Despite rapid technological change taking place across the world’s economies, global trade remains stubbornly analogue.
Business processes in trade still rely heavily on human judgement based on limited and imperfect information and the labour-intensive manual handling of paperwork, Westpac says.
However, Westpac’s Trade Innovation Project provides a glimpse of how trade might operate in the future.
The result is a proof of concept automated trade application, which brings together the internet of things (IoT), artificial intelligence (AI), data analytics and blockchain, in what the bank believes is a world first.
“The crux of the proof of concept was to prove these technologies can work together in a seamless way to complement each other to solve a pain point for the customer,” says Jane Cole, Global Product Head of Trade Finance.
The bank worked with Ausreo, a provider of reinforcing steel, and technology company Infosys
to develop an automated demand forecasting and ordering system for Ausreo’s 20mm steel coils.
The system does four things:
- It uses data analytics and machine learning to create prediction models for coil demand and price, based on historical data.
- The Internet of Things provides improved stock tracking, and the data feeds into the demand and price model, which in turn calculates predictive stock level requirements for the next two months.
- It incorporates an intuitive user interface, which draws on demand data, internal and external pricing data and indexes and stock levels to create recommendations and alerts for a procurement manager to act upon, including optimal price and supplier.
- A purchasing system uses blockchain to handle the complete purchase flow, starting with purchase order generation, invoice generation, bill of loading uploading, order acceptance and payment instruction to the bank.
Cole says that when Westpac compared how the automated system worked to the traditional way of working, it found it was highly accurate in predicting what needed to be purchased and from whom when compared to historical data.
It also saved a lot of time for Ausreo, with the procurement, operations and inventory managers and the CFO no longer needing to spend hours collecting data and making calculations for purchasing decisions. “By using data and internet of things devices, the system was able to measure where their inventory was with the business. The ability to get to that decision took hours instead of days,” Cole says. The system also meant less reliance on human judgement as the data allows for better decision making.
Applying technology to customer pain points
Cole says when Westpac started work on its automated trade application, they didn’t set out to have technology take over the whole process, but rather to complement the human interaction. It’s an important distinction from other technology proof of concepts, which sometimes take an all-or-nothing approach.
“The technology does not need to solve 100 percent. If you can get half the technology do a portion – and, hopefully, as big a portion as possible – but then also bring in the human element into it, that sometimes is the winner,” she says. “A lot of people will shy away from doing it because they think it can’t solve 100 percent.”
In fact, it was important to retain some element of human judgement and allow humans to sometimes override the system, because they could have information which could change decisions, such as a potential big customer order coming down the line.
Cole was also adamant that the project involved a mid-sized corporate business like Ausreo rather than a huge corporate with large funds to invest in the project. Also, pilot customers from diverse industries such as printing and mining were also involved in the design of the project to ensure scalability across industries.
“If we’re serious about digitizing trade, it’s got to be accessible,” she says. “The digitization and the innovation has got to be accessible to the medium companies because that’s where the volume is. The higher value deals are at the top end. But, by and large, the volume sits in that medium, mid-corp space.”
The project also provides a lesson about how to best deploy technology. Cole says much of the hype around blockchain, for instance, has been about the technology looking for a problem to solve.
Westpac’s approach was to first talk to customers and find their pain points and then apply the technology.
The project currently remains a proof of concept, with no immediate plans to commercialise it, but Cole says the project can be used as a template for trade automation in other industries.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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