Australia has an enormous amount of economic opportunity lying at its doorstep in the Asia Pacific. But without addressing the shortfalls in its logistics industry, it cannot fully capitalise on the potential at hand.
A succession of federal governments have sought to provide support and incentives for international traders, but that can only go so far without addressing a key problem: the logistics sector has emerged as an achilles heel to the Australian economy.
Trading in
problems
The industry has failed to embrace automation and digitisation; digital platforms that exist work exclusively of each other rather than together to streamline processes, while the potential held in data all along the supply chain goes untapped. The result is that Australian trade practices are at best stagnating, or at worst, regressing.
In a region as dynamic, industrial and innovative as the Asia Pacific, a reluctance and inability to adjust could have sizeable economic repercussions and cast our country in an inauspicious light.
As it stands, Australia sits at 95th spot on the World Bank’s ‘Trading Across Borders’ ranking. That’s an astonishing slide from 2011, when it was 34th. Now, the nation is lagging behind peers New Zealand, which is 56th, Singapore, at 42nd, and the US, at 36th.1 The ‘lucky country’ ranks well behind other developed economies, yet closely alongside its number one trading partner China, at 97th.
A sinking
ship?
To understand why Australia has fallen so rapidly, its shortcomings are exposed when considering the hallmarks of the highest ranking countries of the ‘Trading Across Borders’ list. These include:
- Allowing electronic submission and processing of information required by customs
- Linking agencies through an electronic single window
- Using risk-based inspections
- Overcoming geographic barriers through regional cooperation
- Sparking competition by making private participation easier
- Upgrading trade logistics infrastructure
- Promoting efficiency in product-specific inspections
Our costs to import and export (border and documentary compliance) are higher than those of similar size economies and regional allies. The time taken to import and export also leaves much to be desired.2 Clearly, Australia is falling well short and is alarmingly on a downward trajectory.
This reality has large impacts on not only those in the supply chain, but the economy as a whole. It has been found that a mere 1% improvement in productivity and efficiency in logistics processes could deliver A$2 billion in benefits for the Australian economy.3 So why hasn’t this happened, and what can be done about it?
Paying for
inefficiency
At present, a lack of digitisation in the logistics sector means manual processing remains the norm. While the advent of email naturally reduced the use of paper, the current processes used by freight forwarders, customs brokers and trade finance have remained, for the most part, the same with minimal evolution. Part of the problem is that, while systems are not completely analogue, they are set up to reward inefficiency and duplication rather than innovation. For example, a perverse situation has arisen whereby some players in the supply chain derive significant income from late fees and penalties – and they are able to do so because their customers and their customers’ customers have limited visibility over their cargo.
Consequently, an estimated A$1 billion of value is tied up in these outdated and antiquated practices, and it’s the small to medium enterprises that suffer the most. The current system is one which forces SMEs to pay freight forwarders, customs brokers and others on the supply chain to engage in ineffective processes on their behalf. This worsens any pre-existing inefficiencies in the logistics sector and is a possible cause for Australia’s sharp fall in its ‘Trading Across Borders’ ranking.
A digital
solution
The value can be unlocked and several organisations have pooled together do something about it. Over the last few months a consortium of PwC, Port of Brisbane, and the Australian Chamber of Commerce and Industry have designed and built the proof of concept, a working design, of what we think is the right digital platform on which industry can collaborate and share data. We’ve called it the Trade Community System and believe it will provide all participants with the end to end visibility and opportunity to drive productivity through innovation.
Rather than replace the many systems that govern various slices of today’s supply chain, a costly and logistically improbable if not impossible task, the system instead links actors and independent platforms via secure blockchain technology. In this way it augments and plugs into, rather than replaces, other systems – even those being currently developed – and securely facilitates the transfer of data to enable visibility.
For instance, using the platform, a shipping container and its cargo can be tracked through various ports, companies, transport methods and nations to ensure the chain of custody, integrity of its contents and transit time. At every point of the journey, all players on the supply chain can see where goods are, identifying unusual activity or delays. For trucking companies, as an example, this means the ability to plan ahead, avoid bottlenecks and leave less cargo sitting around on the docks.
While the PwC backed platform goes beyond ports and covers internal logistics, it is not alone in its goals of disrupting the status quo. Similar initiatives around the world also aim to connect rather than replace, such as IBM and Maersk’s tackling of shipping line systems and Singapore’s success with its TradeNet platform.
Through such initiatives like these and PwC’s Trade Community System, there is an aim to extract and enhance value that has been previously unattainable in an industry reticent to change and innovation. The potential for growth, streamlined benefits and new revenue streams is huge.
Connecting for
efficiency
There is a glaring need for Australia to modernise its trade infrastructure.
By embracing automation and new technologies, Australia can foster greater connectivity and trust across the supply chain. These changes will enable a more efficient trade landscape and enhance Australia’s reputation as a great place to do business.
With implementation of digital innovations, we could – and must – move up in our rankings from the lowly 95th place when it comes to ease of trade. Let’s aim for number one.
