by Luke Branson, Director, PwC Australia
There is currently over $1 billion of unnecessary costs embedded in Australia’s containerised sea cargo supply chains. This story is repeated across other modes of transport and cargo types. A new platform from The Australian Chamber of Commerce and Industry, Port of Brisbane and PwC Australia aims to streamline this process.
These costs are closely attributed to the information asymmetry that exists within Australia’s international trade environment. This in turn is reducing the visibility and velocity of trade and diminishing business interoperability within the supply chain. Compounded by the increasing volume and variability of trade data in an already saturated market of service providers, there is a greater need for digitisation of existing processes.
The Australian Chamber of Commerce and Industry, Port of Brisbane and PwC Australia are seeking to remove the complexities and inefficiencies that exist in the international supply chain through the development of a new ‘Trade Community System’ (TCS) platform.
The challenging state of trade in Australia
The inability for businesses to easily share information creates significant inefficiencies and adds unnecessary costs to international trade. Businesses within the same supply chain are often either unwilling or unable to share or access information in a timely manner, frequently leading to a lack of trust in supply chain data.
Australia’s economic dependence on efficient international supply chains will increase with the growth forecasts of the National Transport Commission indicating domestic freight growth of 26 percent by 2026. This is amplified further when considering that international freight, both sea and air, is expected to expand over the coming decade. Australia’s sea freight is forecast to double over the next two decades, with containerised trade numbers to rise up to 19.4 million by 2032-33. Based on annual growth trajectories for air freight, similar growth is forecast over the next 10-20 years.
Where improvement to Australia’s trade infrastructure is not addressed, it will continue to hinder collaboration, communication and value-generation across the supply chain. To counter this risk, a solution is needed that enables easy use and adoption, trusted and secure sharing of data and sufficient technological agility to meet the changing needs of supply chain participants. Where there is a failure to address this, freight infrastructure may in turn become a barrier to productivity growth in Australia.
Inquiry into national freight and supply chain strategy
The National Freight and Supply Chain Strategy inquiry was conducted by the Department of Regional Development and Cities (DIRDC) to inform of a National Freight and Supply Chain Strategy. The motivation behind the inquiry was to identify the areas where funding could be allocated to improve Australia’s physical and digital freight network to better meet the needs of Australia’s burgeoning supply chains.
Of note, the inquiry identified that a key challenge for supply chain participants is a lack of visibility within the supply chain and difficulty in locating where goods are at any point in time. Diminished visibility was most often attributed to Australia’s lack of digital infrastructure (i.e. the continued use of paper-based records and poor technological integration).
The inquiry highlighted the need for a national freight supply chain strategy that both addresses our expectations of economic prosperity and meets community requirements for safety, security and sound infrastructure for the future.
The Trade Community System (TCS) aims to address the critical action areas identified in the inquiry that are required to lift freight productivity and efficiency in Australia. In particular, TCS presents a solution to three of the critical action areas encompassing: an integrated approach, communicating the importance of freight and measuring freight performance.
With TCS providing a digital and transparent framework, this illustrates a system that strives to provide an integrated approach whereby government and industry can work collectively to promote the importance of freight. Moreover, TCS establishes a consistent solution to freight and supply chain issues, through providing a mechanism focused on enhancing the reliability of freight travel times, when impaired by disruptions.
In contrast to existing traditional Port Community Systems, the TCS drives interconnectivity and operability within and beyond the physical port setting. Systems like these allows for public and private stakeholders encompassing customs, stevedores, freight and companies to optimise, manage and automate port and logistics processes. The TCS aims to create efficiency gains through increased visibility and interoperability across the entire domestic landside supply chain as well.
A trade community system
We believe TCS addresses Australia’s need for a digital solution to our shared problem. The TCS is underpinned by four key principles:
An open, secure and trusted data sharing platform
- The data is owned and governed by its creator
- The platform is operated independently of established supply chain interests
Easy to integrate and start using
- It augments (not replaces) the systems that are already part of Australia’s supply chains
- Users access directly through a web portal or indirectly through their existing systems
Visibility that delivers velocity and efficiency
- The platform will enable goods to flow through the supply chain more quickly and manage avoidable costs and fees
Low to no cost to participate for fair use
- The platform does not make money from charging users to access data about the goods they are managing
- The platform’s revenue comes from the productivity and service innovations that the data provides
The TCS is a platform whereby participants in the supply chain can share information securely and quickly, driving both increased collaboration and productivity. The system enables all stakeholders within a supply chain to securely share their information thereby generating end-to-end visibility.
PwC and its collaboration partners developed a Proof of Concept (PoC) system using real data from one supply chain to first test that the technological concept could be developed. The PoC was developed from January to June 2018 and was suitable for demonstration purposes.
Using the TCS PoC, we have already started to identify significant benefits which would be unlocked through the implementation of a national TCS, and which flow to all actors in the supply chain. These include:
- Reduced costs for supply chain activities – Companies with highly digitised supply chains and operations can expect efficiency gains of 4.1 per cent annually, while boosting revenue by 2.9 per cent a year.2 For example, we have identified savings of half a million dollars per annum for one supply chain of one significant Australian business. This story has been repeated for a number of other businesses we have interviewed through the Proof of Concept project phase.
- Increased visibility and transparency across the supply chain – This will help reduce black spots in the supply chain related to container location and the status of goods.
- Reduced errors from significantly less manual transactions and rekeying of data.
- Improved efficiency in the exchange of information between key stakeholders.
- Competitive advantage, and better risk management associated with supply chain activities.
- Ability to realise savings estimated in excess of $1 billion by resolving unnecessary costs currently found in Australian supply chains.
Pilot planning is underway targeting commencement later this year with the purpose of validating the commercial proposition. It seeks to build and integrate the TCS into participants’ supply chains. Participant’s involvement in the pilot will be for a duration of nine months, with the most active involvement requiring the last six months. The benefits derived from participating in the Pilot Phase encompass, shaping further development of the features of the TCS platform. Moreover, participation will provide fresh insight and perspective from industry experts, allowing for wider business improvement agenda.
So how does it work?
The TCS is comprised of three core technological components:
- The experience layer – containing the technology that governs how users interact
- The data layer – containing the technology that underpins how data relating to supply chain assets and events is interpreted
- The integration layer – containing the technology that manages electronic communications and data exchange with external parties
Testing and proving the technical concept of the TCS focused predominantly on the ‘data layer’ which included the following technologies:
- Asset tagging and nesting
- Chain of custody protocol
- Distributed ledger
The distributed ledger technology (‘Blockchain’) used, formed an integral part of the TCS providing the ‘trust requirement’ necessary for the PoC – the assurance that an immutable, secure and digital receipt of data is recorded as each new supply chain event occurs. Specifically, the Blockchain application was used to place a digital signature of each new supply chain event onto a private distributed ledger. The PoC demonstrated that Blockchain can provide an assurance function and can operate independently of other TCS functions.
What success looks like
The benefits derived from the TCS have the potential to transform every aspect of moving freight through a supply chain. In particular, companies with highly digitised supply chains and operations can expect a boost in revenue by 2.9 per cent and efficiency by 4.1 per cent annually. This illustrates the potential benefits that can be accessed through the implementation of a TCS, which will ultimately allow for Australia to have a greater competitive advantage and better risk management throughout the supply chain.
The TCS has the ability to realise savings estimated in excess of $1 billion by resolving unnecessary costs identified in Australian supply chains. The $1 billion worth of savings opportunities recognised includes a reduction in the cost of doing business, the creation of new revenue streams and better risk management.
Whilst 70 per cent of time is spent processing freight invoices manually by way of document handling, data rekeying and checking/auditing procedures, research has revealed that 30 per cent of freight invoices are incorrect. The introduction of the TCS will minimise manual data errors through greater simplification of communication and the digital transfer of information between stakeholders in the supply chain. Where reduced manual data entries occur, this could provide the Australian economy with enhanced national productivity amounting to $20 billion per annum.
Australia’s trade infrastructure is in urgent need of modernisation to bring us into the 21st century. A truly digital, transparent solution such as the TCS will provide unparalleled visibility across the supply chain for all participants, and help to bridge the evident inefficiencies that have hampered Australia’s international trade and supply chains. The TCS will help to foster greater cohesion across the supply chain and will change the way trade is conducted in this country. That can only be a good thing.
The presence and success of similar platforms, such as Port Community Systems around the world illustrates the benefits that can be achieved from increased transparency across the supply chain. The TCS thus seeks to incorporate and build upon the lessons derived and effectiveness of other systems around the world, and bring this to the Australian supply chain. The future of Australian trade is the TCS and we would invite you to join us in making it a reality.
If you are interested in participating in the TCS, or would like further information, please contact Ben Lannan, PwC Partner – International Trade & Excise at [email protected].