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 1
The Constraint: Coordination and Incentives
Everyone seems to be talking about the value of data, the advances being made with AI and the opportunities created across traditional industries. In this opening piece in a five-part series, we expose some deeper insights on how cargo transportation is changing and why data, visibility and technology in themselves do not result in progress. Instead, new value emerges when multiple stakeholders coordinate around the same signal.
Even as mobile assets like containers and railcars are connected, operators, cargo owners, insurers, and regulators must agree on how to use the data. When we founded Nexxiot in 2015 the barriers to progress were largely from limitations in technology. Now we have the technology, the world is facing a coordination problem.
The cargo transportation industry is facing a structural bottleneck based in misaligned incentives and expectations. Many have been asking, why does more data not automatically produce better system-wide outcomes? We often live happily with the illusion of progress. We have more sensors, platforms, and ‘visibility’ than ever before, yet operational friction and uncertainty persist. Insights exist, but coordinated actions are still limited. Questions around data ownership and legal culpability prevail as structural fragmentation grows.
The system we use was built this way through legacy development and design. Asset owners, operators, cargo owners, insurers and regulators operate with separate P&Ls and risk models, with no single system owner. Across the planet this makes it easy to defer accountability and degrade liability. Incentives are mismatched as the cost of deployment is concentrated on asset owners – even though the value of deployment is distributed. Local optimization dominates system wide optimization. Short-term wins are prioritized over long-term advantages across the value network.
Technology alone cannot fix this. Data does not assign accountability, platforms do not really align incentives and AI applications do not resolve commercial misalignments.
Conclusion:
Digital transformation is a coordination challenge where meaningful progress requires governance reform and economic redesign. If coordination is the major constraint, where is the value of digital enablement actually created? Read the next written insight in the series to discover where value is generated and what this means for the wider industry.
Watch out for the next piece in the Insight Series coming out next Wednesday.
