Can digitization help supply chains steer clear of backlogs?
By Nigel Hook, TradeSun CEO and Founder; Board Director of the FBI Citizens Academy
The California State Transportation Agency, in hopes of building a more resilient and sustainable supply chain across the state, issued guidelines for a $1.2 billion funding package for port and freight infrastructure projects in October.
“After decades of neglect, we are finally making the critical investments needed to modernize our ports — helping us to keep up with demand in a way that is environmentally sustainable and brings our distribution process into the 21st century,” said Governor Gavin Newsom in a statement about the funding.
Finalized in the state budget at the end of June, the program plans to make long-term upgrades that will increase the capacity to move goods throughout the state while reducing environmental impacts on neighboring communities. It follows an executive order in October, 2021 that urged state agencies to develop solutions to support the movement of goods.
Forty percent of ocean containers imported into the U.S. enter through the nation’s two busiest ports, Los Angeles and Long Beach. Both have acutely felt the impact of stressed supply chains and congestion on the docks and beyond. At one point last year, more than 100 vessels were waiting to unload thousands of containers outside of the ports. Meanwhile, a lack of truckers and warehouse workers across the state has further taken its toll.
The funding package is a welcome boost to revitalize aging infrastructure and bring in new technologies that will make supply chains across the state more resilient and efficient. There is, however, a lot of work to be done in ensuring that supply chains meet the demands of the modern era.
What many might not know about the global supply chain and trade system is that propping up this trillion-dollar sector is paper — lots of it. Vital documents such as bills of lading, purchase orders and customs forms nearly always take a paper form, which are inefficient, unsustainable and can be easily manipulated by fraudsters.
Additionally, owing to their global and complex nature, supply chains often lack transparency, which hampers their efficiency and makes it more difficult to measure their impact on the planet. A retailer selling coffee products by different brands, for example, might have little visibility over the coffee bean supply chain involved in the making of those products.
By digitizing documents and data, supply chains can realize cost savings, promote transparency, reduce risk and boost efficiency across California.
Part of the difficulty in achieving that goal lies in the supply chain’s fragmented nature, and the need for all stakeholders in the chain to agree on an initiative for it to progress. For example, the electronic bill of lading (eBL) has been around since 1999, and yet adoption is low — eBLs account for 1-2% of all bills of lading in circulation — because many authorities simply do not accept them as legitimate documents.
There are additional efforts to digitize supply chains at the national level. The Freight Logistics Optimization Works, or FLOW, was launched in March by the Biden Administration to pilot key freight information exchange between parts of the supply chain.
FLOW includes the ports of Long Beach and Los Angeles, Georgia Ports Authority, ocean carriers CMA CGM and MSC, terminal operators, businesses including Target and Albertsons, and logistics and providers such as FedEx and UPS.
“We can further strengthen our goods movement supply chains by making a … bold improvement in a digital infrastructure to connect the supply chain,” the Biden Administration stated in March. “Recent supply chain disruptions have raised national awareness of the need for improved information exchange.”
Indeed, effective data-sharing across the private sector that adheres to data-protection and privacy rules could vastly improve supply chain processes by streamlining information and breaking down existing data silos.
At the global level, the World Customs Organization and United Nations Conference on Trade and Development signed an agreement in October to advance supply chain digitization and data-sharing for global trade industries.
Following the recent supply chain chaos, it’s clear that California needs to modernize its trade and logistics system. The $1.2 billion funding issued by the transportation agency should be used to revamp aging infrastructure and introduce digital capabilities that can support a more efficient and sustainable system fit for the modern era.