Inextricably intertwined: The Power Paperwork Holds in Global Trade (1/2)
In piece 1 of 2, we take a look into why outdated paperwork has reigned supreme as the base communication tool for companies involved in trade. Vector is a London based supply-chain technology startup.
To understand the role of paperwork in global trade, let’s travel back to the 14th century. A historical period that, whilst part of the ‘Dark Ages’, did bring some advancements for society: the invention of floating cranes, mechanical clocks, plate armour, horseshoes, and one of history’s most durable inventions: the Bill of Lading.
A Bill of Lading (BoL) is one type of trade document issued by a carrier that evidences a contract between them and the shipper, listing all the merchandise within a shipment to acknowledge receipt of said goods. That document is then signed by all shippers along the way to confirm receipt and delivery until the shipment reaches its final destination.
One of the earliest BoLs ever found dates back to the late 1300s, recognised by Bensa in his essay “The Early History of Bills of Lading” (1925). Translated from Latin, it reads as:
1390, the 25th day of June. Know all men that Anthony Ghileta shipped certain wax and certain hides in the name and on behalf of Symon Marabottus which things must be delivered at Pisa to Mr Percival de Guisulfis, and by order of the said Mr Percival who shall deliver all his things to Marcellino de Nigro his agent, and I Bartholomeus de Octono shall deliver all his goods at Portovenere and for the better caution I affix my mark so. A copy. — Bartholomeus de Octono mate of the ship of Andrea Garoll.
Surprisingly, not much has changed since Anthony Ghileta took his consignment to Pisa and tracked the journey using a BoL. They are still widely used in transporting freight worldwide today, alongside an array of other documents added over time — commercial invoices, airway bills, certificates of origin, packing lists, arrival notices, to name only a few. In fact, the average trade activity involves 36 documents and 240 copies¹!
Unlike the paperwork, the technology to convey this communication has slowly changed over time — one of the more recognisable and earlier technological innovations was the fax machine. First invented in 1843 and amazingly still in use today! The device meant that document images could be sent ahead electronically and checked at central offices, whilst their physical counterparts were checked en-route with the shipment. Incredibly in global trade the fax machine’s presence endures into 2020, though for the most part email has superseded fax for sending paperwork scans. The modernisation of information exchange is only one piece of the puzzle, another immensely important piece is the actual document creation and checking process, which has remained largely untouched.
Regardless of whether documents arrive via post, fax machine or email, the laborious efforts of understanding and actioning the documents’ contents remain burdensome. For trade involved companies today huge swathes of paperwork still means huge manual labour efforts to process it.
Why does paperwork reign supreme?
International trade relies on a fragmented ecosystem made up of exporters, importers, banks, freight forwarders, vessel operators and multiple modes of transport, who all combine to ship goods globally. With so many players from all over the world, 27 entities involved per trade activity and 8 billion shipments per year², standardisation of information exchange is nigh-on impossible.
Paper solved this communication problem. It has acted as the universal medium, its role as messenger deeply embedded through millennia of historical use, dating back as far as 25–220 AD in the Eastern Han period in China³. Long standing usage aside, paper offers flexibility, a carte blanche without restrictions on how information is expressed on the page. Perfect to serve a myriad of different companies’ styles. Finally, paper has been readily accessible, in volume and in price, with the standard cost of a piece of paper and printing standing at half a cent, in sterling terms less than half a pence⁴. Now, with the rise of software and the internet combined, the likes of Microsoft, Google and Adobe offer digital paper without the need for a tangible copy printed.
Every trade transaction is nuanced — each has its own unique insurance, financing, goods & requirements. Paper captures this variation. Historically, trade companies created unique documents that catered for the idiosyncrasies of each shipment. That might mean building a new document all together, editing existing documents by hand or changing their format to suit a new shipment type. The end result being a high volume of documents and an unruly mess of information locked up in physical form.
So, what’s the big problem?
The main issue is labour. Due to the challenging nature of these trade documents, in which diverse layouts, handwriting, watermarks, stamps and tables prevail, enormous manual handling has been required to date.
For the major logistics players — such as super-markets, freight forwarders and trade finance banks — who deal with multiple trade-involved companies, volumes can reach in the millions of documents annually! In many cases, managing the process of understanding and recording key information takes hundreds, if not thousands of employees’ manual labour and makes tracking information within the documents for audit a real challenge.
When you rely on man-power alone, it means companies are open to human error. Something simple like a weight or date incorrectly inputted, triggers a communication back to the supplier to seek correction, which can lead to delays of hours or days. If one small sub-shipment is wrong it can hold up an entire shipment at customs. Delays lead to storage costs, late delivery penalties and — in the case of perishable goods — possible wastage.
Relying on paperwork also makes it difficult for logistics-involved companies, such as freight forwarders or trade finance banks, to provide great customer service. As well as slow turn-around times, customers have to follow a long, fragmented paper trail or await manual updates to understand the status of their shipment’s journey, customs clearance or financing approval.
The paperwork problem isn’t going to get any smaller. As one of our customers told us, post Brexit they expect even more documentation to process international shipments. Indeed this hot topic has captured headlines across the broadsheets as discussed in our last blog, The Brexit Burden, with reports suggesting an incoming 400 million extra customs forms annually for UK and EU businesses.
Evolution pending: Loading the digital era
Compared to other industries trade is still living in the digital dark ages. There’s huge scope for bringing in technology to revolutionise archaic processes — be it by using drones for last mile delivery, self-driving trucks or the use of AI to reduce the workload on operators.
Speaking with a top ten freight forwarder and many smaller logistics players the consensus is clear regarding paper and the unruly information stored within it, it is not going anywhere fast. In a highly fragmented market, no single party holds the power or permission to dictate a new, singular digital standard.
However, protecting the status quo, especially with ongoing pandemic risk and - for those closer to home - Brexit, means a heavier, more cumbersome paperwork burden pressuring freshly remote operations and the bottom line. As the number of documents increases, the time taken to process each transaction rises - it’s harder to find the right document in a pack of 100 than it is in a pack of 10 documents! Even more so for cross-referencing and validating information, such as the consignment number, from one document across all the other documents and data-feeds referenced in a transaction.
Digitisation is like a flywheel. It’s much easier to add technology into a digital workflow than into a manual one, although the first move can often be the hardest. However, advances in integrating technology solutions and cloud computing means deployment can be a matter of days, not months. The barriers to adoption are lowering all the time.
For us, manual data entry and processing of data remains an outstanding and critical mission in trade’s quest for digital transformation. Today, Vector’s cutting edge AI can unlock digital access to the messy information within trade paperwork without demanding that millions of diverse companies conform to one standard way of inputting data.
The Vector platform is the pioneering universal adaptor for global trade’s unruly information. Our solution transforms the chaotic data in physical paperwork into ordered digital form, effective for remote-work: creating data visibility, facilitating communication and providing actionable insights to accelerate trade, customs and financing approvals. For one freight forwarder their first transaction with Vector resulted in a typically 40 minute-long task reduced down to only 4 minutes.
Vector liberates the time and resources to increase trade-involved companies’ capacity to grow their commercial reach, focus on customer experience and do so whilst reducing operational risk and lack of auditability. For the humans behind the operations, Vector removes the stress and monotony caused by the manually intensive tasks that dominate their day-to-day roles.
This is just the start. With Vector’s dedicated engineering team researching and applying frontier technology, communication of all trade-related information can continue to evolve from The Dark Ages, beyond the paperwork first used in Anthony Ghileta’s 1390 voyage, and into the Digital era.
Author note: Many thanks to Thomas Lovelace, Vector.ai’s MBA Summer Intern, who helped contribute to this article!
Vector.ai: Your Paperwork Co-pilot ™ — We help teams process paperwork 10x faster.
Vector.ai specialises in transforming logistics and trade-finance paperwork and workflows with machine learning. Wave goodbye to manual data entry, we use cutting-edge technology to automate digitisation, understanding and checking of trade documents. Get in touch at contact@vector.ai
Sources
¹ ² JPMorgan, 2017 Trade Outlook Key Factors
³ Wikipedia, History of Paper
⁴ Toner Buzz, How to accurately calculate your printing costs
