Why digital standards matter in global trade

© Kettaphoto

Headlines reporting supply chain disruption have been all too frequent in recent times. Port congestion, fleets out of position and goods held up in the system are an all too familiar refrain.

Supply chain stakeholders mitigate disruption through planning and operational measures. However, effective information exchange sits at the heart of smooth-running container shipping, and this is still hampered by manual, paper-based processes, and unstandardised data.

Tackling supply chain disruption

Stakeholder action, designed to protect businesses from the fallout of trade disruption, includes investing in detection and prediction technologies. Indeed, KPMG predicted that in 2022 businesses will enhance supply chain planning capabilities through enablers, such as AI-driven predictive analytics, track and trace and blockchain technologies.

It is true that technology is critical in today’s supply chain management, however layering technology solutions onto a foundation of unstandardised data can only take the future of global trade so far.

Without standards, transferring digitised trade documents is restricted to platforms that can communicate with each other. Supply chain participants, such as shippers and carriers, must therefore implement multiple platforms to exchange data with all the parties they do business with, at considerable time and cost.

As a result, paper documentation endures, choking supply chains and holding back progress.

Container shipping’s reliance on paper

The numbers are quite staggering. International shipping is so document-dependent that it is not uncommon for a shipping document package to contain 50 sheets of paper exchanged, in some cases, between 30 different stakeholders.

Documents range from bills of lading (B/Ls), carrier and authority certificates, import/export licences and vessel-sharing agreements. The inefficient exchange of paper-based documents can result in cargo being held up in ports because original B/Ls or title documents are stuck elsewhere. In 2020, DCSA estimated that 16 million original B/Ls were issued by ocean carriers and that paper B/Ls cost the industry around $11bn a year. ^[1]

Despite this, at the end of 2021, only 1.2% of B/Ls were electronic. Clearly, this is a missed time/cost opportunity – and what’s more, paper-based, manual processes are error-prone and can be insecure, with the potential for fraud.

The direction of travel is digital

In contrast, digitising documentation can simplify and speed up container shipping processes.

The Commonwealth set out to quantify the difference this could make. Its recent analysis explores the potential impact of adopting paperless trade documentation, and it makes for compelling reading. The report finds that widespread acceptance of digital trade documents could generate an additional $1.2trn in trade by Commonwealth countries by 2026.

Governments are acting. In the US, the Freight Logistics Optimization Works (FLOW) initiative will develop a proof-of-concept information exchange to improve accuracy for a more resilient supply chain. Meanwhile, in the UK the legislative agenda set out in the Queen’s Speech included the Electronic Trade Documents Bill, designed to enable greater digitisation of trade-related paperwork.

Standards are the cornerstone of digital trade

These are significant moves that should accelerate progress towards seamless information exchange. It will be important that these, and other initiatives, further the cause for a common data language and process framework for container shipping, established through open-source standards.

Open-source standards need to underpin the digital infrastructure and processes through which shipping data is exchanged. This will create an end-to-end interoperable system so that transacting parties, such as shippers and carriers, can participate in, for example, an eB/L transaction, regardless of which technology platform they use and which partners they work with.

This takes collaboration on a global scale. With nine of the top 10 ocean carriers, representing over 70% of containerised trade, DCSA champions technology standards for the container shipping industry. Digital standards will transform container shipping through a consistent vocabulary, common process flows and API-based interfaces to improve data exchange and supply chain visibility.

Digital standards are critical to the future of global trade, as they will ensure technology is interoperable at every link in the shipping supply chain.

[1] DCSA research based on data collected from DCSA carrier members. The financial calculation includes costs for carriers, freight forwarders, shippers and financial institutions mainly around manual administration and courier fees.