The Coordination Problem in World Trade
Supply chain participants struggle to act on data, but this is changing fast
Daniel MacGregor – Co-Founder of pioneering digital supply chain enabler, Nexxiot
Why have supply chains historically struggled to act on data? Where is value created when they do, and how can stakeholders across the ecosystem respond as the conditions for coordination begin to change?
World trade functions as a network of independent participants including asset owners, carriers, operators, shippers, freight forwarders, insurers, regulators and financiers, each seeking to manage their own risks, incentives and constraints.
Over the past decade, progress has been made in digitalization. More assets are connected, more data is available and multiple platforms promise visibility and the chance to optimize.
Yet the underlying challenge remains: data alone does not result in coordinated action.
Insight 3
A Prerequisite to Progress: Accountability and Trust
Digital enablement forces supply chain participants to face a new question. If the data shows what happened, who accepts responsibility? In the past, it was unlikely that other stakeholders in the network would ever know about incidents that happened on the journey. Now participants can see every bump and pause in the process. Who is responsible for asset and cargo damage, custody transitions and delays? Now, the industry requires strong trust frameworks because the data now indisputably carries consequences.
These advancements pose a new question. When is data ‘good enough’ to trigger decisions, liabilities and contract fulfillment? We can think of data in different categories of actionability – ranging from advisory to binding – from basic information as insights, to complex asset intelligence, to operational triggers and contractual execution. It’s vital that industry participants work together to establish the conditions required for multi-party coordination.
If the future of digital supply chains relies on high levels of trust, what is required to reach these high standards? Standardization and interoperability, integrity and security, shared definitions (ontologies) and audit capabilities built-in by design.
Other important questions to ask include who is accountable and liable if the data or interpretation is wrong? How can we establish feedback loops to improve accuracy? How do we get consensus on decisions based on data from the network or other parties’ systems? How can we ensure aligned governance across organizations and borders?
These questions have important implications for the entire ecosystem of supply chain participants, actors and service providers. The automation of actions based on collective data, shared signals and ‘hard’ event confirmations, requires strong standards bodies, regulatory oversight and insurance mechanisms that are aligned with new levels of certainty.
Conclusion:
Trust precedes scale. Without trust, action remains optional, uncertainty around status and outcomes remains. Optional network-wide systems do not transform industries. Once a higher standard of trust exists, new possibilities of working together are possible and so the next challenge becomes economic alignment – explored in the next insight.
Watch out for the next piece in the Insight Series coming out next Wednesday.
