Going Paperless in Agri
By Ashley Skaanild, Chief Commercial Officer, essDOCS
*This article originally appeared in the print and online subscriber-only edition of Gaftaworld Issue 225/April 2017 and is published with the kind permission of Gafta, The Grain and Free Trade Association.
Paperless Trade, or trade digitization, covers an expansive scope of supply chain processes, starting from the digitization of origin (source) operations, purchasing, invoicing, carriage of goods, all the way down to execution, finance and payment. For over a decade, both the term ‘paperless’ and more recently ‘digitization’ (used interchangeably) have been much hyped and often over-used, with critics citing too much talk and not enough action. The historical reality over this timeframe is that famously complex and fragmented physical (and financial supply chains) have hindered the industry from catching up with technological advances in other industries.
But today, and particularly over the last couple years, significant inroads have been made – in large part driven by agribusiness companies steadily at the forefront of recent digitization initiatives.
The agri commodities sector continues to experience increased digital uptake, particularly in bulk and containerized trades of grain, beans, oils and meal. 6 of the world’s 8 largest agribusiness companies use or are testing electronic Bills of Lading today. Today, 60% of the world bulker fleet is signed up to CargoDocs, up almost 50% year over year, while the CargoDocs electronic Bill of Lading (eB/L) network currently spans 75 countries covering most key agri trade lanes, backed by an active trade finance banking network of 36 banking groups.
Bulk metals and minerals currently take the lead as the most digitized commodity segment, in large part due to fewer trade document requirements (particularly on the customs/regulatory side) and therefore less complexity in going paperless. However, bulk and containerized agri trade comes second, steadily bridging the gap not only in terms of increasing the percentage of trades being shipping under eDocs, but also expanding the scope of digitization: be it using digital trade finance tools such as ePresentation (covering L/Cs, Doc Collections), or streamlining Document Preparation via collaborative DocPrep platforms that enable you to tie-in multiple supply chain participants.
Furthermore, stakeholder ‘problems’ that traditionally hindered digitization in agri, particularly of Phyto Certificates and Certificates of Origin, are now also actively being addressed, as wider supply chain participants, government bodies, industry groups (such as the IGTC) and regulatory authorities reach a consensus on digitization, even mandating partial digitization on a national level. Recent key developments include the release of the ePhyto Standard by the IPPC in 2011 and the FAO’s approval of an ePhyto Hub last year, which should significantly accelerate the rollout and adoption of digital certificates. Testing for the ePhyto Hub will commence later this year.
Where do I start?
Yet irrespective of all these developments, many agri players see digitization as requiring gargantuan industry-wide change management and a significant investment of precious time that you simply do not have.
To this we say, first-off, that it’s important to remember you’re neither the first nor the last company considering embarking on this critical journey to future-proofing your business.
Second, and most importantly, remember that paperless trade does not happen overnight, therefore it’s critical to consider approaching digitization differently – breaking it down in simple, manageable steps; keeping true to the old adage of “eating an elephant in bite-sized chunks.”
But before we get to that, let’s explore the case for going digital today…
If you’re reading this, it’s likely you’re looking to digitize your current trade processes or you may have already embarked on your journey to paperless. Simply put, digitization and automated processes are proven to enhance efficiencies, reduce costs and optimize working capital, allowing for increased competitiveness (or ‘edge’), both for large players and SMEs. Digitization allows for the convergence of the physical, financial and document chains. This convergence means you can minimize risks, automate processes, improve working capital management and reduce operational costs, all the while contributing to a global reduction in the cost of trade and trade finance, which in turn increases global trade.
If we go into a little more detail, core benefits can be broken down as follows:
- Collaboration: digital platforms enable all the parties involved in an export shipment to collaboratively draft relevant documents, reducing errors, centralizing the process, accelerating finalization and issuance of originals
- Automation: digital contracts and documents enable automation of key processes such as document comparisons and sanction checks
- STP: Straight-Through-Processing reduces data re-entry and corresponding errors, enabling data to flow from a sale of good contract or purchase order into the finance request and then the shipping documents
- Risk / Fraud reduction: eDocs greatly reduce fraud risks through added control of the original, near-eliminating widespread fraudulent behaviour associated with invoices altered mid-transmission. Lost documents also become a thing of the past, while the capability to transfer eDocs instantaneously across the globe means that companies are able to further reduce risk, effort and timelines.
- Elimination of LOIs: removing the risks associated with issuing or relying on trading and discharge letters of indemnity (LOIs), including the fact that LOIs do not provide a pledge over goods and are not sufficient for capital adequacy requirements
- Compliance & Visibility: eDocs ensure that only authorized signatories can issue or endorse original documents or can be configured to prevent unwitting transfer to a Sanctioned Party; eDocs also provide improved visibility of title documents within an organization or group of companies
- Operational improvements: decentralized reviewing and remote accessibility of original eDocs enables significant operational improvements at ports and terminals
- Improved experience: digital solutions improve the experience of people within your organization and across the supply chain by making eDocs accessible from anywhere and by eliminating time lost looking for or managing paper
How to Digitize: Best Practices & Transitioning to Paperless
So how does one get started? As is the case with most transitions, learning from mistakes and following successful precedents of tried and tested methods is the way to go. Today, corporates and banks leading the transition to digital have established some best practices to make thing significantly easier for anyone looking to digitize.
The first, and most important, is that once the strategic decision to digitize has been made, that change needs to be reemphasized through both a top-down approach and by ensuring that all the people effected are incentivized to make the transition successful. Once your organization has senior level sponsorship, i.e. a senior cross-functional team which is properly incentivized to succeed, then digitization is just a matter of good project management, achieved by:
- Focusing on easy wins: to demonstrate internally that digitizing is possible, and to demonstrate value. For example, today, the most digitized agribusiness companies share these common characteristics: they started out by digitizing repetitive, high-volume internal flows from their key origin locations (e.g ex-Americas), then gradually moved to high volume/repetitive flows with their key third party buyers (e.g. for soybean trade ex-Brazil or USA to China), in turn leading to the involvement of their banks (and their counterparties’ banks) via use of electronic presentation, and more recently, participating in co-laded shipments with other agribusiness companies who are also digitizing their trade flows.
- Building industry consensus and momentum: as ultimately no company can digitize trade by themselves. In this regard, it is useful to focus on trades where others are in the process of digitizing, both to gain experience and to allow that trade to reach digital critical mass (even if that trade isn’t meaningful for you, or if documentation in that trade doesn’t cause you issues)
- Digitizing in steps: to ensure that benefits can be quickly realized as you progress, for example you can commence with digitizing the creation of documents with an online DocPrep solution, then move to digitizing trade finance via online applications and ePresentation of documents, before moving to end-to-end paperless trade. At essDOCS, our proven Path to Paperless provides a quick guide on achieving gradual, scalable digitization broken down into manageable chunks.
- Ensure that you publicly communicate your plans: both within your organization and your industry, so others can learn from your work and work with you towards digitization.
Lastly, it is important to set realistic timelines. Digitization simply cannot happen overnight. Set annual targets for the percentage of your business that you’re looking to digitize and then work towards that goal. If you align your goals with those of your counter-parties and industry competitors, it is far more likely that you will all be successful together in digitizing trade!
Conclusion: The secret to getting ahead is getting started
A great amount of work has already been completed in preparing to digitizing trade, on legal, standards, technical solutions and trade facilitation aspects. As agri trade clusters reach critical mass in key commodities, we anticipate that we’ll continue to experience a meaningful acceleration of digital trade. Indeed, it is likely that you will be involved in some aspect of digital trade in the very near future, if that isn’t already the case!
The key takeaway is to ensure that you set realistic targets, track your targets, and in turn improve on your performance, all the while breaking down your digitization project in simple, manageable chunks. After all, “the secret to getting ahead is getting started!”
Join us on the 'Paperless Trade in Agri' Seminar & Networking Cruise
If you’re looking to find out more, be sure to join us at the upcoming ‘Paperless Trade in Agri’ Seminar and Networking Cruise on the 'Henry Dunant’ on Lake Geneva, taking place on Thursday 18th May. I’ll be happy to address any of your questions in person, and look forward to meeting you there!