Digital future

From the December 2018 print edition

The evolving role of technology in the global supply chain was a central theme during the 70th-anniversary Canadian Freight Forwarders Association (CIFFA) conference, held in October in Toronto. Technology trends such as drones, blockchain, artificial intelligence and the digitized supply chain took centre stage during the two-day event, held in partnership with The International Air Cargo Association’s (TIACA) Air Cargo Forum and Exhibition 2018.

The notion of digital transformation within supply chains and transportation ran through the conference, with the opening plenary discussion investigating the progress made in the cargo world towards embracing digital change and innovation.

But that transformation is not purely about technology, said panellist Arnaud Lambert, CEO of Champ Cargosystems. The attitude people adopt towards those new technologies must also change for a transformation to be successful. He recommended hiring young talent to focus exclusively on enabling change. “That would be for me the best investment for your company, because you have a traditional business that needs to evolve and you also need to evolve your customer with it,” Arnaud said.

Fellow panellist Dheeraj Kohli, VP and global head of Unisys, noted that digital transformation involves removing the friction that can exist between people and processes within organizations. Technology is an enabler for the removal of that friction. Kohli recommended breaking down the process of digital transformation into smaller pieces—anywhere there’s friction, something isn’t working optimally, he told the audience. First, look at what’s behind the desire to transform. “If you use technology, wonderful. And if it’s disruptive technology like blockchain all the better,” he said. “That’s how I define a successful transformation—anything that enables things to become better.”

Nicole Verkindt, founder and CEO of technology company OMX, noted that while many stress the importance of adopting new technology, organizations must look where technology can add value rather than merely seeking what’s new. “Where are the areas where you can determine what the value is that you’re delivering to your customer and where can you get a leg up by implementing technology?” she said. “There’s a way to look at the areas of your business that can be automated and where the value is and then look at those areas, as opposed to just adopting technologies because you see that they’re the new trendy thing.”

The panel also discussed whether the speed of digital transformation was a threat to security. Lambert noted that not only was speed a challenge, but so too was the quantity of information produced—what he called “the tsunami of data.” The process’s speed was noteworthy in air cargo, given the different transport modes involved, he said. At the same time, e-commerce is setting a different pace for air cargo that is set to accelerate.

Security is key, everyone wants transparency and organizations must ensure they have the right data and use it correctly, said Arnaud. “And still the weakest link there remains the human,” he said. “You can have all the machines and technology on board, but still security breaches are, 100 per cent, pointing to a human. You can have the best investment in the world on the security side, but humans are still key.”
The panel also debated the merits of being an early technology adopter. Verkindt noted that blockchain technology replaces a ledger system—for example for supplier performance and tracking goods—that organizations don’t want edited. “Those would be areas of the business where I’d look at blockchain—areas where you’re really trying to track information,” she said. “Supplier performance could be one area, but I think it’s going to take some more time. Ripping the Band Aid off of blockchain would be changing the way you’re tracking your activities.”

The first step in early adoption involves learning, Lambert stressed. Organizations can try to adopt and, when a company finds the right technology for a specific purpose, can then use that technology to its advantage. “You need to try it,” he advised. “You can read all the books about how to swim, but unless you’ve been to a swimming pool you don’t know you’re ability.”

The choice to become an early adopter is ultimately a company’s choice, said panellist Yuree Hong, founder of S/He Blockchainers Asia. Hong’s question for the audience was: do you want to be an early adopter or engage with technology once it’s in the market? Digitization will happen, Hong said, and the question is simply when and how. “It’s your choice if you want to be an early adopter,” she said.

Supply chain risk
Another conference session dealt with risk in the supply chain. One of those risks involves protectionism, noted Jeff Fraser of Livingstone. As there are protectionist actions from different countries on various products, he advised making adjustments to products to either change tariff classifications or country of origin. “However, we have to remember that has potential downstream ramifications on qualification for trade agreements and re-export,” Fraser told the audience.

As well, the auditor general released a “damning” report last year on compliance in Canada, Fraser said. The report cites several areas needing rectification, including invoice information. Overall, 74 per cent of descriptions on an invoice coming into the country do not meet the proper classification, Fraser said. That creates a second issue, which is an over 20-per cent error rate in classification. According to the report, the penalty structure in Canada is too lenient to drive compliance, and recommended increasing those penalties. As well, refund options are too importer friendly and the report advised against lowering duty rates for non-preferential trade agreements. “These are some things that are driving customs behaviour as far as audits and changes to the process go,” he said.

The devil is in the details, Fraser noted. For example, the US introduced tariffs on steel and aluminum, which grabbed headlines, but as a result Canada has seen surtaxes on items like jam, pizza, and ketchup among others. “Retaliation is never completely equal,” he said. “It’s always different for each country.”
To help attendees gauge their risk and resilience levels, fellow speaker Kim Campbell, founder of MK Marin Trade Services, discussed transformational trends in supply chain. She touched on the secure corridor concept, an unmanned primary inspection line that CBSA began piloting last summer. The pilot involves having trusted trader carriers with RFID tags on their trucks that are used when the carrier approaches the booth at the border. Cameras take pictures of the driver’s face, the vehicle’s license plate and other details around the truck. “The officers will be monitoring this from a remote location,” Campbell said. “There will be voice communication, so if they want to ask a driver, they can do that from the booth.” The end goal was that potentially trucks would not have to stop at all.

Fellow speaker Gavin Magrath, barrister and solicitor with Magrath International Legal Counsel, told the audience that dealing with change is something businesses have always done. Facing technological change is not that different than in other areas of commerce, Magrath said. “It just presents a specific lens for looking at change,” he said. Regarding trade, a big change that has received little attention involves CETA—the Canada-Europe trade agreement. Through CETA, Canada has gone from having about 50 per cent of goods traded with Europe covered by tariffs to about two per cent. “That really presents some really big opportunities for Canada and European trade and I don’t think that those have really been recognized yet,” Magrath said.

Martin Adabi, counsel, transportation, with Borden Ladner Gervais LLP, discussed the CTTPP trade deal—the new free trade deal with several Asia Pacific and South American countries. The deal, Adabi said, was a “tremendous opportunity” for Canada due to the size of the market covered. But the strengths and weaknesses of the deal depend on the company, he added. In discussing threats, Adabi highlighted uncertainty regarding law, currency and the fact that things can simply take longer in Latin America. Technology there lags compared Canada, and political uncertainty can mean policy changes.
Overall, the conference provided attendees with the information they’ll need to prepare them for the opportunities that technological transformation is providing the supply chain.