Supply chain digitalisation could encourage more SMEs to enter international trade, a panel of experts have said.
With businesses now facing more bureaucracy and costs to trade overseas following the Trump administration’s announcements of ‘reciprocal tariffs’ on all imports to the US, digitalisation could help reduce some of these new costs and documentary requirements.
However, this process will take time due to the number of parties involved in the supply chain.
‘Difficult process’
“Governments in the Western world have spent hundreds of millions of dollars over the last number of decades trying to get SMEs to participate in trade because this will increase the GDP, jobs and productivity of their countries,” said Sean Copeland, co-founder of supply chain digitalisation firm Boex, at a webinar hosted by the Chartered Institute of Export & International Trade.
“The question becomes: why are SMEs not doing more trade? It comes down to it being a difficult process – there’s a lot of paperwork. SMEs don’t have efficient systems, they’ve got to go across numerous systems, and it takes all day. It’s a big commitment for an SME.
“If you can streamline that process, increase their workflow automation, reduce the time, errors and other issues, perhaps government reduces some of the red tape, you end up with the ability to reach those SMEs.”
‘Gamechanger’ legislation
Copeland said that the UK’s 2023 Electronic Trade Documents Act could be a “gamechanger” and a “gateway for more inclusive trade”.
The act gave digital versions of key trade documentation – including bills of exchange and bills of lading – the same legal standing as their paper equivalents, and it has been heralded as a key enabler for the digitalisation of trade and supply chain processes.
“If you went to a bank with a paper bill of exchange, this would cost €2000, but it’s a much more economical instrument when done as a digital process,” he said.
“We’re able to reduce overall costs just on the efficiencies introduced,” he added.
‘Takes time’
However, when asked why supply chain digitalisation hadn’t yet taken off in the way many anticipated around the time that the act was introduced, Copeland said:
“There’s a lot of partners involved in international trade – it’s a business-to-business-to business (B2B2B) process.”
Noting that actors throughout the supply chain need to go through an “education process”, he said that the digitalisation transformation will “take time”.
“People have to get used to a new process, to understand it. You can have many people that are really excited here at the start of the supply chain, but along the way, people don’t necessarily understand I need to change.”
Ilona Kawka, the Imports Advisory Practice lead at the Chartered Institute, who was speaking alongside Copeland, agreed that education was needed as “traders don’t really know where to start”.
Kawka added that a “project approach” is needed, as the digitalisation process involves “a lot of work with different departments within the business.”
‘Smarter, not harder’
On the webinar, Kawka introduced the concept of ‘digital trade corridors’, which she described as a “system of interconnected transportation routes that facilitate the movement of goods, services and data between and within communities in a pre-determined pattern based on cultural norms, established trade agreements, laws and regulations.”
The Chartered Institute has been involved in the development of trials of this initiative, at the request of the UK Cabinet Office. She spoke of how pilot digital corridors had been established for goods movements between the UK and Poland, as well as the UK and Kenya.
These corridors aim to streamline customs processes through improved supply chain data exchange, enabling a movement from paper-based systems to digital, and improving efficiencies throughout the supply chain, including through advanced risk assessment on goods by border agencies.
On digitalisation more broadly, she said “it’s about creating a data-rich environment, where trust is built into the design, helping to reduce frictions between actors, creating a supply chain that works smarter, not harder”.
Benefits to come soon
Although Copeland said that getting to this stage will take time, he said he was hopeful that developments will coalesce soon.
“Things are happening quietly behind the scenes, and the magnitude of the change is going to appear all at once when people realise [the benefits], across the single supply chain,” he said.
“People will see the benefits, and realise they are saving time and money,” he added.
You can watch the recording of the webinar and access a pdf of the slides here.
