1. Technology and
Digital Transformation

1. Technology and Digital Transformation

The cliché that 'change is the only constant' describes the impact of technology on corporate activity.

Rapid advances in technology means that companies that have been busy in recent years harnessing the power of developments such as the Internet of Things (IoT), robotic process automation (RPA), and machine learning must now contend with the advent of even more transformative tools.

The first edition of this report looked at the potential impact on the global supply chain of cloud computing, 5G telecom and 3D-printing, among others. At this juncture, steady progress is being made in incorporating these technologies into global supply chain operations, according to Hari Janakiraman, Head of Industry and Innovation, ANZ.

While most companies have connected their discrete processes and systems residing on the cloud to enable real-time information-sharing by participants across the supply chain, many others are scaling up the deployment of IoT, including by using sensors to track the flow of materials through the supply chain with near-pinpoint accuracy.

Take-up of these technologies is being further boosted as their impact on the bottom line becomes clearer, with studies showing that digitised supply chains produce annualised savings of about 7% on operational costs. Indeed, most executives surveyed in a separate study cite optimising costs and driving growth as the top objectives fuelling their investments in supply chain technology.⁸

DISRUPTION REDEFINED

More disruption is around the corner. The emergence of gen AI tools like ChatGPT⁹ has upended the thinking around what technology can help achieve.

With the ability to crunch prodigious amounts of data and to learn as it goes, gen AI has the potential to illuminate the farthest corners of the global supply chain. This includes aiding the creation of more accurate demand–forecasting models, optimising inventory and distribution strategies,¹⁰ and even providing companies with details about the financial health and emissions records of all their suppliers – a nearly impossible prospect until recently.

For example, Janakiraman says, “We have partnered with a fintech company that uses AI-driven language models to look at every published piece of documentation available in the public domain, understand what is in those documents, and then start mapping out customer supply chains.”

This allows ANZ’s clients access to significant insights into the operations of their suppliers across multiple tiers, which can include hundreds of thousands of entities. Additionally, the information offered up by the AI tool is extremely comprehensive: ranging from basic information such as the geolocation of each supplier to details about their financial health and ESG scores. Access to such information can be invaluable, helping corporates mitigate various risks, including by identifying potential bottlenecks tied to geopolitical disruptions or in complying with a web of evolving regulations around emissions disclosures.

“No human has the capacity to read and digest the spider web of information on the internet, map those connections, and offer all of that up in a nice dashboard format.
And do all of that in a matter of a week.”

Hariramchakraborthy Janakiraman – Head of Industry and Innovation, Transaction Banking, ANZ

With technology continuing to enable improvements up and down the value chain, banks like ANZ are increasingly using virtual ‘sandbox’ environments where they can engage with fintechs and other third-party providers to test new products and solutions, and bring them to market quickly and efficiently, and with low risk, says Erwan Cesbert, Head of Supply Chain Finance Sales, ASEAN+India, ANZ.

Current and future supply chain technologies shaping investment trends

“Because they are isolated from broader systems, sandboxes help test ideas, developments and programs without impacting the platforms on which they operate. Sandboxing will be transformative not only in transaction banking, but for the entire financial services industry.”

Erwan Cesbert – Head of Supply Chain Finance Sales, ASEAN+India, ANZ

Another transformative technology poised to disrupt the world of supply chain management is the tokenisation
of real-world assets, where the ownership of physical assets can be transferred to the blockchain, which offers a tamper-proof record of transactions. A growing number of financial institutions around the world, encouraged by supportive regulators, are examining ways to tokenise real-world assets to allow information to travel faster than before, enable instant settlements, and turn concepts such as atomic settlements into reality.

Indeed, tokenisation is already underway: ANZ worked with Grollo Carbon Ventures to successfully trade tokenised Australian Carbon Credit Units marking the completion of the bank’s first use-case as part of a central bank digital currency pilot run by the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre. The transaction – conducted on a public, permissionless blockchain – demonstrated the use of digital assets to reduce settlement time and help mitigate settlement-related counter-party risk.¹¹

“As consensus builds around the various approaches to tokenisation, Ethereum standards for Fungible ERC 20/Non Fungible (ERC721) and combined ERC1155 are being explored for trade document digitisation, fractionalisation and securitisation of trade assets, creating an immutable record of assets as well as liquidity for trading these assets, while reducing friction and fraud through duplication,” says Balaji Natarajan, Executive Director, Regional Sales, ANZ. “It is increasingly becoming more and more visible across the corporate world.”

MOVE FAST AND COMMIT TO CHANGE

For companies to fully capitalise on the potential of these digital tools, senior management must lead all stakeholders in moving quickly and fully committing to the changes that technology will bring to legacy processes, Janakiraman says.

“Companies have to be open to updating and, in some cases, completely revamping their systems. That requires commitment to investment and change. And it has to start from the top with high-level buy-in,” he says. “Because this technology is evolving so quickly, companies that can keep pace will be able to retain their edge over the competition for a considerable period of time.”

For fast movers, the returns can be substantial. Some estimates peg the efficiencies created by using gen AI to be upwards of 30%.¹² This makes it significantly challenging for late movers to catch up with rivals. At the same time, it’s important to recognise that – given the complex and extensive nature of modern supply chains where a single company could be dealing directly or indirectly with hundreds of suppliers in different markets – not everyone will be at the cutting edge of digital transformation. It’s the same with regulatory regimes, which will differ from country to country.

“So, strategically managing your supplier network and coping with a wide variety of regulatory frameworks while waiting for everyone to get on the same page is going to be the challenge,” says Natarajan.

“Generative AI unleashes an opportunity to create an intelligent, data-driven supply chain, enabling visibility deep into supplier tiers and nexuses, as well as real-time ESG tracking. The ability to interrogate vast amounts of data will strongly enhance a company’s understanding of current and future risks, uncovering hidden and seemingly unconnected disruptions, while providing options for businesses to best prepare for the unexpected.”

Hariramchakraborthy Janakiraman – Head of Industry and Innovation, Transaction Banking, ANZ

Private and public sector supply chain network visibility

ANZ–Taulia Strategic Relationship

Advancing Treasury Solutions, Strengthening Supply Chains.

As this report shows, economic and geopolitical headwinds are accelerating nearshoring and reshoring trends – even as technology is revolutionising global supply chains and trade finance. Inevitably, corporations and their treasuries must adapt to these changes to stay relevant and competitive.

As companies respond by investing in digital transformation to overhaul their capital and supplier management operations, the banks that serve them are evolving their offerings. From letters of credit and guarantees to invoice financing and dynamic discounting, traditional trade finance instruments are being digitalised. These processes are made more flexible and resilient by banks leveraging technology through upskilling in-house teams and striking strategic relationships with fintechs.

One example is the collaboration between ANZ and Taulia, a provider of cloud-based working capital management solutions that processes more than US$500 billion annually and serves millions of businesses around the world, including global corporations like Airbus, AstraZeneca and Nissan.

"The strategic relationship is a complementary one where ANZ provides the banking and financial services, and Taulia delivers “data as quickly as possible, as efficiently as possible and as simply as possible, to benefit both the supplier and the buyer in a trading relationship.”

Steve Scott – Head of APAC, Taulia

DATA AT THE HEART OF EVERYTHING

Simply put, it is all about data, Scott says, noting that fintechs and banks are increasingly coming together to provide
the tools that enable underlying operational data to be used efficiently. This in turn enables the creation of innovative financial products and services, which offer improved cash management capabilities, better operational efficiencies and heightened transparency across the supply chain ecosystem.

Furthermore, the end-to-end solutions offered by a bank-fintech collaboration can equip corporate treasuries with better fraud-protection capabilities, help them to meet diverse compliance and reporting requirements, and provide access to granular insights that aid good business decision-making.

The demand for these services is recognised by the market – as the funding attracted by fintechs shows, particularly for those operating in the payments, supply chain and sustainability sectors. The payments sector was the top sub-sector attracting US$16 billion in H1 2023 while fintechs serving the supply chain, logistics and green sectors raised over US$10 billion in the same period, bucking a downward trend in the overall fintech funding space.¹³

AGENTS OF CHANGE

Looking ahead, strategic relationships like the one between ANZ and Taulia could become the order of the day as businesses recognise the importance of technology in streamlining and optimising their supply chain management systems and see it as a powerful agent of change.

Why this shift? Because increasingly they understand how AI and machine-learning can improve demand and cashflow forecasting capabilities, and that blockchain can help to digitalise the traditionally paper-based world of trade finance securely and transparently. Digital payment systems are seen as facilitating timely payments to suppliers. And holistic, data-driven supply chain management software solutions are being embraced for their ability not only to integrate inventory and accounts receivable management – reducing costs and strengthening cash flows – but also to drive ESG-related improvements across the value chain, making global supply chains more sustainable and resilient.¹⁴

“While we still see a few bumps in the road – inflation affecting consumer sentiment, credit challenges, China’s economic slowdown – when it comes to supply chain finance, we absolutely are finding companies focusing on building supply chain resiliency and looking at it not so much as an opportunity to benefit only themselves, but as an efficient tool to deliver capital and finance into the ecosystem.”

Steve Scott – Head of APAC, Taulia

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Macroeconomic and Geopolitical Considerations

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