Will Biden’s EO Drive the Digital Supply Chain?

Vector flat global transportation concept illustration. MIT Sloan Management Review.

The most recent big news in freight transportation is President Joe Biden’s Executive Order to boost competition in rail and maritime shipping, possibly setting the industry on course for seismic change.

U.S. transportation regulatory agencies have been asked to crack down on anti-competitive conduct and opaque fee structures in both rail and maritime, to drive down consumer costs and wipe out corruption. Biden asked the Federal Maritime Commission to “take all possible steps to protect American exporters from the high costs imposed by the ocean carriers and crack down on unjust and unreasonable fees, which include detention and demurrage charges.”

Some U.S. rail infrastructure is lacking. Many ports are at capacity. There is a shortage of truck drivers. The port hinterland is congested, and global shipping rates are soaring. Against this backdrop, the Biden Administration has demanded a comprehensive crackdown on excessive charges, intending to ramp up regulation and transparency. In the meantime, shippers and end-users are finding that uncertainty, risk and speculation are central to their strategies for global supply chain resilience.

The White House stated that the dominance of a few freight carriers costs American importers and exporters dearly, and that operators have extracted exorbitant rates and charged excessive demurrage and “late” fees on shipments that aren’t picked up from terminals on time. The EO could mean maritime regulators will crack down on such practices to protect American shippers and consumers.

In the transportation supply chain, it’s not so much the physical assets that are lacking, but the antiquated, siloed IT systems and processes. Thankfully, the supply chain digital revolution has been growing in presence for several years, and now it’s poised to deliver. The rise of digital freight forwarders temporarily filled the information gap, but pure data platform aggregators only analyze non-live, incomplete historical data to create rudimentary planning tools and business intelligence resources. Asset-light software platforms may be able to support some decision-making, but they lack up-to-the minute, high-resolution data accrued from active IoT sensors. 

In February 2021, I pointed out that in U.S. rail “current infrastructure has severe limitations, and old business practices cannot hope to deliver what customers now demand in the digital age.” I went on to say that “anyone who cares about the future of the railroads knows something must be done fast.”

The article highlighted the mandate of the RailPulse program, which brings together such major freight fleet owners as Norfolk Southern, GATX Corporation, Genesee & Wyoming, TrinityRail and Watco. These are big players who will be dramatically affected by the shockwaves of regulations that may follow Biden’s Executive Order. The EO could also encourage rail regulators to take up a long-standing proposed rule on so-called reciprocal or competitive switching, the practice in which shippers served by a single railroad can request bids from a nearby competing railroad, if service is available.

When developing cutting-edge IoT and AI engines for an industry like rail, there are many challenges to overcome. Sensors, device hardware and business models must be structured with clear value objectives from the start. It is not just a case of selecting hardware and hiring a team of data scientists. Developing and testing takes time. Managing version control when the whole world is switching to IoT-based, data-driven processes is highly complex.

Nexxiot CEO Stefan Kalmund believes that “IoT logistics will be won and lost on the ability to disrupt business models across multiple processes throughout a global value network, at pace and in scalable ways. This all depends upon the ability to collect and process real-time data direct from assets and cargo itself. This means what was once just an inert object suddenly comes to life as active participants in supply chain processes.”

Biden’s EO is part of a wider raft of measures meant to foster competition throughout the economy. This is a key part of the Administration’s strategic agenda and can be viewed as an acceleration event on the enablement of digital rail. If regulators demand transparency, deploying the latest in monitoring and automation technology will be no longer be viewed as optional.

Daniel MacGregor is Co-founder of Nexxiot AG. He created and built this multi-million-dollar, digital supply-chain technology company from scratch. The company, he says “has a clear focus on digitizing mobile assets like rail freight and containers to create services for smoother operations in an integrated solution.” Daniel is a leading voice in the drive for sustainability and supports the creation of standards and applications. From hardware to information distribution and business-process innovation, Nexxiot’s clients deploy these solutions to differentiate their services and monetize digital insights. The company recently established a U.S. presence.