From flying shuttles to rolling robots, automated supply chains are almost here

Emerging technologies prepare the ground for the autonomous world, including the unmanned supply chain with many benefits but also risks to be mitigated. The main challenge and responsibility for the leaders of today is to capture the benefits while finding meaningful activity for all of us.

ASCFrom Amazon’s delivery drones to self-driving cars, autonomous factory equipment to Elon Musk’s 760 mph vacuum tubes – automated vehicles are on the rise.

Even beyond the grounds of private companies, tests of automated transport have been successful. A truck platooning system, in which groups of two or three “smart trucks” travel closely behind one another communicating wirelessly, arrived in Rotterdam in April. The Ministry of Transport in Singapore seeks proposals to develop something similar.

Also in Singapore, Airbus is pursuing an autonomous air taxi project to deliver parcels to ships in the port. On the water, the cargo ships of the future are expected to be crewless and remote-controlled.

The so-called “last mile”, delivery to the doorsteps of businesses and consumers, is probably the most complex task in the supply chain – especially in busy urban environments full of cars, bicycles and children playing in the streets. Intelligent self-driving vehicles can transport up to 100 pounds. In Paris, two entrepreneurs are building a flying river shuttle that will bypass traffic by travelling above the Seine.

Raw materials can now be extracted in automated mines; they then reach the smart factory 4.0 and are transported from there by wireless truck or delivery drone to the automated distribution centres of retailers or the smart boxes of individual consumers.

The point? The autonomous end-to-end supply chain is almost complete.

Automatic benefit

Automation in the world of logistics will create enormous opportunities when it comes to making the flow of goods safer, more efficient and more environmentally friendly. Self-driving cars alone would reduce accidents by 70%, improve fuel efficiency by 20%, and save about 1.2 billion hours of driving time over a period of 10 years. Less congestion will make the flow of goods and people faster – and those countries with driver shortages, such as the United States, United Kingdom and Germany, will find relief.

The improvements do not come without challenges, however. One key concern is cyber risk. We need to ensure that autonomous units cannot be hacked. Also ethical questions need to be answered – how to decide whom a vehicle is supposed to save in case of an accident, for example. Policy-makers also need to consider the impact on jobs: where to start, where to slow down the autonomous economy to avoid unwanted consequences, starting with unemployment.

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The autonomous movement, which began in the early 1950s, is now in full swing. Of 1,433 consumers surveyed in the US, 70% think they will order the first drone-delivered package within the next five years. The majority of policy-makers (88%) expect autonomous vehicles to gradually become a reality within the next 10 years, based on a recent worldwide self-driving vehicle study by the World Economic Forum.

According to the same survey, 60% of policy-makers expect a ban on private cars in cities over the next 15 years. And this might not be limited to private vehicles: over time cities will further regulate goods deliveries, which are one of the main causes of daytime congestion. Therefore, not only transportation companies, but also shippers need to prepare for an autonomous future.

Capturing the full potential of the automated supply chain requires rethinking entire logistics systems. There will be an evolution from the fixed “collect in the evening and deliver during the morning” approach to a fluid system of continuous movement and supply. Platoons, drones, tunnels, tubes, rolling robots and automated warehouses make the constant flow possible.

But this requires flexibility and innovation on the operator level, as well as investments in technology and infrastructure. It requires close collaboration between not just manufacturers, retailers and developers, but policy-makers and the citizens themselves.

Image: REUTERS/Wolfgang Rattay

This blog was originally posted on the World Economic Forum Agenda.

Is this the key to successful global trade?

“Logistics performance – both in international trade and domestically – is central to the economic growth and competitiveness of countries, and the logistics sector is now recognized as one of the core pillars of economic development.”
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So reads a 2016 report by the World Bank titled Connecting to Compete 2016: Trade Logistics in the Global Economy. The report features the Logistics Performance Index, which ranks Germany as the world champion in logistics. The country scores even higher than it did the last time it topped the index, two years ago.

In today’s interconnected and interdependent global economy, where consumers and citizens benefit from the global flow of goods, we need to collectively ensure that all parts and pillars across the globe can carry the heavy loads coming through the supply chain.


Logistics Performance global rankings 2016


The path to prosperity

Logistics is the key enabler of the world’s supply chains, which bring resources, seeds, fertilizers, materials, parts, machinery and equipment to farms and factories, as well as goods to shops, supermarkets and households.

Without logistics, today’s global procurement, manufacturing and distribution would not exist. Logistics connect sellers and buyers across the globe and provide companies with access to domestic and international markets. Related services influence the cost of goods and determine the competitiveness of economies. Their integration in global trade and value chains adds value to the worldwide networks of procurement, production and distribution so important for job creation, national economic development and wealth.

In short, when logistics function as they should, they are the basis upon which economies are built.

In the top 30 of the Logistics Performance Index we find 22 OECD countries and 14 members of the European Union. China moved from 28 in 2014 to 27 in 2016. India, currently the world’s fastest-growing large economy, did not make its way into the top 30 this time but has jumped 19 places to rank at number 38.

Strong nations depend on and benefit from buying and selling in foreign countries. Competition is what drives them, collaboration is what helps a nation to capture its full potential.


Asia rising

Globalization, logistics and trade have had a significant impact on global wealth levels. In 2013, the Economist wrote that in 20 years nearly 1 billion people had been taken out of extreme poverty. In 2015, the World Bank announced that global poverty was likely to fall below 10% for the first time.

This reflected the entry of China, India and other developing countries into the global procurement, manufacturing and distribution system, as increasingly powerful players in the world economy. Still, many developing countries remain on the margins of world markets, requiring helping hands to improve their logistics capabilities.

Between 2007 and 2014 the gap between top and low performers was slowly shrinking – driven by the logistics sector’s continuous improvements in infrastructure and service quality, as well as customs clearance processes. In 2016, logistics performances converge at the top and the gap between high and low performers widens.


Landlocked logistics

How fast the picture can change. Take the Philippines: it ranked 44 in 2010 but has fallen to 71 in 2016. The drop is largely driven by two factors: transport-related infrastructure and the competence and quality of logistics services, including transport operators and customs brokers. The online publication Supply Chain Digital writes: “Stalwarts of the Philippines’ logistics industry have voiced concerns over a series of Bureau of Customs directives instigated in the past year.”

Logistically constrained countries – landlocked nations without direct access to the oceans and global waterways, for example – are regularly struggling with trade and transport facilitation and reforms. Beyond political will, the disadvantaged countries with weaker logistics (often today’s suppliers and definitely tomorrow’s potential customers) require and deserve attention and support from the international community.


Reliability over speed

In high-performing nations, slower global trade after the 2008 global financial crisis, as well as environmental concerns, create a pressured environment for the logistics industry. The sector – itself estimated to contribute 23% of total global greenhouse gas emissions – faces concerns over jobs, land use and urban planning. In the interests of economic inclusion and peace, all nations need to further advance trade and transportation facilitation, whether individually or collectively, while safeguarding the citizens against harmful activities.

According to the World Bank report, “supply chain reliability continues to be a major concern among traders and logistics providers”. And indeed, reliability is more important than speed. And critical for reliability is efficiency at the borders. The current global trend towards disintegration, such as Brexit or the erection of fences at the Hungarian border with Serbia and Croatia, are not helping.

In economies where infrastructure and skills are no longer the key concern, governments might need to invest more money and time in explaining to the citizens the benefits of trade and logistics.

This blog was originally posted on the World Economic Forum Agenda.

The world is building fences. Here’s why we should worry

Long forgotten seem the walls, fences and barbed wires at all borders. Therefore, the understanding of the benefits of open borders might be fading. Of course, with terrorist attacks and waves of migrants concerns are rising. However, I wish that we are mindful and clear about the effectiveness, consequences and cost of the new global disintegration tendencies.

Fences

In December 2015, the BBC wrote: “EU border security becomes new mantra“. Not only Europe but larger parts of the world are going through a phase of increasing disintegration: the Brexit referendum, discussions about the exclusion of Greece from the Eurozone and the beginning of the construction of fences along the green borders of barrier-free Schengen.

Near Schengen, on 14 June 1985, the picturesque town in Luxembourg, five European countries signed the agreement which led to the creation of Europe’s borderless Schengen area. In light of mass flows of migrants seeking asylum in Europe, Hungary blocked migrants from onward travel to the rest of Europe and constructed a four-metre-tall fence along sections of the border with Serbia – a country not part of the Schengen area.

Also, Austria has begun building an anti-migrant barrier across the Brenner Pass at the Italian border. Putting an end to hope on one side and reducing fears on the other. However, it’s not only in Europe that countries are raising the bar. US presidential hopeful Donald Trump wants to build a wall at the Mexican border. Increasing fear of terrorists in the US has led to the reintroduction of a visa for “certain Europeans“.

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Image: The Economist

Click here to see other regions in the Economist’s interactive map

The hidden cost of disintegration

What would be the impact of reestablishing barriers? Citizens would face long-forgotten burdens: the northern Europeans, for example, would experience long traffic jams at the Brenner Pass on the way to the holiday destinations in the south. Labour markets would also be affected: 1.7 million people cross European borders every day to get to work. Consumer prices would rise due to the forced slowdown and necessary adjustments along the supply chain. Waiting and inspection times at the borders would need to be factored into the prices of goods, as well as the changes required to the highly cost-optimized just-in-time concepts – largely applied in global manufacturing in the automotive industry – and the efficient goods supply out of the distribution centres. Many of the products made available by bilateral and multilateral agreements would disappear from supermarket shelves.

Disintegration would affect the competitive position too. Europe, for example, might find itself in a very disadvantaged situation given that Asia is continuing to integrate. What if TTP arrives and Schengen leaves? There might also be explosive geopolitical risk involved, with Crimea, Ukraine and new Chinese islands in the South China Sea heating up the debate. As new fences go up across Europe, what tensions could result from countries such as Spain, Italy and Greece being left more or less alone with new waves of migrants?

How effective are visas and border controls?

Looking back: how safe has the world been with more barriers? Did borders protect Italy from the onslaught in the 1970s of the Red Brigades, Spain from the ETA, Germany from the Red Army, and France from GIA? Did borders protect the US from attack on 9/11? How effective have been the high metal fences and walls, barbed wire, alarms, anti-vehicle ditches, watchtowers, automatic booby traps and minefields along the inner German border from 1945 to 1990? The threat often lies within: “Not one Paris attacker has been identified as a Syrian refugee”, Mashable wrote.

Tightening up security

The world has experienced decades of advancing global integration. Increasingly open borders and many trade and investment partnerships have strongly contributed to the prosperity and wealth of people and nations. International organizations and agencies have not only supported global growth but also established institutions in charge of dealing with the risks of reducing national barriers. Organizations have developed international ties and many platforms of collaboration to fight crime and terror have emerged.

Interpol – the International Criminal Police Organization – has strong links with Europol, the organization coordinating the local police forces across Europe. Within countries, ministries and agencies are increasingly working together. Germany, for example, has established the GTAZ – the Joint Counter-Terrorism Centre – an autonomous authority and co-operation platform used by 40 internal security agencies.

The private sector has launched initiatives to protect staff and assets against terrorism and other threats across the globe. Since the attacks of 9/11, security measures have been tightened. Today, individuals and companies are checked against the sanction lists of the US and Europe. Employees appearing on the lists are no longer allowed to be paid a salary, and companies are excluded from doing business. Though, as the Panama papers show, we have not yet closed all the back doors.

Battle on the internet

Social media helps terrorists organize itself and recruit new fighters. On the other hand, the FBI uses internet surveillance software like Carnivore to identify and stop attacks. Organizations such as the Search for International Terrorist Entities are scanning propaganda material and training manuals, and sharing the insights with other organizations. Technology trumps. The internet has the potential to flatten borders while reducing risks. The more people are active on the net, the better economic value can be extracted and (potential) terrorist activities monitored. Which also does not come without concerns and complexities – as the discussion between Apple and the FBI shows.

Governments have the obligation to protect citizens and the right to control borders. However, what are the effects of the potential disintegration on citizens, migrants and the economy? The Bertelsmann Foundation warns that reestablishing permanent border controls in Europe could produce losses of up to 1.4 trillion euros over 10 years.

We need to understand and be mindful of the impact of our decisions on the economy. All the same, should we apply economic reasoning to a decision on whether or not to offer a helping hand to people in severe need?

Image: REUTERS/Marko Djurica

This blog was originally posted on the World Economic Forum Agenda.

What does London’s new mayor mean for Brexit?

London has elected its first Muslim mayor. It’s a development that many see as reflective of the city’s tolerance and capacity to embrace differences. Will the election of the pro-trade and pro-Europe Sadiq Khan ultimately prove a crucial turning point in the Brexit debate?

LondonAndTheBrexit

The city’s citizens have good reason to vote for openness. London is built on trade. Trade has largely contributed to today’s wealth and the rise of many cities, regions and nations. Although trade growth has been moderate since the Global Financial Crises, reestablishing trade barriers might lead to significant negative effects.

The United Kingdom has its own currency and enjoys a high degree of economic sovereignty, which would hardly be enhanced by Brexit. Whether the wave of refugees seeking save harbour in the UK would slow down post-Brexit remains a question mark. What’s more certain is that trade barriers regularly increase the price of imported consumer goods, the prices of materials and parts to local production as well as industrial assets, and consequently the prices for goods produced in-country, for internal consumption or for export.

Four scenarios for Brexit

What would Brexit entail? Answering this means formulating the possible positions the UK could take after an exit from the European Union (EU). The scenarios include: (1) complete independence, (2) loose association with the EU, and (3) broad harmonization with the EU – the exit could also be structured in a gradual and staged way. Finally, (4) the UK could join another zone, such as the North American Free Trade Agreement (NAFTA).

The choice between these options would determine the extent and nature of future trade barriers and the level of impact on society and economy within the UK, in respect to the exchanges of goods with EU members, with countries and blocs the EU has agreements with and finally with other blocs and nations.

If the UK stayed largely harmonized or associated with the EU, little change would occur. Under all the other scenarios, procurement, manufacturing and distribution networks would possibly need to be adjusted – immediately or over time, partially or even drastically.

How would Brexit impact business?

Looking at the cross-border movement of goods, the costs of trade to the economy as well as the impact on cost structures and consumer prices depend on the conditions in four key areas of trade facilitation: (1) border administration, (2) market access, (3) telecom and transport infrastructure, and (4) the business environment. Brexit would affect three of the four areas, namely border administration, market access and business environment.

Tightened border administration extends the time goods travel, slowing down deliveries while increasing the cost of transport. In addition, border controls reduce the reliability of the supply chain as the time required for possible inspections is unpredictable. In time-critical industries, this would force companies to hold buffer stocks and re-design logistics systems.

State investments in hyper-efficient customs clearance facilities, combining technology with smart procedures, can smooth away some of the negative effects. These approaches include pre-clearance processes based on pre-submitted customs information, or ensuring goods carry digitally and instantly retrievable information which can be used to let them clear customs while passing the border – probably a longer shot.

A curb on innovation?

The second area affected by the potential Brexit would be market access. Controls and regulations to structure which companies can sell and operate on the national market is often linked to the protection of local industries. This protection eases the pressure on local companies to innovate and drive serious programs to improve competitiveness.

Third, the business environment would be affected too: changes could occur in the area of investment policy and the hiring of foreign workers. The UK government would potentially need to negotiate trade terms and agreements with many partners – a costly process which can take years. In the meantime, the local and foreign companies operating in the UK might be faced with significant uncertainty.

In order to compensate for the cost and price increase, the UK government could consider tax cuts and subsidies to ease the pressure on consumers and manufacturers. Otherwise, the rising cost of production could trigger the gradual migration of UK manufacturing towards lower cost locations and increasing dissatisfaction among consumers and citizens.

Uncertainty, reduced competitiveness and job cuts

Uncertainty, reduced cost competitiveness and potential measures to protect local industries can lead to the gradual retreat of foreign players. Job losses and increasing dependency on imports would be the consequences. Over time, protected UK industries might fall behind the foreign players due to reduced cost optimization and innovation pressure and hence competitiveness.

In the short run, some sectors would be able to reap some short-term benefits. Logistics for example would be under pressure to redesign logistics concepts and build new distribution centers. However, this short-term revenue booster is to be considered economic waste. Instead of making the supply to the local economy and society easier and more fluid, investments would flow into efforts to cope with additional administration, regulation and procedures.

Logistics – in common with many sectors – would suffer in the end. For example, as the customers of the logistics and supply chain service providers put pressure back on suppliers, the effect would be shrinking margins. This is particularly challenging at a time when cash and financing needs for newly required investments would be well on the rise.

Referendum

It remains unclear what position the UK would take in the event of a Brexit. What is clear is that the additional layers of work and cost caused by tightened border administration, regulated market access and a deteriorating business environment would result in additional burdens and disadvantages for companies, and especially for consumers and citizens.

While initially, some industries would reap benefits, soon the negative repercussions risk spreading across all stakeholder groups – government, business and society.

Let’s hope that the election of Sadiq Khan will be followed by more enlightened public sentiment towards globalization, the importance of stress-tested trade blocs and the accomplishment of new agreements like the TPP and TTIP.

This blog was originally posted on the World Economic Forum Agenda.

Can trade change the way we see globalization?

Many voices have been prophesying the end of globalization. Koert Debeuf, political analyst and visiting research fellow, CRIC, Oxford University, writes in the aftermath of the Paris attacks on 13 November 2015: “The world has left the path of globalization and is taking the trail of tribalization.” Are we facing a new trend?

CanTradeChangeTheWayWeSeeGlobalization

Globalization is a multidimensional phenomenon – the interconnectedness, interdependence and integration of cultures, markets and individuals. The emergence and growth of the global net of diverse national economies has brought new perspectives and prosperity to countries, companies and citizens. Although the trade flows are changing and the growth has slowed after the global financial crisis, connectivity is the key enabler of modern life.

Despite all connectedness and convergence, the world remains diverse. And that diversity is a major source of creativity; it drives innovation and progress, growth and prosperity. Connections and interactions within and among groups with a multitude of races, ethnicities, genders and sexual orientations are driving creativity and innovation in companies and across geographies. Competition makes us focus and keeps us contributing to economic growth.

However, diversity and competition are also leading to anxiety and conflict.

There is a need to strike the right balance between growth and prosperity on the one hand and preservation and protection on the other. What are the specific roles governments, businesses and resources play in this respect?

Borders aren’t always barriers

In the wake of the 9/11 attacks in New York, and more recently in Paris and Brussels, governments have attempted to protect citizens by raising the barriers at their borders. The intentions are good, but the practice risks burdening the economy or even excluding their own consumers, investors, brands and manufacturers from the many benefits and opportunities created by international trade and globalization.

However, today’s governments may not have the mandate to make this decision themselves. One of the deep-rooted desires of humanity is to exchange with other people and travel the world. As we see in the ongoing “hacktivist” challenges to the national firewalls, people will not give up on finding ways to access what is kept away from them – even if they simultaneously fear losing the security provided by national borders.

Borders do not need to be barriers. Modern technology has reached a stage where both security and fluidity is possible. Despite open borders, local cultures persist – as many examples show. Nations should continue to set the rules based on local codes, interests and needs, while regional and international bodies, such as the ASEAN and the World Trade Organization, help to prepare, negotiate and execute international frameworks and implement tested tools for secure borderless flow of goods and people, capital and data.

This often challenged but widely used model requires from the various actors – mainly governments and international organizations – empathy, creativity, diplomacy and pragmatism.

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Small businesses with global goals

Multinational companies have been developing the capacity to thrive in global commerce for some time. Thanks to internet, small and mid-sized companies have also gained access to the global markets. Although the physical supply chain still struggles to overcome the various hurdles to make international commerce easy and truly a reality, many online platforms and sites already exist to serve sellers and buyers, independent of location.

On the back of international agreements and with the help of supply-chain service providers, global brands have built global sourcing, manufacturing and distribution networks. The diverse range of companies competing in today’s worldwide markets do not only design, manufacture and provide us with the goods we enjoy – but also offer jobs in the many countries in which they operate.

Therefore, not only are global companies likely to object to regulation that significantly restricts their ability to manufacture and sell abroad, but smaller players, employees and consumers might well join the effort to maintain access to resources, products and customers in the digital global market.

Global solutions to global problems

On the one hand, the planet needs preservation and protection: if we do not act there will be more plastic than fish in terms of weight in the world’s oceans by 2050. On the other hand people need food, shelter, healthcare, education and jobs: in 2015, 836 million people around the world were living on less than $1.25 a day. While there are grave concerns about the effect of industrialization and consumption on resources and the environment, there is no doubt that poverty should be eradicated. And as the poor often live on the most affordable and hence vulnerable land, one obstacle to ending poverty is climate change.

We can observe that no barrier, no net, no firewall is large, long or strong enough to keep pollution, micro-plastics, terrorists and other threats away. Considering the magnitude of today’s environmental threats, there is a need to act fast and collectively. The world needs a cross-disciplinary and cross-industry effort, not only to effectively respond to the global environmental and resource challenge but also to other crises, such as pandemics, conflicts and the refugee challenge.

COP21, the Bali package and many other initiatives and agreements show that governments and enterprises are willing to stand together to develop more effective global frameworks and mechanisms. We need to strengthen the global platforms of collaboration and impact on which international organizations and governments, businesses and academia can co-create the most effective and balanced global solutions.

Ultimately, globalization is not an on/off exercise but the ongoing responsible management of global conventions and national codes, global markets and diverse economies, global commons and inclusive global growth. This requires confident and capable actors with strong identities not afraid to open up and willing and able to respect the different cultures while complying with international treaties and law. Even more so, globalization should be the golden path that connects and lifts the diverse global community to the next level of prosperity.

Image: REUTERS/Edgar Su

This blog was originally posted on the World Economic Forum Agenda.

Supply chain safety or the genetic code of everything

In a recent Forbes article we could read that the CDC estimates that approximately one in six Americans get sick each year from foodborne diseases, leading to roughly 3,000 deaths. This is well in line with the horrifying stories of the milk powder scandals and 300,000 thousand affected babies. The news about shortcomings and effects of irresponsible behavior in respect to the supply chain is taking its toll. Apparently is our knowledge about the origin and the risks of materials, parts and products limited. What can be done to better protect our lives?

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Authenticity is the first step. In order to ensure authenticity, safety, security and quality of the food we eat and the products we use, there is not only the one solution needed but a bundle of protective measures. In addition to the obvious standards and efficient certification processes, we are in need of pragmatic laws and regulation. We also require reliable product tracing technology allowing the seamless follow through and detailed information about the products – about the score against the standard – and insights in the organisations involved; these can be transportation companies, traders and manufacturers. The effective protection requires data sharing, and maybe the need to establish an independent and efficient data market.

The ultimate protection of our health requires the genetic code of everything!

What we need is the full set of information of each and every product – the unique product fingerprint which can be compared with the database of safe practices. We need the measurement of truth, the proof of compliance with standards, laws and regulations. Imagine that all products we consider buying carried the QR code providing pre-checked information, including the origin, the quality and the manufacturing process. Imagine that through the internet every smart phone user would be able to retrieve the specific information about the meat we eat, the soap we love, and the paint used in the offices, the apartments, and the public buildings we are living in or we are visiting.

Total Supply Chain Visibility: a vision in the making?

Governments and organisations like the Consumer Goods Forum are working to develop and share best practices. The United States passed the Consumer Product Safety Improvement Act (CPSIA) to establish safety standards and requirements for children’s products. The supplier certifications accepted by the Global Food Safety Initiative (GFSI) aim at delivering safe food to citizens worldwide. The private sector plays its role too. Large companies help small farmers to fulfill requirements. There are around 700 global certification programmes. Probably too many, creating complexities which might slow down processes and cause unnecessary costs.

Laws and regulations have been put in place elevating traceability beyond just a value-added to the supply chain. In the European Union traceability has been obligatory for all businesses in the food chain since January 2005. In the United States of America, the Bioterrorism Act came into effect for larger companies in 2005 and for smaller players in 2006, with similar requirements regarding records to identify previous sources. Traceability becomes the new standard in the modern supply chain.

Most companies are mapping the parts of the supply chain under their control. However, the exercise needs to go beyond the borders of direct responsibility and control. We need visibility of the whole flow. Starting upstream at the mines and fields, going further along the various steps of manufacturing and assembling of products or the processing of food down to the buyers and subsequent cycles of usage. Unfortunately, in the eye of catastrophes such as the salmonella outbreaks companies sometimes appear ill-equipped to respond quickly.

With the new age of digitisation, with the emergence of sensors in almost everything – from electronics and vehicles to cloth and wallpaper governments, organisations and companies can gather and compile enormous quantities of data. More importantly the information can be transmitted to the internet where various applications can enrich, analyse, organise, and store the records. Through product identification, unique tracking numbers and labeling, we are able to link materials, parts, products and food back to specific data relating to the production, and distribution. Through the new technologies we have access to the entire cycle history. Held available in internet platforms, users can swiftly and easily retrieve this information by smart devices like phones, watches and other wearables. The proof of traceability might soon be the minimum standard for doing business in the digital age.

Where are the hurdles? Traditionally, individuals and companies struggle to exchange information and data. Furthermore, there are standardisation gaps and security concerns. Privacy protection is a challenge too. One solution might be a data market. Similar to the stock exchange this place of clear rules and supervision would allow to safely and swiftly exchange and monetise the data gathered or produced by the different parties. The data market would be an incentive to generate and share even more data.

There is much to gain!

Beyond our own individual safety, many opportunities lure in the world of the retrievable genetic code of everything. Players along the value chain, like raw material providers, suppliers, manufacturers and food processors can differentiate themselves from competition through visibility and an enlarged safety offer. Logistics and transportation companies can enhance their vertical knowledge and build new services around data management and the orchestration of the relationships along the supply and value chain. New services and players will emerge. TrueTag and CLEARthru are examples of this development.

Despite all technology and process innovation, we still need to act upon the new wealth of information and knowledge to protect ourselves. The responsibility for the health and wellbeing of the planet and society will stay with us and the many other consumers and buyers everywhere on the globe. It is up to us all to accept or reject. Finally: as most tracing technology has been available for so long, we might wish to consider to push a bit harder on the implementation and utilisation.

4 things to know about the new era of global trade

As Otaviano Canuto, the executive director of the IMF, wrote in the Huffington Post, “world trade suffered another disappointing year in 2015, experiencing a contraction in merchandise trade during the first half and only low growth during the second half”. After the boom of previous years and since 2008, world trade has been rising slower than GDP. In light of the lingering effects of the global financial crises, China rebalancing towards domestic consumption and the lack of new BRIC-like global growth engines, companies and governments need to adjust their strategies.
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The main characteristics of the new era of global trade are relatively mature value and supply chains, increasing regionalization and localization of production, the rise of non-tariff barriers after a period of significant tariff reductions, and an e-commerce boom, which often struggles to overcome the hurdles in international business. Digitization appears to be the key enabler of modern times, and an important lever to capture value in the new era of global trade. It is digitization that opens up new horizons for product design and management, manufacturing, retail, and the repurposing of goods. However, we need open and courageous leaders in government and business to make the change happen and capture the opportunity in the following main areas of development.

1. The new customer experience: “fast products”

Today’s customers demand fast products, such as fast fashion with quickly changing models. In fact, this works well for brands wanting to avoid the high inventory and high risks they encounter when they have to make big bets on the right designs for an entire fashion season, for example. Fast products require short supply chains. Consequently, production needs to move closer to the markets and shops to meet the shorter lead times from sketch to shelf. Zara, for example, “adapts couture designs, manufactures, distributes and retails clothes within two weeks of the original design first appearing on catwalks”. In creating the new customer experience, the management of the supply chain becomes a critical source of competitive edge.

Companies that wish to play in the “fast economy” will require new factories close to the markets and new distribution platforms. Those countries that provide the most fluid import and export ecosystem will be high on investors’ lists. In particular, countries in regions close to large markets, such as Central America, South-East Asia and North Africa might wish to review their strategies to capture the value of this trend.

2. Multilayer global manufacturing and supply platforms

Digitization helps the fast economy. In the past, brands tended to centralize manufacturing for better manageability and quality control. The power of information technology, the internet of things, big data and the cloud provides a new level of collaboration and empowerment throughout the value and supply chain. One example is the Flex Pulse Centre. The enhanced visibility allows companies to move factories closer to the customer without risking sudden surprises. In the continuous process, the global supply chain is converting towards a more and more dense and integrated platform of short, medium and long distance cargo moves – with regional and local distribution centres along the way. With the fast economy some intercontinental flows of goods will become regional and local traffic. However, the new factories will continue to require global supply, as not all materials and resources will come from sources nearby.

These multilayer global manufacturing and supply platforms still have many black holes. Some blackouts of visibility are caused by governmental security concerns, for example in freezones, others by the lack of digital infrastructure. There are opportunities for business and government through public-private partnerships to establish not only the digital architecture but also the trust to fully leverage the available technology. It goes without saying that the smooth and seamless movements of goods in and out of countries through the reduction or elimination of tariff and non-tariff border barriers is essential for establishing denser platforms and making countries and locations more attractive.

3. Scaling up market participation: International e-commerce

The era of “platformization” allows for a more inclusive economy. Global e-commerce platforms such as eBay or Alibaba can connect millions of manufacturers and billions of consumers, making the global market accessible to even the smallest manufacturer and providing the broadest choice to all consumers. In addition to much broader and better match-making, middlemen are cut out which allows for higher margins on the sales and lower prices on the purchasing side. It also reduces the risk of corruption. However, the concept only works if the underlying logistics and transportation platforms support the digital transactions.

Unlocking the potential of international ecommerce requires efficient and cost-effective logistics and smooth customs processes through the paperless digital export and import processing. On the import side there is a need for effective tools to be able to process and analyse information about shippers and products moved. These tools reduce clearing times, even enable pre-clearance, and help to manage the risks that come along with lower value goods, which fall often below the threshold of more diligent customs clearance processes. In addition, governments need to ensure healthy competition and avoid the formation of digital monopolies. Platforms can also be used to foster the job-creating small and midsized business landscape.

4. Repurposing of goods

Although there is a need to analyse the entire value chain, as sometimes even long-distance transport might be less carbon intense than local production, tightening the supply chain in many cases saves energy and emissions. Hence, the trend towards localization and regionalization helps with resources and the environment. However, new technology and digitization can go well beyond the simple shortening of the supply chain.

The new visibility in the supply chain not only helps identify leakages and misuse but enables new operating and business models, ranging from optimizing delivery routes to tapping into unused capacity enabled by the many platforms of the sharing economy. Additional potential lies in the resources locked in the products which are thrown away every day: electronics, paper and plastics. Asset tracking could help unlock a potential value of about $52 billion annually for consumer electronics and household appliances alone. Repurposing products will be a major challenge and opportunity for governments and companies in the years ahead.

In the modern interconnected and interdependent world, we need seamless global visibility and fluidity of the flow of goods. Businesses seek and will find new sources of value in tracking products throughout the first lifecycle and the recovery for the repurposing. By creating a repurposing capability, the public and private sectors have a unique opportunity to position themselves as modern and responsible players.

In the past, developed and developing countries have benefitted from globalization, with China as the most recent role model of trade-driven growth. Some low-cost labour countries might still be able to repeat China’s success, others need to look for new models. While globalization has driven the rise of emerging markets and global players, it has also paved the way for today’s dense multilayer value and supply platforms, which are the basis of our modern life.

Companies and governments need to update knowledge and adjust strategies. We must keep in mind that despite all the technological possibilities, it is our skills, wisdom and courage that will help develop new business models and drive the necessary policy reforms. As Sachin Maini once said: “While technology makes it possible to do much more than we could without it, it can’t help us decide what to do.”

This blog was originally posted on the World Economic Forum Agenda.