The overdue logistics revolution: Digitalising trade documentation

Imagine it’s the early 1500s, and a cargo owner is excitedly waiting to ship their goods across the Atlantic to explore opportunities in the New World. After the loading is complete, they are handed a bill of lading: proof that the goods are accounted for on the ship, the quantity of the cargo and other basic details like the port of origin and destination. Jump back to the present, and while a few logistics processes, like customs, have seen encouraging changes to go digital, a large section of trade and logistics is still heavily paper-based.

Trade documents are nothing new. They have been circulating the globe since the Roman times. Bills of lading were written into law in the 13th century and revised several times by countless kingdoms for innumerable reasons. A single shipment needed 50 different documents and were often exchanged manually between multiple stakeholders. Unfortunately, even in 21st century, a single shipment still requires 50 different documents and is still often exchanged manually between multiple stakeholders. This process, as a result, continues to be slow, inefficient, and error prone. It can also be costly, with businesses spending billions of United States (US) dollars each year on trade documentation.

What are the benefits of digitalising trade documentation?

Substituting traditional paper documents with electronic equivalents enables businesses to streamline their operations, cut costs, and enhance efficiency. Such a transition can yield substantial advantages for both businesses and consumers, including:

1. Reduced costs: Based on a recent McKinsey study, the adoption of an electronic bill of lading holds the promise of delivering annual cost savings of 6.5 billion US dollars for all stakeholders. Embracing digitalisation can lead to reduced expenditures in areas like printing, postage, and storage for businesses. Furthermore, it can diminish the necessity for labour-intensive data entry and processing, thus affording employees the opportunity to concentrate on higher-level strategic responsibilities.
2. Enhanced Efficiency: Digitalising trade documentation can significantly streamline trade operations by eliminating the manual exchange and processing of documents. This translates into expedited delivery times and lowered inventory expenses.
3. Augmented Transparency: Digitalisation offers businesses the advantage of real-time visibility into their shipments, tracking their journey from start to finish. This empowers companies to promptly identify and address potential issues, enhancing operational efficiency.
4. Mitigated Fraud Risks: Digitalisation presents a more formidable challenge to counterfeiters attempting to manipulate trade documents. This fortification aids in diminishing fraud instances, safeguarding businesses from financial harm.

What are the barriers to digital documentation in trade?

The benefits of digitalising trade documentation are clear. According to the International Chamber of Commerce (ICC) anticipates, there is a projection that by 2026, the adoption of paperless trade could result in an extra 267 billion US dollars in exports for G7 nations in comparison to their initial forecasts. However, despite the promising potential, the pace of progress has been sluggish. A primary obstacle in this journey is the fragmented nature of the trade ecosystem, involving a multitude of stakeholders. This fragmentation presents challenges in reaching a consensus and establishing uniform digitalisation standards.

What has been done to ease digitalisation of logistics documents?

There are two key initiatives underway:

1. The International Chamber of Commerce (ICC) has developed a set of standards for electronic bills of lading (eBLs). eBLs are digital versions of the traditional bill of lading, which is one of the most important documents in trade. The ICC's eBL standards are now being used by a growing number of businesses and governments around the world.
2. Another initiative is the Digital Container Shipping Association (DCSA). The DCSA is a non-profit organisation that is working to develop digital standards for the container shipping industry. The DCSA's goal is to make the container shipping process more efficient and transparent by digitising key documents such as bills of lading, shipping manifests, and container weight notes.

Digitalising to make supply chains disruption-proof

The emergence of the COVID-19 crisis, subsequent economic repercussions in the post-pandemic era, and ongoing geopolitical conflicts have all contributed to severe disruptions in supply chains on a global scale. These occurrences and the subsequent disruptions have underscored the critical importance of trade flows to the global economy while also highlighting their vulnerability.

One way to be prepared for future disruptions is through the adoption of technological advancements. Embracing digitalisation in logistics documents offers numerous advantages, such as cost reduction, enhanced efficiency, increased transparency, and greater resilience. Collaborative efforts between governments and businesses are essential to expedite the digitalisation of trade documentation, thereby fostering a more efficient and transparent global trade ecosystem.

Additionally, this transition can contribute to the sustainability of the global trade industry, as traditional paper production and transportation processes are energy-intensive and lead to deforestation. Transitioning to electronic documents not only lessens the environmental footprint but also promotes a sustainable future for the trade industry.