DIGITAL REVOLUTION IN LOGISTICS

One of the key aspects defining the modern transport and logistics sector is the implementation of new digital solutions that ensure maximum coordination of freight transportation involving many countries. In the context of Azerbaijan, a leading transport hub of the Middle Corridor, the rapid digitization of all operational processes is unavoidable. To address these tasks, the Joint Stock Company Azerbaijan Railways (ADY) has been carrying out extensive modernization for the second year based on a special digitization strategy approved by the Supervisory Board, focusing on the implementation of advanced IT solutions in freight transportation. An important step in this direction was the recent decision by the Asian Development Bank (ADB) to approve a loan of $47 million for the digitization of the ADY system.

As evidenced by the experience of the European Union, the USA, Canada, China, Japan, the Republic of Korea, and other leading countries of the Asia-Pacific region, the optimal conditions for the delivery of high-quality work and increased profits are the maximum use of multimodal transportation and the implementation of interstate integration schemes based on digital data exchange. The development of electronic platforms for the exchange of transport documents and permits is a notable trend in the post-Soviet space, with notable advancements observed in Russia, Belarus, Kazakhstan, Uzbekistan, Azerbaijan, and Georgia. Moreover, integration with analogous systems in Turkey, China, and India, where such systems have already been developed and are in use, has been observed. In a recent announcement, Mohammad Reza Arif, the First Vice-President of Iran, articulated the country's intention to engage in railway freight digitization projects in collaboration with the EAEU countries along the North-South international transport corridor. This indicates that the digitization processes extend well beyond the boundaries of national and narrow regional frameworks.

The objective is to achieve the unification of transport documents within the framework of organizations such as the Eurasian Economic Union (EAEU), the BRICS (Brazil, Russia, India, China, and South Africa) group, the SCO (Shanghai Cooperation Organization), the ASEAN (Association of Southeast Asian Nations), and the OTS (Organization of Turkic States). What are the advantages of the global trend towards the digitization of railway transport? The implementation of digital queues at borders, the digital exchange of documents, the utilisation of electronic navigation seals on transit goods, and the deployment of specialised trackers on vehicles facilitate the efficient delivery of goods, ensure control, and enable the monitoring of supply chains, including those that traverse international boundaries. The implementation of digital cargo escort technologies and the transition to electronic document management in freight transportation are of paramount importance for accelerating and simplifying cross-border procedures. Furthermore, the electronic issuance of permits and shipping documents in a "single window" mode, technologies for collecting and verifying carrier information, and the formation of their rating based on freight transport data are also applicable in this context.

The development of digital mechanisms in the railway communication system is primarily focused on ensuring seamless multimodal container transportation, fully processed in electronic format. Multimodal transportation involves the delivery of goods under a single contract, even though it is carried out by several (at least two) modes of transport. Until recently, goods were delivered by ships, then transferred to trucks or railway trains, accompanied by a huge number of documents and approvals. The prospects of digitization effectively counteract all this bureaucracy and paper routine. The introduction of smart contracts using blockchain technology simplifies interactions between partners and makes freight transportation completely transparent. A system of digital trust is established, significantly simplifying the work of freight forwarders, suppliers, manufacturers, and consignees.

Single Platform

The transition to a single electronic format for the arrangement of freight transportation by road, sea, rail, and even air transport is a challenging undertaking. In order to ensure the continued efficacy of multimodal transportation, it is essential to establish a digital platform for the management of transport and logistics. Such a platform should facilitate not only the interfacing of internal country subsystems and services in other types of transport but also the seamless management of regional and international cargo logistics. It is important to note that there are inherent risks associated with the integration of corporate cargo support systems with the state platform. Additionally, there is a need for close coordination and systemic integration with the information systems of partner countries.

For several years, Azerbaijan has been implementing measures to digitize its freight logistics. Those most actively engaged in this endeavour are the structures of the Joint Stock Company Azerbaijan Railways. In particular, all recent modernization processes have been accompanied by the formation of a network infrastructure. In 2019, the ADY constructed fiber-optic lines along the protective strip of railways, thereby establishing a sustainable backbone infrastructure. This infrastructure enables the provision of digital services to freight carriers. This project was carried out in conjunction with the primary internet service provider, AzerTelecom, as part of the comprehensive Azerbaijan Digital Hub initiative.

The expansion of the optical infrastructure was also a component of the recently completed ADY project aimed at increasing the capacity of the Georgian section of the Baku-Tbilisi-Kars (BTK) railway, which has been increased from 1 to 5 million tons of cargo per year. During the modernization of the BTK infrastructure, 338 kilometres of fiber-optic cable were installed, along with the requisite digital equipment.

The necessity of accelerating the development of digital infrastructure in the Caspian region and integrating national software solutions within a unified open platform was underscored during the "Meeting with Global Partners." The Forum of the Trans-Caspian International Transport Route (TITR), organised by China Railway Express in Xi'an, China. During the discussions, representatives from the railways of China, Kazakhstan, Georgia, and Azerbaijan placed particular emphasis on the acceleration of customs clearance processes and the simplification of applications for transit codes, the unification of documentation standards, and the creation of a unified digital information system. 

The countries situated along the route of the Great Silk Road still have a significant amount of work to do in order to fully digitise the rail transport system. The rapid digitisation of the Middle Corridor represents one of the most urgent challenges facing its operation. The creation of a unified digital platform for the TITR is a crucial step in integrating the digital systems of participating countries. Furthermore, the partner countries currently exhibit disparate levels of digitisation, which presents a challenge to the implementation of a unified information exchange and cargo tracking system. "It is imperative that efforts be accelerated to establish a unified digital platform, in order to prevent delays in the supply chains of cargo," stated Arif Aghaev, an advisor to the chairman of ADY, at a consultative meeting of railway administration heads. 

It is noteworthy that the information systems of Azerbaijan and Kazakhstan's railways are currently integrated with the customs module of the DTC (Digital Trade Corridor) Tez Customs platform. Similar work is planned in Georgia. It is anticipated that by 2025, the TITR partners will have launched the Block Digital Corridor platform, which will unify procedures for document flow, customs clearance, and cargo tracking throughout the entire transport route.

Separate Strategy

Azerbaijan plays an active role in all regional initiatives aimed at digitising rail transport. The country is implementing advanced practices in this area and attracting international financial organisations to capitalise on such initiatives. For example, on 1 October, the Asian Development Bank (ADB) published information indicating that the bank's board had approved a loan of $47 million for the digitisation of Azerbaijan's railway system. The aforementioned funds are to be allocated towards the digitisation of pivotal processes at ADY. This encompasses the management of freight operations, maintenance, asset repair, and investment planning. Additionally, the project entails the development of a system that will enable clients to access information, including pricing and tax calculations. The project will serve to enhance the safety, reliability, and efficiency of Azerbaijan's railway networks, while simultaneously providing funding for digital improvements to ADY's corporate functions. Digitisation will facilitate Azerbaijan's pivotal role in integrating the economies of East and Central Asia with the Caucasus and Europe, enabling the country to fully realise its considerable potential as a trade and logistics hub," asserted Yevgeny Zhukov, Director General for Central and West Asia at the ADB. 

In summary, over the past two years, the implementation of IT innovations in Azerbaijan has been accelerated. The supervisory board of ADY has approved and is currently implementing a separate digitisation strategy that has established a modern IT office, thereby creating an innovative and dynamic space. In an interview with APA, Andrey Iskrich, head of ADY's Digital Development Department, stated that ADY's objective is to transform Azerbaijan into a global transport hub and expand cooperation on digitising transport infrastructure with countries along international transport corridors North-South and East-West. "In the initial phase of our digital strategy, we conducted an in-depth analysis of our production processes and developed a comprehensive conceptual design that outlined the requirements for three pivotal systems designed to streamline the company's operational activities. Freight Transportation Management, Freight and Commercial Operations Management, and Locomotive Crew Management. These systems implement crucial processes such as transport planning and personnel management." 

Additionally, the railway authority is engaged in the process of integrating with an international logistics platform, namely that of Global DTC. The objective of this integration is twofold: firstly, to facilitate the exchange of data pertaining to cargo, and secondly, to provide Track&Trace digital services. The principal objective is the automation of operational processes. As indicated by the department head, outdated equipment is being updated, work on automating production processes and office functions is underway, information security is being ensured, and IT competencies are being enhanced. In 2023, ADY undertook a comprehensive review of its human resources, developed a robust information security policy, implemented project management standards, and introduced new digital systems, including MS Project and Atlassian Jira, which have enhanced transparency and reliability across all digital processes. Furthermore, a tariff calculator has been made available on the ADY website. The implementation of this web tool has led to notable improvements in the quality of transportation cost calculations, increased efficiency in processes, and a reduction in the complexity of interactions with clients. 

At the beginning of October, an electronic work permit system was launched, which has the effect of significantly optimising the registration and processing of documents. This efficacious electronic instrument facilitates the streamlining of business processes and the enhancement of client interactions. "The accuracy of the data has notably improved, reducing the incidence of errors and accelerating the processing of digital documents," observed Emil Ahmadov, the head of the freight transportation department. The digital order system presented in ADY SMART has the capacity to reduce freight railway operations that previously required several hours to complete to a mere 20 minutes. 

ADY is of the opinion that investments in digitisation and human capital will stimulate economic growth and, moreover, facilitate the effective integration of the company into all regional transport projects.