In the third episode of our four-part series on technological disruption, Oswald Chan discusses the extent to which technology can reshape the entire process of the industry supply chain - from logistics management, retail inventories to trade finance transactions.

Online shoppers nowadays demand more convenient and flexible pickup solutions as they want to get their purchases faster. With the burgeoning cross-boundary e-commerce platforms, rising e-commerce shipments pose a challenge to the logistics industry to make deliveries sustainable.

Hong Kong's online shoppers can now enjoy faster and greater flexibility in receiving their packages with extended hours of pickup at reduced fees if they choose the cross-boundary e-commerce operators that have opted for the new delivery solutions provided by UPS.

The United States-based logistics service provider announced the alternative delivery locations (ADL) service in cooperation with Shenzhen-based logistics company SF Express in June.

After completing online purchase transactions, customers will receive a pre-alert text message on their mobile phones ahead of the shipments' arrival in Hong Kong. They can choose to collect the goods at a designated alternative location either in a locker or a physical store operated by SF Express without any additional charge.

The pre-alert text message will generate a security check number for customers to type in to authenticate their identities when collecting purchases. These designated lockers and stores span 500 locations in the city, covering major residential and commercial districts.

The new delivery service allows online shoppers to receive their shipments in a preferred location at their convenience, other than their home or office, thus reducing missed deliveries. The delivery solution also gives consumers greater control in the delivery process.

The ADL service is one of the initiatives unveiled by UPS in applying technologies to streamline logistics services. The logistics titan is investing $1 billion each year to create new technology platforms to provide value-added services to its customers, such as e-commerce operators and global retailers.

UPS has developed its air cargo freight system, whereas it can monitor air routes to save energy costs and achieve the company's other environmental-friendly objectives. The company has also installed the technology-powered system to scan package labels to prevent goods containers from being mistakenly put on the wrong freight plane or delivering goods containers to the wrong destination.

The transportation company has implemented its global goods container tracking system to ensure full visibility and traceability of the logistics process, while the need for customs clearance can also be met.

"With the proliferation of e-commerce, the supply-chain and logistics service segments have to respond accordingly. E-commerce and technology have already been intertwined to boost efficiency and meet customers' demand for fast delivery," said Lauren Zhou Li, managing director for UPS Hong Kong and Macao.

Apart from logistics players, Hong Kong is striving to embrace technology in infrastructure facilities. In 2016, Airport Authority Hong Kong and the Hong Kong Applied Science and Technology Research Institute set up a joint research center to look into new technologies that can transform Hong Kong International Airport (HKIA) into a smart airport.

Trial projects underway include a barcode and radio-frequency identification scanner that allows passengers to print luggage tags at home and then check in luggage themselves. A driverless tractor trial is also underway.

The airport is also looking at ways of expanding mobile check-in and baggage pickup services to off-airport locations, such as theme parks, hotels, convention centers and cruise terminals. HKIA is further exploring how facial biometrics technology can be used at check-in, boarding pass checkpoints and when boarding aircraft.

Besides finance, logistics is seen as the industry that's most intrinsically predisposed to utilizing technologies such as blockchain, and ranks the highest in terms of scope for innovative applications of technology that creates value.

"Blockchain's tamper-resistant and distributed data storage features enable us to improve traceability and transparency for logistics and supply-chain management. These characteristics will be put to use in optimizing business transactions and trade relations," said Sunny Lu, chief executive officer at VeChain, the research and development team of more than 50 professional blockchain application developers based in Shanghai.

"A great many more enterprises will begin using blockchain when the technology is supported by comprehensive policies. When policy is established, enterprises that have already applied blockchain will have made substantial headway, and will stand to reap the benefits," said Cheung Chun-yin, PwC China partner.

According to research company Transport Intelligence, the e-commerce logistics market in the Asia-Pacific region is expected to more than double - from $108 billion to $232 billion - by 2021.

To cope with the growing trend of technological adoption in the logistics sector, Australia-based logistics property developer Goodman Group said in May it plans to build a warehouse with robots receiving, sorting and storing goods, at a site in Tuen Mun it had secured for HK$2.75 billion. The project, opposite the River Trade Terminal container port, is expected to yield a total gross floor area of 852,000 square feet and be valued in excess of $750 million after the project's completion.

The logistics property developer sees e-commerce players now representing 60 percent of its business, and plans to build a high-quality, modern logistics facility on the site to accommodate the latest advancements in automation and robotics rarely seen in Hong Kong.

In addition to the logistics business, the adoption of technology is becoming prevalent in the entire supply-chain process for value creation.

Robotics tie-up

Li and Fung - a Hong Kong-based supply-chain solutions provider - has stepped up the creation of its fully digital apparel supply chain for apparel and textile products by teaming up with US robotics startup Software Automation.

The Atlanta-based robotics startup has developed its proprietary fully automated sewing technology Sewbot to accelerate the full digitization and manufacturing automation of the supply chain in the household goods, footwear and apparel industries. The partnership will initially focus on the supply chain of T-shirts, with the potential to expand to other product categories in future.

The Sewbot technology allows customers to take a self-portrait photo via an app, which will gather precise body measurements. The data will then be sent to the nearest plant where Sewbot will make the clothing item.

Utilizing a single operator, the Sewbot technology can produce one complete T-shirt every 22 seconds, which is twice as fast as manual sewing.

With the capability to produce tailor-made and locally made apparel products, the new technology can completely convulse the fashion supply chain, whereas retailers can have zero inventories, and return costs could be slashed drastically for retailers and e-commerce operators.

Digitizing the production portion of the supply chain presents a game-changing opportunity for manufacturers and suppliers. Technology solutions like automation will enable manufacturers to deliver better productivity and efficiency and create new, higher-value employment opportunities for their employees, such as engineers and technicians.

"Using those learning to scale the technology and create customized solutions for our supplier network around the world will benefit not only our suppliers, but also all our stakeholders along the supply chain," said Spencer Fung, group chief executive officer at Li and Fung.

Trade finance is another segment in the logistics industry that benefits from the technological application. With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.

Seven banks in Hong Kong, including Hong Kong and Shanghai Banking Corp and Standard Chartered Bank Hong Kong, will jointly launch a blockchain technology-based trade finance platform next month. It's expected that more banks in the city will join the platform.

According to media reports, this platform is built based on the technology provided by a fetch subsidiary company of Ping An Insurance Group Co of China. The blockchain project is aimed at digitizing documents and automating processes to reduce risk and increase the financing capability of the banking industry.

Besides retail banks, the city's de facto central bank - the Hong Kong Monetary Authority - is gearing up to build the blockchain technology infrastructure, vying to link up with trade finance platforms in other jurisdictions to further facilitate cross-boundary trade.

The HKMA has tendered for the Global Trade Connectivity Network, a distributed ledger technology-based trade finance platform initiative, with the Monetary Authority of Singapore. The platform is expected to commence service in the first quarter of next year.

HSBC and Dutch-based ING Bank have already executed the live trade finance transaction for agricultural company Cargill using blockchain technology, drastically slashing the paper-based documentation exchange time from the original five to 10 days to within 24 hours.

In early May, a Cargill shipment of soybeans was transported from Argentina to Malaysia via Cargill's Geneva and Singapore subsidiaries. The letter of credit facilitating this trade finance transaction was completed digitally on R3's Corda blockchain platform, supported by 12 banks.

"The improved operational efficiencies, greater security with real-time tracking of goods and documents, and automatic reconciliation of payments will help boost both intra-regional and international trade flows," said Ajay Sharma, Asia-Pacific regional head of global trade and receivables finance at HSBC.

According to the United Nations Economic and Social Commission for Asia and the Pacific, digitizing all of the Asia-Pacific region's trade-related paperwork could slash the time it takes to export goods by up to 44 percent, cut costs by as much as 31 percent and boost exports by up to $257 billion a year.

Nine major European banks, including HSBC, established the live blockchain-based trade platform we.trade in October last year. As of late June, seven trade finance transactions supported by four banks had been completed by 10 companies from five countries on the platform.

At present, the trade finance transaction platform operates across 11 European countries, and the next step will be to attract more banks and their customers to join we.trade.

The platform is built on IBM blockchain technology and is powered by Hyperledger Fabric, offering customers access to a simple user interface for trade finance transactions.

http://www.chinadaily.com.cn/hkedition/2018-08/17/content_36778961.htm