While digitalization is advancing across all sectors, trade operations remain largely analog.

The reality is that nearly 40 different types of documents must be exchanged among numerous companies -- including shipping lines, shippers and logistics providers -- and communication still relies heavily on phone calls, fax and email.

In recent years in particular, disruptions in international logistics stemming from situations in the Middle East have further highlighted the drawbacks of analog processes that had previously gone unnoticed.

In mid-July, Sekisan Co., a Japanese port logistics company based in Yatomi, Aichi Prefecture, received a call from a freight forwarder -- a company that handles the arrangements and procedures for international freight transport on behalf of clients.

The caller informed them that a container ship scheduled to arrive at the Port of Nagoya in two days had been delayed, pushing its arrival back to the following week. Since trucks and drivers had already been assigned, the staff member in charge was forced to scramble to readjust the schedule.

Geopolitical risks have been surfacing, throwing international logistics into disarray.

Since late 2023, an increasing number of shipping companies have been avoiding the Suez Canal due to attacks on merchant ships by Yemeni rebel forces, and when the United States and Israel attacked Iran in February this year, the Strait of Hormuz was effectively blockaded.

Takuya Matsunaga, manager at Sekisan, said, "It's a daily occurrence to find out about a ship's delay just before it's due to arrive."

The fact that trade operations remain largely analog is also a factor. Most freight forwarders and shippers who place orders with port logistics providers like Sekisan determine arrival dates manually -- by contacting shipping lines via phone or email, or checking each company's website one by one. A freight forwarder official said, "Given the time difference, it's difficult to track arrival dates in real time."

As a countermeasure, Sekisan assumes ships will be delayed and accepts more work than its fleet of 25 trucks can handle. By taking on extra orders, the company can avoid having its trucks sit idle even if delays are suddenly discovered. Matsunaga says, "If there are gaps in the schedule, drivers' jobs are at risk. It's a tightrope walk, but we have no choice."

36 types of documents, 240 copies

According to a 2022 report by the World Trade Organization, an average of 36 types of documents and approximately 240 paper copies are exchanged among multiple businesses in a typical trade transaction.

In a survey conducted by Sojitz Tech-Innovation Co. in May this year among corporate trade managers, 14% reported having "digitalized their entire operations," while "manual processes are the mainstay," "not considering digitalization" and "considered it but have not implemented it" accounted for a combined 43%.

One reason for the delay in digitalization is that departments responsible for import and export procedures are often perceived as not directly contributing to revenue, leading to investment in them being put on the back burner.

Furthermore, trade involves many companies -- including shippers such as manufacturers and trading companies, as well as shipping lines, transporters and freight forwarders -- so even if one company digitalizes its processes on its own, the benefits are unlikely to materialize if others remain analog.

A representative from a trading company said, "Even for the same procedure, the formats often vary widely depending on the company or the person in charge."

Logistics costs reduced by 30%

Amid these challenges, the trend toward digitalization is gradually gaining momentum.

The trade management system developed by Tokyo-based startup Shippio Inc. is linked to the databases of various shipping lines, allowing users to check the status of vessels from their computer screens. Additionally, estimated arrival dates are updated in real time, ensuring users always have the latest schedule information.

Kobe-based UCC Ueshima Coffee Co. introduced this system in March last year with the aim of streamlining its coffee import operations. Prior to implementation, departments responsible or imports had to handle over 300 emails, phone calls and faxes per day from relevant internal departments and business partners. Vessel movements were manually entered into Excel spreadsheets and circulated among staff.

However, after the system was introduced, business partners were also able to check vessel status directly through the system, leading to a sharp decline in inquiries. The company reports that it has reduced import-related costs by about 30%.

Koji Nagata, manager of the Material Import Department, explained, "Now that we've eliminated waste, we want to allocate our staff to other tasks."

Since its launch in 2018, Shippio's system has expanded to more than 1,500 companies.

Sales Director Kosuke Takehara explained, "The fact that international logistics were relatively stable before the COVID-19 pandemic was one reason such extreme reliance on analog methods has persisted. In recent years, these issues have come to light, and more companies are becoming aware of the problem."

Cross-industry initiatives have also begun. A prime example is Tokyo-based TradeWaltz Inc., established in 2020 through joint investment by companies including trading houses, banks and logistics firms. The company provides a system that enables the digital exchange of trade documents using blockchain technology, which makes tampering difficult. It is also aiming to digitalize trade settlements.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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