There are three key areas in which technology has the potential to improve “business as usual” in supply chains: information, trust and transport. Many of the enabling technologies, such as distributed ledger technology (DLT) and artificial intelligence (AI), overlap across these three areas, bringing challenges as well as opportunities. The main questions revolve not around whether these innovations will find their way into regional supply chains, but the speed and consistency of their adoption.

Online supply chain information has been available, to some extent, for a generation. However, the rise of the Internet of Things (IoT) and exponentially higher storage and computing power mean the quantity of data is now so large that big-data analytical tools, and, increasingly, AI, are needed to make sense of it. Two-thirds of supply chain leaders already expect big-data analytics to be of critical importance by 2020.

Technological upgrades to infrastructure based on blockchain, will also make inroads. The advantages of DLT (of which blockchains and cryptocurrencies are examples) include information flows that are collaborative, rather than the one-way document exchanges of the current electronic data interchanges (EDIs), and that are more transparent and auditable, reducing fraud. In addition, DLT creates the possibility of using smart contracts that trigger events such as ownership transfer and payment, speeding up processes and cutting out intermediaries. Receipt of a delivery can trigger payment through a range of methods including letter of credits, the release of fiat currency funds in an escrow account or even direct payment using cryptocurrency tokens embedded in the contracts. Smart contracts can also mediate payments and refunds of sales taxes and customs duties.

The integration of DLT builds on longstanding efforts to digitize paper-heavy trade processes, with EDI standards dating back 30 years, as well as more recent regional efforts such as the 2016 UNESCAP Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Asia-Pacific Model E-Port Network, a 2015 Asia-Pacific Economic Cooperation initiative of 16 ports, which may soon trial blockchain technology for customs clearance in China.

Kasey Kaplan, Asia-Pacific managing director for the Blockchain in Transport Alliance, an industry standards organization, says that DLT will roll out first “in elements of the supply chain that don’t touch government regulation, such as verification and tracking.” The biggest impact may come when DLT reaches customs processes: the World Bank estimates that documentary and border compliance can together take several days on average at both export and import points, a lag that proponents of the technology are hoping to reduce or eliminate. This, however, is “going to take more time,” says Mr. Kaplan, “because policy, producers and technology are all going to need to change.”

The hard infrastructure of ports will need to incorporate automation, robotics and analytics-inspired optimizations to match the ever-rising technological savvy of supply chain players. In May 2017, the Qingdao New Qianwan Automatic Container Terminal became Asia’s first fully automated port, combining automatic quay and stacking cranes with driverless vehicles to move containers between ships and storage, cutting costs by 70 percent and improving efficiency by 30 percent. This level of automation may become the norm at major greenfield ports, such as Singapore’s giant Tuas Port, while existing ports are likely to be gradually retrofitted with partial automation, as is happening in Indonesia’s freight transport program.

Addressing these shortfalls in ICT uptake could serve as an important enabler not only for trade but for overall development, in line with goal nine of the UN’s Sustainable Development Goals, which recognizes the importance of internet access. Randeep Sudan, board adviser at Ecosystm, a technology consultancy, and former global adviser on digital strategy at the World Bank, believes there could be broader implications for countries that do not upgrade. “Developing countries will be required to use these technologies and invest in some of them in a major way going forward,” he says. “They cannot escape using them if they want to remain competitive.”

This is largely because the overall impact of new trade technologies will be to reduce trade friction and encourage more integrated supply chains, thereby boosting volumes. It is difficult to extrapolate the full implications, but there are estimates for some aspects. Bain & Company, a consultancy, forecasts that closing the trade finance gap using blockchain and other technologies could boost global trade by USD1.1 trillion over a decade in real terms, with Asia representing about 40 percent of the current shortfall in trade finance to be filled.In Hong Kong, China; and Indonesia, for example, imports rose by 19 percent and 37 percent, respectively, in the years after introducing an EDI or electronic single window, while exports increased by 16 percent and 18 percent. Bringing down barriers via DLT and other technologies could make it easier for smaller companies, and those in less-well-integrated parts of Asia in particular, to enter supply chains.

Not only could overall trade volumes grow, but routes could reconfigure as improvements in cost and transport time make longer-distance supply chains more viable and AI analytics uncover unanticipated suppliers. New autonomous vehicles and fast unmanned ships could also reconfigure the way logistics firms use road, rail and ocean transport. This, in turn, may result in greater-than-anticipated pressure on certain routes and ports, requiring new investment, while also leaving other assets underutilized. The same AI and big data optimization tools that will help companies in the supply chain should also help governments identify emerging infrastructure bottlenecks that need addressing. ICT upgrades could also help governments’ abilities to collect tax revenue domestically, thereby helping developing economies invest in much needed infrastructure.

Other barriers exist, among them cybersecurity and the risk that competing and incompatible standards could inhibit the widespread usage of innovations like smart contracts. Yet despite these hurdles, DLT and other trade-enabling technologies have the potential to strengthen regional integration and set the tone for an “infrastructure 3.0” revolution in Asia over the coming years. This will, however, require policy efforts to sustain investment in hard infrastructure such as ports and ICT and software like DLT, as well as to address issues around standards and security.