What are the main drivers for digital transformation within global supply chains at present?
Many of the processes and technologies underpinning trade finance and supply chain have not been modernised in decades. The result is that those transactions continue to rely on paper-heavy processing, unsuitable for the current digital age. Traditional technology required corporates to log into multiple portals and juggle relationships and documentation for each shipment. In addition, businesses must navigate the growing threat of cyber-attacks, evolving regulations, and ever-changing sanctions lists. Despite this complexity, cumbersome and time-consuming paper-based exchanges are still commonplace.
By digitising these manual processes and superceding ageing legacy systems, a technology such as blockchain has a real impact on reducing the costs, risks and delays to participants involved in trade finance and supply chain. If applied effectively, the technology has the potential, for example, to unlock what the Asian Development Bank has identified as a potential US$1.5trn opportunity in global trade finance. Companies of all sizes will benefit from better visibility into trading relationships and easier access to financing options, beyond point-to-point relationships, to a global network of trading parties.
What is the impact of China on global supply chains and how has this evolved in the last two years?
Earlier this year, research showed that more than 200 of the Fortune 500 Global firms have a presence in Wuhan, the city that has become known for its alleged origination of the coronavirus. In line with this, China’s dominant role as the “world’s factory” means that any major disruption to the flow of goods puts global supply chains at risk. A secondary problem is that even where supply chains are domestic, factory shutdowns and reduced workforces are limiting the ability to produce goods.
Therefore, the decentralisation of supply chains and the trade finance networks that fuel them can mitigate this risk and disruption.
What is the current state of play in APAC in this space?
The need to decentralise supply chains was recently recognised when trade ministers of Japan, India and Australia agreed to work towards achieving supply chain resilience, citing digitisation of trade procedures as part of their initiative.
Digital transformation is part of the solution to reducing the heavy reliance on specific cities and countries in order to protect against future pandemics, along with environmental and socio-economic disasters. Blockchain technology’s decentralised ledger could remove the risk of a central point of failure and in doing so, bring wider benefits to global trade finance networks.
How does digital transformation protect and help to mitigate risk in the global supply chain?
Digital transformation will enable greater visibility into the origin and movement of goods and more accurate and timely supply chain data to address inefficiencies and risks in today’s global supply chains. Without a way to synchronise information among multiple parties along the supply chain, each organisation records its own version of the truth, leading to errors, high costs, and reputational and financial risks. What if buyers, suppliers, shippers, and other supply chain actors could transact in a trusted network that keeps everyone in sync, in real-time and in strict privacy?
By leveraging blockchain in the supply chain, distributed ledger technology applications enable global trading partners to transact securely and with consensus over shared facts to increase efficiency, transparency and visibility. Blockchain use cases for supply chain include immutability into the provenance of goods, the elimination of reconciliation pain across multiple parties and the real-time visibility to perform track and trace analysis, assess risks and accelerate physical and financial supply chains.
How can corporates stay up to date with the latest developments in this space?
In order to move towards a truly digitised and connected ecosystem for trade finance, mass adoption on a global scale is essential. This elusive network effect can only be achieved if corporates in the space prioritise forward-thinking and inclusive integration solutions that lower the barriers to entry for all types of companies involved in the trading process.