspective, there is obviously a lot of debate about the use of Artificial
Intelligence. We are also investing in it, but I think that people are still not very clear about
how it could help them. For example, the development of prediction functions or solutions
along the port logistics chain is something absolutely necessary and whose usefulness is
only recently being discovered. This is being made possible thanks to the fact that systems
such as PCS have the capacity to accumulate a lot of information, a fundamental aspect
for applying artificial intelligence and generating these operational knowledge or insights.

Another different area of ​​data is related to compliance, in which very interesting things are
happening. New technologies can ensure whether compliance in a transaction is
appropriate, and from which a series of cost-generating tasks can be released.

Blockchain-based technologies ensure this type of functionality. At the level of maritime
single window solutions, our studies and projects aim at substantial improvements in the
productivity of maritime interface operations in ports, eliminating unnecessary paperwork
and physical documents in a digital, safe and efficient flow, significantly impacting ship
waiting times (up to 25% less time), saving fuel and extra costs associated with low
productivity.

The above can be classified as sustainability benefits that PCS and MSW deliver to the
operational functioning of ports. The final message for port communities is to understand
that the port business is not only about moving cargo, but that the port must also facilitate
the exchange of information. That is why the role and leadership of local or national
authorities is essential to enable ports to advance in the development of PCS and MSW
services, intelligently regulating this market and allowing end customers to enjoy these
digital benefits in the short term, with greater productivity and competitiveness.

Thank you very much, Mr. Vineet Malhotra, it will be until the next opportunity

By: Porthink