What is Exception Management?
Exception management (also called “management by exception”) refers to the process of identifying, analyzing, and resolving anomalies that occur during the shipping process. These exceptions can include any event that changes the arrival time, such as lost containers, port congestion, or damaged goods, each of which can disrupt the supply chain. For example, let’s say you are tracking 4,000 shipments, but only 110 are critically delayed or early, and all the rest are on time. With exception management, you’d be empowered with updates or notifications for only these 100 shipments – the critical exceptions.
Effective exception management leads to improved customer service, increased operational efficiency, and lower costs. With advancements in predictive intelligence, shippers are better equipped to be proactive, rather than reactive, when exceptions occur.
What is an Exception in Shipping?
Any deviation from the original process that affects the cargo’s arrival time is an exception. It is important to note that this doesn’t necessarily mean the shipment will arrive late. A container arriving earlier than expected can present challenges to the consignor and be considered an exception.
What Causes Shipping Exceptions?
Transporting containers is a complex process with many moving parts along the supply chain. If one thing goes wrong, it can have a ripple effect on the actual time of departure (ATD) or actual time of arrival (ATA). Some common reasons for shipping exceptions are:
- Rollover – the container failed to be loaded onto the vessel that was scheduled to transport it out of the transshipment port (TSP) or POL
- Transshipment delay – the transshipment will occur later than scheduled
- Late departure – the vessel left the POL later than scheduled
- Short transshipment buffer – transshipment has a high risk of not being completed as scheduled, due to the TS window being too small
- No vessel allocation – no vessel has been allocated to load your container(s) at the POL or TSP
- Unfeasible journey – the expected transit times provided by the carrier are too short, based on Windward data and estimations
How Exception Management Works
Effective exception management is a four-step process:
- Detection: the first step in exception management is detecting when something has gone wrong. There are several ways of doing this, such as real-time tracking systems, reports from personnel, or automated alerts from software systems
- Analysis: once an exception has been detected, it needs to be analyzed to understand its cause and impact
- Resolution: after the exception has been fully understood, steps can be taken to resolve it. This might involve rerouting a shipment, expediting a delivery, replacing damaged cargo, or updating the documentation
- Prevention: depending on the cause of the exception, understanding why it happened may allow companies to prevent similar exceptions in the future
An ocean freight visibility (OFV) system that uses AI and machine learning will detect exceptions and send alerts to all relevant stakeholders. It also uses predictive intelligence to recognize trends and patterns, providing actionable insights that are used to adjust shipping strategy and avoid delays.
What are the Benefits of Exception Management?
Shipping exceptions are a reality that everyone in the shipping industry has to deal with. By managing the exceptions, companies can stay in front of the delays and provide actionable visibility to everyone involved in the supply chain.
Some of the benefits include:
- Improved efficiency: by quickly identifying and addressing exceptions, companies can reduce delays and ensure that goods reach their destination as quickly as possible. This streamlines the entire operation and maintains efficiency
- Reduced costs: when exceptions are managed effectively, they are less likely to result in lost or damaged goods. This can significantly reduce costs associated with replacements or refunds. Additionally, by updating the consignor about delays or shipments arriving early, they can adjust the pick-up time to avoid demurrage and detention fees
- Better decision-making: the data can provide valuable insights for decision-making, such as highlighting areas of weakness in the supply chain that need to be addressed
- Increased transparency: exception management often involves keeping all stakeholders informed about the status of shipments
- Enhanced customer satisfaction: timely and efficient handling of exceptions can minimize disruptions for the end customer, leading to improved customer satisfaction and loyalty.
Taking a Proactive Approach to Exception Management
Many companies remain hesitant to adopt evolving exception management trends, such as AI, enabling proactive management of shipping exceptions. Instead, they lean on traditional methods that require significant time and human resources to manually verify the status of containers with all relevant stakeholders, check for weather delays, identify issues at transshipment ports, etc.
Unfortunately, a manual approach frequently means receiving information that can no longer be acted upon. Carriers are known for their lack of timely updates, if they provide any updates at all. All the while, a container could be idle at the terminal, accumulating demurrage charges.
Implementing an AI-based solution not only decreases operating costs and manpower requirements, but also enhances the handling of exceptions. For instance, it enables the setting of different prioritization levels for each exception, allowing the focus to be on the most urgent issues first.
Additionally, these solutions include tools for filtering alerts by the reason for the delay, enabling the company to notify customers in cases of delayed, damaged, or lost cargo. By providing this advanced notice, customers gain time to make necessary arrangements, and trust in the company is increased. Another advantage of AI-based solutions is the ability to customize exceptions, setting specific parameters for what constitutes an exception, thereby reducing false alarms for minor exceptions that don’t require action.