Topic 5 Digitisation and the information

supply chain
Introduction
The importance of possessing information is not new. The commonly used phrase
‘knowledge is power’ is attributed to Sir Francis Bacon in his book published in 1597.
However, what has changed is our ability to capture, retrieve and disseminate data. As you
learned in Topic 3, this has never been easier as a result of technological development and
digitisation. Indeed, there is now so much data available that there is a danger of ‘data
overload’, so the challenge is to identify the data that is useful and to find ways to use it in
the most efficient way possible. In the context of supply chain management and supply
chain finance, the aim is to digitise the data created when an event occurs in either the
physical or financial supply chain and then use that data to gain efficiencies or to facilitate
access to finance.

In Topic 1, you learned about the ‘event-driven’ nature of supply chain finance, and
in Topics 3 and 4 about the operation of the physical and financial supply chains
respectively. The ‘events’ that drive supply chain finance are drawn from both the physical
and the financial supply chain. You will learn about the ‘events’ in more detail in Topic 6 but,
for now, it should be noted that each ‘event’ has an information by-product. It is this
information that is the subject of the ‘information supply chain’.

Learning objectives
By the end of this topic, you will understand:

• how physical and financial supply chain events result in the creation of information;
• how the form of this information is changing from paper to digital data;
• who owns the information arising from each event; and
• how the information can be used by finance providers to drive supply chain finance
solutions.

Think...

What role does information play in supporting supply chain finance solutions?

Have you ever wondered why financing trade is regarded as less risky than other forms of
working capital finance, such as overdraft facilities?

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As a finance provider, are you more or less comfortable knowing what your money is to be
used for and having visibility of the source of repayment?

How might your evaluation of a financing proposition be influenced by your ability to link
the finance to an underlying transaction rather than being underpinned by fixed asset
security?

5.1 What is the information supply chain?

The information supply chain represents the processes and organisation that are necessary
to collect, transform and distribute information efficiently.

As noted previously, there are many stakeholders in the physical supply chain. Each
stakeholder has a role to play and each action is an ‘event’ that generates information. Each
event impacts the seller and/or the buyer to some degree and the information relating to
the event can also be relevant to the finance provider.

For example, when a carrier accepts goods for shipment and loads them onto the vessel, we
can see that there is an event and there is also the related information:

• the loading on board is the ‘event’; and

• the issuance of a document to the seller confirming that the goods have been loaded on
board the vessel and providing details of the shipment is the ‘information’.

We could extend this example further if we consider that the carrier will know where the
vessel is at any point in time and could, if required, report that information to the seller as
well.

Using another example, when an inspection agency undertakes pre-shipment inspection of

the seller’s goods on behalf of the buyer, there is once again an event and there is also the
related information:

• the execution of the inspection itself is the ‘event’; and

• the inspection report is the ‘information’.

5.1.1 Relevance to finance providers

Why is this information potentially useful to the finance provider?

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The goods exist and have been inspected by a qualified third party

This knowledge should provide some comfort to the finance provider that the seller has
fulfilled their contractual obligations and that the buyer (the finance provider’s client) will
receive goods that conform with their purchase order. This information enables the finance
provider to place greater reliance on the on-sale of the goods to generate the source of
repayment in respect of the finance they have provided.

The goods are on board a named vessel en route to the appropriate destination

This knowledge provides further comfort to the finance provider. In addition, in a traditional
trade finance structure, the document provided by the carrier will also confer title to the
goods when delivered to the finance provider, providing transactional security and control.

In these examples we have referred to a ‘document’ issued by the carrier and a ‘report’
issued by the inspection agency, implying that the information is produced and
disseminated on paper. Indeed, traditionally all of this information was on paper, but in
recent years we have seen the development of digital equivalents of paper. In the context of
supply chain finance and, to a certain extent, traditional trade finance, the digitisation of
data has been a significant factor in the development of solutions.

FACTFIND

Digitisation and the evolution of supply chains

Explore these articles to find out how supply chains have changed as a result of digitisation.

IFC: Technology and digitsation in supply chain finance

PWC: Industry 4.0: How digitisation makes the supply chain more efficient, agile, and
customer-focused

Simichi-Levi and Timmerson: Deep transformation with smart supply chain digitisation

5.2 Digitisation vs digitalisation

The terms digitisation and digitalisation are sometimes used interchangeably. However, it is
important to note the differences between the two.

Digitisation

At a relatively basic level, digitisation refers to the replacement of paper documents with
electronic records.

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Digitalisation

Digitalisation, on the other hand, refers to the automated use of electronic records to
instigate actions that are part of physical and financial supply chains.

Example

To illustrate the difference, a paper invoice can be replaced with an electronic record
incorporating the information usually contained in an invoice. This invoice has, therefore,
been digitised. You will learn about e-invoicing in more detail in section 5.4.1. Full
digitalisation implies that the electronic record representing the invoice is used to update
accounts payable and accounts receivable ledgers (held in accounting or ERP systems) and
also to initiate financing transactions and to generate payments.

Key terms

Electronic record

A collection of data elements used to convey information and to drive other actions in the
digital space.

Digital documents

A type of electronic record that replicates the properties of a paper document.

You will learn more about the distinction between electronic records and digital documents
in the sections that follow.

5.2.1 Paper-based trade in a digital age

For generations, the documents that facilitate trade finance have been produced, signed
and checked on paper. Documents of title, such as a bill of lading, and negotiable payment
instruments, such as a bill of exchange or promissory note, have been freely accessible to all
parties. The use of paper has facilitated the ability of a single party to:

• have possession (sole control) of an original;

• distinguish between an original and a copy; and
• transfer possession by delivery.

These attributes have enabled these documents to confer rights upon the holder that are
enforceable under common or civil law. Any digital replacement of paper must retain these
attributes in order to be enforceable in law. You will learn more about these digital
innovations and their legal consequences in Topic 22.

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However, paper is not infallible. It is expensive to produce, store, move and manage. During
the Covid-19 pandemic, paper documents were caught and held up during various
lockdowns, leading to delays in the movement of goods and the financing of trade. Paper is
also susceptible to fraud as it is difficult to prove the originality and ownership of
documents produced on paper, especially in times of dispute and legal argument.

5.2.2 Benefits of digitisation

Data from both the physical supply chain and the financial supply chain can be digitised,
delivering potential benefits to sellers, buyers, key supply chain stakeholders and finance
providers. Of course, in order to realise the potential benefits, parties must be able to
access the data and validate its authenticity; so the question of standards and
interoperability arises. You will learn more about these challenges and explore various
forms of innovation in supply chain finance in the topics that follow.

The data that is produced as a result of the digitisation of the physical and financial supply
chains is the same data that is required to drive a financing solution. Many companies,
particularly in the mid-market segment, see the opportunity to realise efficiency benefits
from seamless integration of digitised data with their operations and processes as potential
by-products of using supply chain finance.

5.2.3 Legal validity

Most of the laws governing commerce and finance were not created with digitisation in
mind. For example, the UK’s Bills of Exchange Act dates back to 1882 – somewhat earlier
than the technology developed to create electronic records.

Solutions: legal acceptance of electronic documents

As you learned in Topic 3, great progress has been made to adapt legislation based on the
UNCITRAL Model law on Electronic Transferable Records (MLETR), which was first issued in
2017. MLETR sets out the requirement for control and possession to be established in order
for an electronic record to be equivalent to a paper-based transferable document. It also
includes provisions for countries to pass laws that achieve the same effect. These options
facilitate the legal acceptance of electronic documents of title, such as bills of lading and
electronic negotiable payment instruments, such as bills of exchange and promissory notes,
without the need to have multi-party contractual arrangements that are restrictive in nature
and therefore not currently widely accepted (United Nations, 2017).

Legal differences between jurisdictions

An international trade transaction, by definition, involves more than one country. Each
country will be part of a legal jurisdiction. For example, if countries are members of an

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economic or political union (such as the European Union) the same laws will apply across
countries within the regional group. Examples include the General Data Protection
Regulation (GDPR) or the Payment Services Directive (PSD).

Replicating the functionality of paper documents

Some progress has been made in many jurisdictions to ensure that a digital equivalent of a
paper document has the same functionality as a traditional paper document. In some
instances, this has been achieved through the use of an electronic signature. Although
effective in many jurisdictions, e-signatures have yet to be accepted across every country in
the world.

Challenges relating to the transfer of rights

There are significant challenges in replicating the functionality of some paper documents
used in international trade such as those used to confer rights to the holder. For these
documents, it is important to be able to establish which document is the ‘original’ as well as
to execute the transfer of rights from one party to another. Examples commonly used in
international trade include bills of exchange, promissory notes and bills of lading (see
section 5.3.1).

Example

Bill of lading

The legal framework surrounding the use of bills of lading is quite complex. The main
challenges relate to the fact that a paper bill of lading is also a document of title, meaning
the party to whose order it has been drawn has to present the physical paper document to
the carrier in order to obtain possession of the goods.

As you will learn in section 5.3.1, bills of lading are actually issued as a set of originals
(usually three), each of which can be surrendered to the carrier in order to exercise the
holder’s right to obtain possession of the goods. Once one of the originals has been
surrendered, the remaining originals in the set cease to be valid. This characteristic of bills
of lading, coupled with the fact that the carrier usually has a lien on the goods until their
freight bill has been paid, further complicates the legal position.

In addition, similar in some ways to a bill of exchange, the rights of possession can be
transferred from one holder to another by means of endorsement. The legal framework
governing the use of bills of lading cannot, therefore, easily be applied to electronic records.

FACTFIND

Legal status of electronic documents

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Find out more:

UNCITRAL: Model Law on Electronic Transferable Records (2017)

ICC: ICC Banking Commission and Clyde & Co launch report on the legal status of electronic
bills of lading

GTR Review: Lloyds Bank completes first UK digital promissory note pilot

5.2.4 Standards and rules in digitisation

In the absence of an established legal framework, parties using electronic records in place of
paper documents have generally agreed to operate in accordance with a set of rules or
standards, often referred to as a ‘rule book’. This creates a contractual relationship between
the parties that govern the processes, rights and responsibilities. The disadvantage here is
that the electronic records can only be used by parties that have ‘joined the club’ and signed
the rule book. Membership of a club can be problematic where there are a number of
different participants in a supply chain and usually involves payment of fees and some
degree of technology integration, which adds further to the costs and challenges of
adoption.

ICC Digital Standards Initiative

To address the need for standardisation from both a legal and technical perspective, ICC and
the WTO jointly issued a Standards Toolkit in March 2022, as part of ICC’s Digital Standards
Initiative. The toolkit:

• provides an overview of existing standards to help drive adoption;

• identifies potential gaps; and
• promotes interoperability.

The toolkit’s objective is to equip every supply chain participant, both public and private,
with the most widely-used standards, encouraging increasing trade digitalisation. In doing
so, it is hoped that the international trade community will unlock the benefits of cross-
border paperless trade by moving to a future of secure, trusted and seamless connectivity
between supply chain participants.

Other digitalisation initiatives

As part of ICC’s trade digitalisation workstream, significant progress has now been made
towards the standardisation of practices and creation of appropriate rules. Although these
rules are not laws, they provide a clear framework within which legal interpretation can be
made in a consistent and predictable manner. As you learned in section 3.6, ICC published
an updated version of eUCP and launched eURC in 2019.

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In addition, ICC issued the Uniform Rules for Digital Trade (URDTT) in October 2021,
providing a framework within which digital trade can be undertaken. The central element of
URDTT is the definition of a payment undertaking, including its essential characteristics and
properties.

FACTFIND

Digitalisation initiatives

Find out more from ICC:

ICC: Standards toolkit for cross-border paperless trade

ICC: The ICC digital standards initiative

ICC: Ground-breaking repository of paperless trade solutions seeks submissions

ICC: ICC Banking Commission releases new eRules on the use of electronic documents

ICC: URDTT

5.3 Digitising the physical supply chain

Data generated from events in the physical supply chain relates to the movement, storage,
ownership, origin and condition of goods. This data has been recorded on paper for decades
by trade finance practitioners and includes documents that:

• confer title to goods;

• facilitate transfer of title to goods from one party to another;
• evidence shipment of goods;
• acknowledge receipt of goods;
• confirm storage of goods;
• attest to condition of goods; and
• evidence insurance of goods.

5.3.1 Electronic bills of lading (e-bills of lading)

The introduction of e-bills of lading reliant on the contractual agreement of the parties
involved, illustrates how elements of the physical supply chain have been effectively
digitised.

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Traditional functions

Bills of lading have traditionally performed several functions:

• they provide evidence of a contract of carriage from the place of loading to the place
of discharge;
• they acknowledge receipt for the goods issued by, or on behalf of, the carrier;
• they are documents of title (ie they confer upon the holder the right to take
possession of the goods);
• they are ‘negotiable’ (ie the right to take possession of the goods can be transferred
by the consignee or holder to another party by endorsement); and
• they are usually issued in sets of three, with each acting as an original on the basis
that, once an original has been surrendered in exchange for the goods to which it
refers, the other two cease to be valid.

Much of the data contained in a traditional bill of lading can now be produced and shared
digitally. As a result, buyers, sellers and other stakeholders in the physical supply chain now
benefit from increased speed, reduced costs and improved accuracy and authenticity.

Addressing challenges

The e-bill of lading seeks to replicate the functionality of traditional bills of lading in digital
form while avoiding the challenges associated with the traditional paper-based approach.
Such challenges include:

• delays in receipt of original bills of lading leading to demurrage costs being incurred at
the port of discharge;
• errors in goods description leading to delays in settlement;
• additional costs due to inefficient handling of bills of lading by sellers, buyers, carriers
and finance providers;
• sets of bills of lading being split, leading to a lack of clarity regarding the identity of the
holder; and
• fraud – it is relatively easy to copy or print a fake bill of lading.

Examples of e-bills of lading

The e-bill of lading replicates the key of its paper equivalent elements (ie evidence of
shipment and transfer of title). However, in the absence of the legal changes and while slow
but gradual progress is being made to adopt the principles of MLETR, as highlighted in 5.2.3
the use of an e-bill of lading has been restricted to those parties willing to sign up to a
contractual arrangement or rule book, combined with a centralised or distributed title
registry of some sort. You will explore various iterations of this model developed by Bolero
International (now part of WiseTech Global) and essDOCS in Activity 5.1. An alternative

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approach, from E-Title Authority, is based more closely on paper-based practices, but uses
technology to create and transfer electronic title instead of creating a title registry.

5.3.2 Port authority initiatives

Another good example of the digitisation of the physical supply chain is the development of
initiatives by various port authorities to aid better interaction between the different parties
that support a supply chain.

Port authorities have recognised that to remain competitive and in sync with increasing
international and national regulations, they need to better cater for the digitisation efforts
being made by shippers.

As an example of a port-led initiative, the Port of Singapore Authority (which has

connections to 600 ports globally) launched its Internet of Logistics initiative in 2021. The
initiative aims to create a ‘logistics ecosystem’ (PSA International, no date), that acts as a
hub connecting physical, regulatory and financial activities to improve the visibility and
efficiency of cargo and trade flows.

Other major ports such as Rotterdam and Hong Kong are also undergoing their own
digitisation journeys.

FACTFIND

From beginning to end: facilitating global trade

“There are more than 200 documents involved in every single container shipment. We have
to start thinking in terms of a supply chain visibility model whereby we can access
information from beginning to end. Basically, that is what an information pipeline is […]

“Clogged ports and congested roads are its visible signs, but one of the costliest barriers to
global trade is the documentation that follows – and threatens to stop – every container of
goods traded across borders.”

(Churchill, 2015)

Explore the following links to find out about the digitalisation journeys being undertaken by
ports in Singapore, Hong Kong and Rotterdam:

Singapore

PSA International: Your cargo solutions partner in Internet of Logistics

Hong Kong

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LegCo Research Office: Enhancing Hong Kong’s position as a maritime center

Rotterdam

Port of Rotterdam: Digitisation: the smart port of the future

Communication sharing

Find out more about a new information infrastructure for international trade based on
shared communication:

Copenhagen Business School and Delft University of Technology: Design guidelines for
adoption of an information infrastructure for international trade in the global supply chain
over sea

Activity 5.1 E-bills of lading models – application and benefits

Part 1

Review the different operating models of the following three providers:

1. essDOCS: Case studies

– essDOCS: Case study: Bank of China (Issuing bank)

– essDOCS : Case study: CargoDocs for agents
– essDOCS: Case study: CargoDocs – Refinery One

2. Bolero: Bolero for carriers and logistics

3. e-title: Transferring an electronic title

Part 2

Now that you have reviewed the different operating models consider the following
questions.

• What do you think the major benefits of digitised bills of lading are?
• Can you identify some of the potential obstacles to adoption?
• How do the differences between the three models impact adoption?
• Which supply chain stakeholders, apart from the shipper of the goods, are impacted by
the adoption of e-bills of lading?

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• How are finance providers impacted?

5.4 Digitising the financial supply chain

Data relating to the financial supply chain can also be digitised. As noted in Topic 4, the
financial supply chain events relate primarily to the issuance, management and
reconciliation of invoices and purchase orders, so these instruments are core to the
digitisation process.

Combining e-invoicing with payables financing

Digital data drawn from a company’s accounts receivable and accounts payable records is
very frequently used to drive receivables finance and payables finance solutions. A number
of fintechs have combined the electronic invoicing process with a payables finance solution.

Digital data has the potential to promote the development of more sophisticated and
innovative supply chain finance solutions. The potential benefits of such innovation include
greater cost-efficiency and, more importantly, increased availability of supply chain finance
to support growing SMEs and larger sub-investment grade corporates, particularly in
emerging markets. In addition, the use of data drawn directly from ERP systems should
mitigate the risk of fraud, improve risk management and facilitate compliance with AML and
sanctions regulations.

Key benefits

These include:

• elimination of errors as supplier invoices are produced electronically and matched

digitally against the buyer’s purchase order data;
• avoidance of delays as invoices can be approved and reconciled quickly;
• efficiency and cost savings inherent in the digital process relative to manual paper-
based processes;
• avoidance of fraud as supplier data is electronically matched against the buyer data;
• more effective payment processes as accounts payable files are used to initiate
payments;
• enhanced credit control as receivables are tracked and chased more effectively;
• standardisation of terms, reducing the number and frequency of payment runs; and
• better management information to provide enhanced visibility and control.

5.4.1 Electronic invoicing (e-invoicing)

Electronic invoicing is a service delivered to trading companies by a number of specialist

providers. It uses digitised invoice and purchase order data to automate the accounts

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payable processes. The service provider establishes a relationship with buyers who are then
able to automate their upstream supply chain by inviting their suppliers to use their e-
invoicing service. The buyers are able to upload their purchase order data onto the platform
and their suppliers are able to raise e-invoices using the purchase order data. The suppliers
are then able to use the platform to monitor outstanding receivables. The platform also
interfaces with the seller’s accounts receivable software as well as the buyer’s accounts
payable software, facilitating reconciliation for both parties.

E-invoicing networks are said to drive corporate profitability and growth by enabling buyers
and suppliers to submit, process and pay invoices online in the language, currency and
format of their choice (IOFM, 2016). Automated financial processes have resulted in an
increase in net income and profit margins for 33% of the sample of finance executives
surveyed (IOFM, 2016).

Primary features of e-invoicing

Invoice receipt

• e-Invoices are securely transmitted from a supplier’s billing system to a buyer’s

accounts payable system without requiring data entry.
• An online portal enables suppliers to track invoice and payment status and
collaborate with buyers to resolve disputes.

Invoice validation

• Configurable business rules validate invoice data at the point of supplier submission.
• Validating invoices at submission increases straight-through processing rates.

Invoice matching

• Two-way and three-way matching of invoices to purchase orders and/or goods and
services.
• Unmatched invoices are electronically routed for approval or resolution.

Invoice routing

• Based on company-specific business rules such as invoice amount.

• The workflow provided by e-invoicing drives control across all invoices and
processes.

Invoice posting

• Approved invoices are sent to an ERP, general ledger (GL) or accounting system for
posting and payment.

Source: IOFM (2016)

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Benefits of e-invoicing

Both buyers and sellers are able to realise benefits from participation in an e-invoicing
network, though the solution is dependent on buyers having sufficient scale, in terms of
numbers of invoices received, to make the arrangement worthwhile. e-Invoicing is,
therefore, better suited to mid-market companies and major corporates than to SMEs.
Where an SME is the supplier, of course, there is no reason why they cannot benefit from
using a buyer’s e-invoicing solution.

The main benefits to both parties include:

• accounts payable cost reduction;

• efficiency improvement;
• more effective cash and working capital management;
• transparent spend; and
• agility and scalability.

Source: IOFM (2016)

Activity 5.2 e-Invoicing efficiencies

Part 1

Explore the websites of the following companies that provide e-invoicing services:

• Taulia: Electronic invoicing

• Tungsten Network: AP electronic invoicing

Part 2

Listen to Prabhat Vira, president of Tungsten Network, talk to John Bugeja, author of these
learning materials, about how e-invoicing creates opportunities for efficiency gains for both
buyers and sellers and also has the potential to facilitate the provision of payables and
receivables finance.

Please note that this was recorded in April 2018.

Part 3

Outline the key areas where e-invoicing has made a difference, for instance:

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• How does e-invoicing ‘reduce friction’ in the financial supply chain? How does this
translate into cost savings?
• What other potential efficiency gains can you think of?
• How can e-invoice service providers collaborate with finance providers?

5.5 Finance provider perspective

From a finance provider’s perspective, the ability to access digitised data from both the
physical supply chain and the financial supply chain opens up new opportunities for product
efficiency gains and new product innovation. Benefits that can be realised from using the
digitised data to drive supply chain finance solutions include:

• elimination of paper as data replaces the physical shipping documents;

• automation of finance processes as accounts payable and accounts receivable files
are used to drive the provision of finance;
• enhanced visibility and, where possible, security for the finance provider, leading to
greater appetite to support growth; and
• substantially reduced queries and need for support as invoices are accurate and
invoice status (submission, approval, payment) are electronically displayed on a
portal to both buyer and supplier.

In addition, the use of digitised data by financial institutions can also help them to fulfil their
regulatory obligations. Data is easier to deal with than paper when it comes to collecting
and collating the information necessary to undertake anti-money laundering (AML)/Know
Your Customer and sanctions screening activities. The use of data drawn directly from ERP
systems should mitigate the risk of fraud, improve risk management and facilitate
compliance with AML and sanctions regulations. It also provides a robust audit trail and
should generally be easier to validate than paper, the latter being relatively easy to fabricate
by anyone with access to a printer and scanner.

Innovative solutions

Digital data has the potential to promote the development of more sophisticated and
innovative supply chain finance solutions. The potential benefits of such innovation include
greater cost-efficiency and, more importantly, increased availability of supply chain finance
to support growing SMEs and larger sub-investment grade corporates, particularly in
emerging markets.

You will learn about innovation in the use of digitised data by finance providers in more
detail later in the course. In the rest of this topic you will learn about developments in the
supply chain finance market and how non-bank finance providers have positioned
themselves to compete with banks. You will also learn how technology is driving innovation

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in solution design and how finance providers and logisticians are tackling challenges
concerning standards, security and scalability.

5.6 Fintechs and the information supply chain

Financial technology firms (fintechs) have been leading the way in the use of digital data to
automate and streamline their processes. Benefiting from the opportunity to develop their
operating models without having to rely on legacy systems, many have been able to exploit
the fact that they are starting with a ‘clean slate’ by using the latest technology, often
delivered as a service by agile technology providers.

Established banks, by contrast, tend to have large IT departments running multiple legacy
mainframe systems and are naturally cautious about embracing the inherently more agile
‘software as a service’ model favoured by new entrants. In order to counter this drag on
innovation, many banks have become members of various consortia that aim to transform
the delivery and management of both trade and supply chain finance. In addition, many
banks have established innovation hubs and incubators, often in collaboration with fintechs,
so that they can learn about the new technology without jeopardising the smooth running
of their existing business processes.

You will learn about alternative financing and innovation in supply chain finance, in Topic
22. As an introduction, explore how non-bank finance providers approach the use of data to
optimise efficiency in the delivery of their solutions.

5.7 Blockchain: one truth across the supply chain

“Blockchain is a shared, immutable ledger that facilitates the process of recording
transactions and tracking assets in a business network. An asset can be tangible or
intangible” (IBM, no date).

Many supply chain participants believe that blockchain has revolutionised the way
businesses are run in a similar way that email and the internet did in the past.

Others are more sceptical, citing security concerns, the absence of ‘standards’ and a
perceived scalability constraint as reasons why this technology will not gain universal
adoption.

One thing is clear, there has been a great deal of debate regarding the use of blockchain in
supply chain finance and numerous proofs-of-concept, which are mainly trade finance-
related and undertaken by the various consortia, have been widely publicised.

You will learn about blockchain in more detail in Topic 22 when we explore alternative
finance providers and innovation. For now, you will be introduced to how blockchain could

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potentially leverage data from multiple stakeholders on the supply chain to facilitate the
development of innovative solutions.

The examples illustrate how the digitisation of documents combined with blockchain
technology have eliminated delays, reduced costs associated with supply chain
management, and provided the basis for increased availability of supply chain finance.

FACTFIND

Blockchain in practice

Watch this video from TradeLens to find out how blockchain works:

TradeLens: TradeLens and blockchain technology supply chain demo

Read about how TradeLens connects 200 ports and terminals, over 15 customs authorities
around the world and several intermodal providers and solutions.

PYMNTS: Shipping DLT TradeLens touts Q2 integrations, but few new users

PYMNTS: TradeLens sends Europe’s first electronic bill of lading

Conclusion
The volume of information created as result of a single cross-border shipment of goods is
enormous and, traditionally, all of this information has been paper-based. Handling such
volumes of paper is time-consuming and expensive for all parties, including finance
providers. The digitisation of the information supply chain has the potential to dramatically
reduce time and cost. In addition, the use of data opens up the possibility of automating the
provision of finance, facilitating the development of innovative supply chain finance
solutions.

Fintechs have been at the forefront of developments in digitisation. However, banks are
now showing much greater interest in using new technologies, such as blockchain, through
their membership of the different consortia, which have been established to underpin the
supply chain finance solutions roadmaps.

The fundamental rationale for the use of supply chain finance, rather than other,
unstructured forms of working capital finance, is based on the fact that the finance is
directly related to the underlying commercial cross-border transaction. The essential
characteristic of supply chain finance is that it is ‘event driven’ and that the information
relating to each event is visible to the finance provider. Such visibility provides comfort that
the financier’s money is being used for the intended purpose and that there is a viable
source of repayment. Visibility of critical information also provides early warning of any

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deviation from the expected sequence of events, enabling the finance provider to intervene
and take remedial action if required.

Information is, therefore, critical to the effectiveness of supply chain finance. Digitisation of
information and the adoption of new technologies for accessing and sharing such
information are fundamental enablers for the development and adoption of supply chain
finance.

Think again...

Now that you have completed this topic, how has your knowledge and understanding
improved?

For instance, can you:

• explain what is meant by the term ‘information supply chain’;

• identify the principle data elements that a finance provider would find useful in the
delivery of supply chain finance; and
• understand how technology can facilitate the capture and dissemination of information
to key supply chain stakeholders, including the finance providers?

Test your knowledge

1. How does the information supply chain relate to the physical and financial supply chains?

Select all that apply:

A. The information supply chain relates to the provision of services, not of goods.

B. Each physical or financial supply chain ‘event’ generates information – this is the
data that constitutes the information supply chain.

C. The information enables sellers, buyers and finance providers to track the
progress of the physical and financial supply chains.

Feedback

The information supply chain applies equally to goods as well as services. (See section 5.1.)

The correct answers are: Each physical or financial supply chain ‘event’ generates
information – this is the data that constitutes the information supply chain, and the

© The London Institute of Banking & Finance 18

information enables sellers, buyers and finance providers to track the progress of the
physical and financial supply chains.

2. Which of the following statements is/are correct?

Select all that apply:

A. The digitisation of supply chain data ensures that payment terms can be reduced.

B. Digitised supply chain data can replace the paper documents used by finance
providers to support the finance of trade.

C. Digitised data benefits sellers, buyers and other stakeholders in the physical
supply chain in terms of speed, accuracy, cost and authenticity.

Feedback

The digitisation process does not impact payment terms directly, but the greater efficiency
often results in the elimination of unnecessary delays. (See section 5.3.)

The correct answers are: Digitised supply chain data can replace the paper documents used
by finance providers to support the finance of trade, and digitised data benefits sellers,
buyers and other stakeholders in the physical supply chain in terms of speed, accuracy, cost
and authenticity.

3. Which of the following statements is/are correct?

Select all that apply:

A. Electronic bills of lading replicate the key elements of paper bills of lading (ie
evidence of shipment and transfer of title).

B. Electronic bills of lading provide certainty regarding the title to the goods at any
point in time prior to their release.

C. Adoption of electronic bills of lading has been slow due to concerns regarding
fraud.

Feedback

The risk of fraud is actually lower with electronic bills of lading as the data is captured
directly from the carrier whose identity has been validated. In addition, paper documents
are more easily replicated by a fraudster than digitised equivalents. (See section 5.3.1.)

© The London Institute of Banking & Finance 19

The correct answers are: Electronic bills of lading replicate the key elements of paper bills of
lading (ie evidence of shipment and transfer of title), and electronic bills of lading provide
certainty regarding the title to the goods at any point in time prior to their release.

4. How does electronic invoicing enhance the efficiency of the financial supply chain?

Select all that apply:

A. Cost reduction in management of accounts payable.

B. Greater accuracy through automated reconciliation of invoices with purchase

orders, leading to enhanced efficiency for both seller and buyer.

C. Reduced freight and insurance costs.

Feedback

E-invoicing does not directly impact freight and insurance costs, but the increased accuracy
and speed of processing can reduce delays in settlement (reducing demurrage costs) and
avoid disputes (potentially reducing insurance costs/claims). (See section 5.4.1.)

The correct answers are: Cost reduction in management of accounts payable, and greater
accuracy through automated reconciliation of invoices with purchase orders, leading to
enhanced efficiency for both seller and buyer.

5. Which of the following statements is/are correct?

Select all that apply:

A. E-invoicing is of benefit to sellers and buyers but has no impact on finance

providers.

B. E-invoicing data can be used by finance providers to drive supply chain finance
programmes.

C. Digitisation of data has the potential to promote innovation in the development of

supply chain finance solutions.

Feedback

E-invoicing has benefits for finance providers in that it improves data accuracy, speed of
data transmission and provides a clear audit trail, all of which can help finance providers to
develop more effective, innovative and compliant supply chain finance products. (See
section 5.5.)

© The London Institute of Banking & Finance 20

The correct answers are: E-invoicing data can be used by finance providers to drive supply
chain finance programmes, and digitisation of data has the potential to promote innovation
in the development of supply chain finance solutions.

References
Bacon, F. (1597) Meditationes Sacrae. Londini: Excusum impensis Humfredi Hooper.

Churchill, J. (2015) Can the cloud lift global trade? [online].

IBM (no date) What is blockchain? [online]. Available at:

https://www.ibm.com/blockchain/what-is-blockchain

IOFM (2016) 5 ways electronic invoicing networks transform accounts payable into a profit
center [pdf].

PSA International (no date) Your cargo solutions partner in Internet of Logistics [online].
Available at: www.globalpsa.com/iol/

United Nations (2017) UNCITRAL Model Law on Electronic Transferable Records (2017)
[online]. Available at:
https://uncitral.un.org/en/texts/ecommerce/modellaw/electronic_transferable_records

© The London Institute of Banking & Finance 21