Global trade continues to expand as consumers purchase goods from around the world with a click. But how much does digital influence the route that products take from makers to buyers? What unique challenges does the industry face as growth forces it to seek new efficiencies?
In this episode of the EIU Digital Economy, the impact of digital trade is discussed by Martin Holme, global head of supply chain management and e-commerce logistics at Maersk; Jenna Brown, chief executive officer and cofounder of supply chain data management startup Shipamax; and Christopher Clague, managing editor and global editorial lead for trade and globalization at the Economist Intelligence Unit.
Shipping is the lifeblood of global commerce, handling as much as 90% of international trade traffic. And yet the state of digitalization in the industry is very low. Martin Holme says that complex paperwork and missing industry components such as a common data standard among shipping companies makes digitalization more complex. “It’s not uncommon that the cost of processing the paperwork is higher than the cost of actually moving the goods across the world,” says Holme. But it’s clear, he adds, that this situation is beginning to change as venture capital flows into the industry. “There’s also a lot of work by incumbents … and a lot of work on optimization. So it’s moving ahead.”
Moving, yes, but slowly, says Jenna Brown. Shipamax, Brown’s company, helps shippers streamline their processes by extracting and structuring data from shipping forms, emails and other sources. But she says the industry is a long way out from port on data standards. “When you’re looking at operational logistics [in shipping], it’s a messy process and you’ve got an industry that is wildly fragmented.” Creating something that can be managed by one standard is a very daunting task, she says.
Blockchain technology would seem to be a good fit for a globally distributed industry that needs to manage and secure complex transactions. Chris Clague cautions, however, that the industry must consider carefully how blockchain is implemented to avoid creating a digitized version of the current state. “Interoperability is a big issue,” Clague says. “What has the potential, or what is potentially the outcome of this, is you have a lot of different blockchains that are siloed and not talking to each other. If that can be resolved — and that’s a big if — then blockchain presents a lot of opportunities. But if it can’t, then what you’re doing is replicating the paper-based problems that the industry is facing now.”
Brown thinks blockchain can aid the industry, but she is similarly concerned about the need to create clean data. She says shippers can learn from the payment sector of financial services, another industry that deals with a high volume of complex international transactions. “Payment networks are monitored by looking at behavior across the system [to flag] which behaviors look strange in a transaction,” Brown says. “If we can take those paper documents, digitize them and monitor the behavior behind the meaning of these transactions, you probably will get to a better outcome in identifying fraudulent or strange transactions.”
Investments in digitalization also mean hiring more IT and data science professionals. Today’s competitive environment makes that a challenge. And attracting them to a “conservative and rusty industry,” as Holme puts it, has made for slow going at first. “Now that we have attracted a number of [these professionals] into Maersk, they actually find this incredibly exciting,” says Holme. “The whole opportunity of digitalizing trade, and really helping to grow the global economy, is very exciting.”
But will the investments and recruiting and technology result in the kind of rapid reinvention in shipping that other industries have experienced? Brown isn’t sure. “I think the technology that is likely to win here will require a kind of tweak rather than a radical change in human behavior,” she says. If incremental technologies can provide meaningful value, Brown adds, companies will be more motivated to change. But what that is yet remains unclear. “I guess we still have to figure out what that will be.”
For more about digital trade, the impact of digital on the services industry and the drive to make shipping more environmentally sustainable, tune in to the full episode of EIU Digital Economy podcast.
Read the transcript of The Digital Economy (episode 9) – The digitalization of trade podcast