Like many documents in the freight and logistics industry, bills of lading (BOLs) are traditionally transferred using printed hard copies. But with so much of the supply chain going digital, experts are starting to wonder if the industry is ready to take the plunge into paperless BOLs.
Let’s explore where we stand now and where we’re headed in the future in terms of paperless bills of lading.
What is standard practice now?
Currently, the standard practice for managing bills of lading is something of a hybrid model.
Moving in step with digitization elsewhere in the supply chain, a significant portion of the industry utilizes electronic data interchange (EDI) technology to issue and transfer bills of lading.
EDI is an intra-company communications system that standardizes forms and practices for transfer. This technology is nothing new — early versions were introduced in the 1970s — and it’s common practice for handling several transactions, including:
- Payment transactions and receipts
- Purchase orders
- Acknowledgment of POs
But there’s a catch. For a BOL to be legal in many countries, it needs to exist in hard copy, even if a digital copy already exists. A paperless BOL document created and shared via EDI is not legally a “bill of lading” until it’s printed — so even digital “paperless” BOLs require a physical record to be valid.
This regulation leaves shippers and carriers to manage a two-step process, where digital solutions are used to track documentation for transfers and even create BOLs, but those BOLs must be manually confirmed, printed, managed, and stored for legal purposes.
To get around this hangup, some firms agree to use software solutions to handle transfers within a specific set of rules and with the express understanding that the validity of approved documents won’t be challenged. This skirts legal requirements but leaves both parties open to potential problems if the rules are not closely followed.
The challenges of paper bills of lading
Why not just stick to the old tried-and-true paper transfer method? Unfortunately, paper bills of lading have presented challenges in freight billing for years.
Paper bills of lading can be forged or stolen by unscrupulous parties. They can arrive behind schedule and independent of the load, creating problems for delivery at the arrival port. Perhaps the most common issue is one of simple human error — when a BOL is filled out incorrectly or goods aren’t described correctly, disputes arise. Disagreements between parties slow down the transfer of goods, hold up customs, and sometimes require resolution in court.
It’s no surprise that many argue that the future of the industry is “fully paperless trade” powered by technology like blockchain.
Entirely paperless trade utilizes the power of electronic document transfer to streamline paperwork processes securely and with fewer errors.
Many companies are trying to digitize as many shipping and customs processes as possible to maximize the benefits from automation, including better overall efficiency and business intelligence. As digitization expands further into the international supply chain, companies are already reaping the benefits. For example, automation can significantly lower price per BOL, improving your bottom line.
There’s no shortage of opportunities for improvement throughout the bill of lading lifecycle, and the advocates for paperless BOLs aim to capitalize on those opportunities. Paperless BOLs cut down on the transfer time between parties, and digitized forms can cut down on the number of fields left blank (a common reason for rejected BOLs). Digitization can also improve communication about shipments, both between shipping partners and with third-party BOL processors.
Many of these transitions were already underway in late 2019. But the COVID-19 pandemic has substantially accelerated changes in the freight and transportation industry and highlighted the need for more efficient, agile processes. As shippers and carriers grow accustomed to the new normal, more are experimenting with digital solutions for traditionally analog practices.
What’s on the horizon?
The biggest challenge that proponents for fully paperless trade face is bureaucracy. Another related issue is security concerns — a big reason why said bureaucracy is dragging its feet.
Many industry experts are looking to blockchain as a possible solution. Popular for use in cryptocurrency, blockchain creates an inalterable ledger of activity, including transfers and transactions, that can be handed off between parties. A blockchain BOL solution would be transferred digitally, reducing the likelihood of theft or loss, and could not be changed through forgery. A legal framework needs to be created with specific protocols for how the secure transfer of BOLs would work.
Until then, some companies are creating their own platforms and apps for electronic bills of lading. Technically these are not truly “paperless,” as a hard copy must be printed out to be valid under current laws. However, they’re still very beneficial for improving efficiency and accuracy.
As technology, laws, and industry standards continue to evolve, we’ll likely see even more of a shift towards paperless processes, including paperless BOLs.