(Nate Greno, Unsplash)
- Expanding global trade is essential to reducing poverty.
- Responsible, accelerated and affordable digitisation can facilitate global trade and sustainably reduce poverty.
- Five Logistic Internets can increase efficiencies and reduce costs for businesses and trading partners around the world.
The expansion of international trade is essential to development and poverty reduction. To meet the UN’s first Sustainable Development Goal – “no poverty” – we must reduce trade barriers, especially for the world’s poorest.
One of the most efficient ways to sustainably reduce poverty globally and promote shared prosperity is to identify ways by which responsible, accelerated and affordable digitisation can facilitate global trade. In addition to reducing trade barriers and expanding GDP, digitisation is one of the most economically attractive, and fastest, ways to end poverty.
The most effective path to digitisation of global trade is for incumbents in the logistics industry to collaborate to realize five Logistic Internets. This will lead to substantial business benefits, through increasing global trade, trade-related efficiencies and reduced costs. It will reduce poverty, too, as more trade and greater efficiencies lead to higher welfare and GDP along with fewer administrative costs.
Reducing supply chain barriers has a larger effect on trade and GDP
Image: World Economic Forum
The solution: 5 Logistic Internets
A “Logistic Internet” extends the current Internet with foundational, logistics-specific features. It’s commercially, politically and competitively neutral. The purpose is to replace the current one-to-one connection with an Internet-like paradigm of connect once, then share with everyone, everywhere.
Anyone can innovate and build value-adding services on top of Logistic Internets, thereby increasing the innovative capability within logistics. And once created, a service can immediately be used everywhere – the way a homepage is available for any browser, or an app is available for all iPhones.
Logistic Internet extends the current Internet with foundational logistic-specific features
Logistic Internet #1: Global Trade Identity (GTID)
The World Economic Forum recommended a shared digital Global Trade Identity (GTID) for businesses and governments. This will be a foundational component in digital business ecosystems. It removes barriers to digital cross-border interoperability and eliminates the hidden costs of everyone managing multiple digital identities.
A digital identity is essential. It ensures you know who you are interacting with through authentication (“Who are you?”) and authorisation (“What are you allowed to do?”)
The corresponding digital signature also ensures integrity in signing digital transactions, by providing:
- Confidentiality. Only the parties involved can see the transaction.
- Non-repudiation. You cannot later deny participation in the transaction.
- Tamper-resistance. A signed transaction is impossible to change.
Logistic Internet #2: Shared Visibility (SV)
Optimising the business eco-system is the central philosophy behind digitisation – and the purpose of shared visibility (SV). SV gives everyone in the ecosystem access to the necessary logistics information in order to make decisions to benefit the entire ecosystem.
SV will digitally connect actors in a standardized way. It enables any number of actors to be dynamically added to or removed from a business ecosystem, while still receiving the same quality and consistency of information digitally and in real-time, which can guide individual decisions.
SV mitigates the increased complexity of the business ecosystem as digital connections increase. SV allows ecosystems to be adjusted fluidly and dynamically without compromising the quality and timeliness of information.
Logistic Internet #3: Port Call Optimisation (PCO)
Port Call Optimisation, or PCO, addresses the fact that cargo vessels spend between just 60% and 70% of their port time at a berth. And port call operations involve a substantial number of actors, who are often not familiar with other actors’ activities.
PCO facilitates the delivery of port call events (or, timestamps) in real-time to authorised entities, to maximize efficiency and reduce lead time. This will improve efficiency and reduce costs end to end.
All actors involved in a port call share intentions and activities via the PCO, and thereby facilitate shared situational awareness among port operators. This makes it possible for all actors to predict when and where movements and services will be conducted, enabling just-in-time operations and coordinating movements and operations.
It’s likely this could address inefficiencies amounting to more than $5 billion, due to reduced use of fuel as vessels can speed optimally, as well as better utilisation of expensive assets by reducing idling time for all actors.
Logistic Internet #4: Financial Flow (FF)
Handling financial flows in global trade is costly. Typically, there are several intermediaries between the actual payer and the receiver, requiring lots of paper and long processing times.
The emergence of blockchain and the programmability of cryptocurrencies has showed it’s possible to safely transfer payments globally without intermediaries while reducing processing time – eliminating the use of paper and saving money.
Digital currencies will likely be realized as Central Bank Issued Digital Currencies (CBDC), which will inherit the possibility of being programmed from cryptocurrencies, enabling FF to trigger commercial actions automatically based on defined criteria.
Lack of access to trade finance is a major obstacle to trade for 66% exporters in Africa. The digitisation of financial flows enables easier access to trade finance in developing countries, thereby reducing trade barriers.
Logistic Internet #5: Customs Cross Border Interoperability (CCBI)
Single Window implementers have realized enabling a single point of data submission at the national level only partially meets the requirements of an international supply chain. Despite the successful implementation of paperless (or mostly paperless) trading using a Single Window at the national level, many physical documents continue to be generated to fulfil the requirements of trading partners, counterparts and authorities across international borders.
UNECE says to maximize the benefits of a national Single Window, coverage should be extended to include cross-border electronic data exchange of all information.
CCBI would allow any permits, licenses, certificates etc. to be shared digitally with any customs authority around the world. CCBI is a foundational step toward eliminating paper documents in global trade by facilitating generic digital interoperability of government-to-government interactions on a global scale.
Ensuring commercial, competitive and political neutrality
The maturation of 4IR technologies like cloud computing, blockchain, IoT and AI enable the commercially, competitively and politically neutral digital foundation for global trade. This ensures:
- Countries and business can benefit irrespective of their level of digital readiness.
- Each jurisdiction decides how they will handle available information according to national policy frameworks.
- Small and medium-sized enterprises can efficiently participate in international trade.
- Each country’s required investment is insignificant.
- No single entity controls important components, protecting them from shifting political and commercial priorities.
- The Logistic Internets are sustainable as a business.
Blockchain, Centre for the Fourth Industrial Revolution
What is the World Economic Forum doing about blockchain in supply chains?
The World Economic Forum has joined forces with more than 100 organizations and 20 governments to accelerate the deployment of blockchain for supply chains – responsibly, securely and inclusively.
The multistakeholder team, represents large shippers, supply chain providers and governments – including Maersk, Hitachi, Mercy Corps, Korea Customs Service, Llamasoft and Ports of Los Angeles, Oakland, Valencia and Rotterdam.
The group will co-design an open-source toolkit to guide supply chain decision-makers towards utilizing blockchain to maximize the benefits and minimize the risks of the technology.
The World Economic Forum’s project, Redesigning Trust: Blockchain for Supply Chains, is part of our Centre for the Fourth Industrial Revolution.
Companies globally can join our efforts to streamline new and complex technologies like blockchain, helping to revolutionize sectors and ecosystems and build trust globally. Click here to find out more
Clearly, logistics incumbents should collaborate to realize these Logistic Internets. The business case is attractive, with an increase in market and innovative capability and a reduction in costs.
Even more, it will reduce poverty and promote shared prosperity, by increasing administrative efficiency and decreasing the environmental impact of logistics.
Efficient and accelerated digitisation of global trade is essential for ending poverty. The five Logistic Internets are an economically attractive means to meet this shared goal.
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