As digital transformation's importance has continued to grow, international trade has proved to not be indifferent to its impact. Since the global financial crisis, cross-border capital flows have plummeted, with banks pulling back in response to new regulation. Investment has been anemic for years and the expansion of global supply chains seems to have reached the frontier of efficiency. None of this is to say that globalization is in retreat. Rather, it is becoming a more digital phenomenon.
For more than a decade now, new and powerful digital approaches to commodity trading have come to the fore. The world is entering into a period of an “even more rapid” digital change. Digital technologies are transforming the commodity trading value chain. At the front-end, machine learning and algorithmic trading have had a significant impact on pre-deal analytics and revenue generation, while in the back office, process automation has resulted in efficiency gains.
Some of the ways digitalization can be seen transforming the commodity trading scene are – • Customer insights/reach – Digitalization offers data analytics on customer information and insights that will enable a 360-degree view of a customer’s needs and preferences thereby offering benefits of real-time as well as high-resolution business insights to the commodity trading industry. • Productivity – The impact of digitalization on labor productivity levels will be profound. Productivity levels will increase due to a more targeted management of labor force and automation of business processes. Algorithm-based trading systems are being widely used, and this enables information to be analyzed in a much faster and accurate manner. • Supply Chain – Companies are also using real production lines as well as real-time supply chains. These have sensors for determining the precise location of commodities and the pain points in the distribution channels so as to eliminate them for an optimized customer experience. • New Value Pools – Digitalization will allow for more precise and focused capital investments when it comes to commodity trading. It is enabling digital prototyping, on-demand cloud, digital consulting, made-to-order, high-speed trading, analytics based forecasting, digital savings/wallets/credits, and digital identity among others.
Though digitalization is imminent for the commodity trading industry, but the truth is that it does not come on the cuff. The larger the legacy of digitalization the more disruptive it will be.
Some points for further discussion can be – • How will digitalization affect the commodity trading business model • How to best identify areas where value is being created • How blockchain can revolutionize financing of trade • Digitalization of risk and compliance.