Supply Chain Synergy

8 9 When chemicals giant BASF’s Shanghai operation decided to relocate its merchandise business to China to better serve local markets, it had four key objectives: 1. improve documentary quality; 2. shorten documentation delivery lead-time; 3. optimize costs; and 4. digitalize to allow greater flexibility, especially amid the changing environment of the Covid-19 pandemic. BASF assigned its Asia Pacific Trading Centre in Kuala Lumpur to centrally prepare thousands of trade documents against payment (DP), documents against acceptance (DC) and export letters of credit, for the countries in the Asia market. Its innovative e-trade solution provided an end-to-end handling procedure for documentary trade transactions. This comprised a streamlined processing flow with different counterparties at various locations, and a robust online model to centralize the operation. Digitalization across Asia As Asian corporates rethink and reorganize supply chains and trade Embracing digitalization finance driven by the disruptions caused by Covid-19, the uptake and implementation of digital technology has emerged as a vital tool for managing uncertain operating environments. Despite its increasing relevance, digitalization and its uptake are at best patchy across the APAC region. According to research carried out by Citi in partnership with East & Partners, one in three companies in China, Singapore and Hong Kong are using new, innovative tools for trade. Yet only 6% of companies in Vietnam, 12% in Thailand and 14% in India are embracing the digital uptake. The overwhelming majority of Asian corporates, at 87%, are already using digital technology to track the movement of goods along their supply chains. Beyond that, however, the implementation and use of digital technology is low. Megha Chopra, Asia Pacific Head of Trade Sales and Client Management, Treasury and Trade Solutions, Citi, argues that while digital uptake to boost trade remains nascent in the region, the potential is huge. For one, it improves and accelerates supply chain integration, which is important Digital uptake in trade SUPPLY CHAIN SYNERGY Asia’s recent meteoric rise as a global trading region provides a unique opportunity for companies to leapfrog several generations of technology China 35% Singapore 31% Hong Kong 30% 6% Vietnam 12% Thailand 14% India HIGH LOW How digital is your supply chain? Drivers of change A possible catalyst for change is the agenda of some Asian governments to drive digitalization in cross-border trade. Santosh Dujari, India Sales Head, Treasury and Trade Solutions, Citi, says “in India, improving ease of doing business has been a strategic priority of the government and simplifying cross-border trade has been at the core of this transformation. A few years ago, trade in India was extremely paper intensive, but today, on account of digital platforms and processes, trade flows are completely paperless. We are seeing a digital impetus across the entire trade ecosystem, be it supply chain platforms, trade funding structures or trade instruments.” In the meantime, Chopra explains that Asia’s more recent rise as a global trading region provides a unique opportunity compared to other regions. “Asia does not struggle with legacy systems, so there is a real chance to leapfrog several generations of technology.” 1. TRACKING Tracking/visibility of goods movement 87.4 2. ONBOARDING Digital onboarding of suppliers 18.3 3. USE OF DATA Use of data for stress testing the supply chain 17.2 4. INVOICING Integrated peer-to-peer process with electronic invoicing 13.9 5. COMMUNICATION High level of communication within the ecosystem 11.6 6. VISIBILITY End-to-end visibility from demand to supply of goods 10.4 Over 9/10 companies using digital tools are forecasting export growth in the next year Across enterprises exporting only or both importing and exporting, 1/2 predict exports will increase in the next six months J F M A M J J A S O N D of Exporters of Importers 53% 93% 88% We see big wins coming from digitalizing more of our supply chain process—our suppliers are asking for it, especially DLT (distributed ledger technology) where we’re reducing our processing costs significantly and winning new relationships.” Treasurer, US$1.2bn Taiwanese Electronic Components Manufacturer Digital prowess is a key conduit for growth for reacting quickly and efficiently to a bottleneck, staffing problems or restrictions on movement. Digital uptake can also help overcome signs of rising dissatisfaction with trade loans among importers and exporters. Santosh Dujari India Sales Head, Treasury and Trade Solutions, Citi