Digitalization – behind this complicated word lies a process that has changed the world beyond recognition in just a decade. Retail is one of the areas that has benefited the most from new technology, moving more and more online.
Today, digitization is beginning to penetrate the field of agro-products trading, but with some difficulty. The leaders of the conservative industry, which historically lags behind other areas of the economy in the use of modern technology, are increasing their IT budgets every year in search of solutions that can increase their income.
However, as long as the majority of market players have not realized the importance of this process, modern technology plays the role of a competitive advantage only for a small group of large companies. Instead of becoming a factor that will transform the industry and help it grow, which will benefit all participants and economies.
Read on the topic: How to sell grain quickly and profitably: a reminder for traders from Zernotorg.ua
E-COMMERCE AND GRAIN TRADING
In recent years, online retail trade has been developing at a blazing speed. From 2017 to 2020 the global E-commerce market has doubled from $2,3 trillion to $4,5 trillion and continues to grow.
Experts predict that almost all retail commerce will move online in the next 20 years. Experts predict that the majority of online sales will be conducted through mobile devices.
Sellers and buyers will benefit from the transformation of commerce. The first ones can work uninterruptedly, even with limited social connections during the Covid-19 pandemic. And also save on staff by automating order processing. The latter can get uninterrupted access to goods from the comfort of their own homes.
Grain trading is still far from this level of organization. This business, by its very nature, retains many archaic elements. Most often, goods are bought and sold using cell phones, Excel spreadsheets, postal services and paper documents.
Despite the fact that many electronic exchanges and marketplaces are being created, the bulk of sales and purchases are still made in the real world, not online.
Dmitry Mykhalchuk, founder and CEO of GrainTrack
If market participants find each other at sites that proudly call themselves “grain exchanges”, all processing and execution of transactions takes a lot of “manual” operations, because these sites are actually message boards and do not contain instruments for automating trade transactions.
Read on topic: Agricultural e-commerce: trading platforms for market participants
HOW TECHNOLOGY CAN HELP
At the same time, modern technology allows us to digitize, simplify and automate most of the critical processes in grain trading – from search of goods, conclusion and processing of a deal to its post-sale fulfillment connected with storage and transshipment of grain.
A significant role in this direction has recently been given to blockchain technology, which is believed to be able to solve the main problem of grain traders’ transition to online trading – the reliability of data storage.
Recently, there have been several attempts to create specialized b2b platforms for trading agricultural products based on this technology. In particular, private investors in Russia and European countries have already announced the launch of such projects. The organizers have even managed to report on the first “successes” associated with the great interest in their products. However, there is no independent objective information about the success of the projects yet.
An attempt to use blockchain capabilities to modernize the trading process was also made by the international giant traders of the ABCD quartet, as well as COFCO and Viterra.
These companies announced the launch of the Covantis digital platform in the spring of 2021. The platform is designed to simplify the paperwork for shipping agriproducts by sea.
Эти инициативы в целом полезны для рынка. Однако проблема заключается в том, что все они очень разрозненны, не имеют должной поддержки у участников отрасли, чтобы стать глобальными проектами. Либо, что еще хуже, способны разъединять рынок, вводя двойные правила игры и предоставляя конкурентные преимущества крупным компаниям.
Another technology that is bid on in the digitalization of grain trading is the cloud. Today this technology is used by most software developers, which are designed for use by grain traders as internal information systems (CRM, ERP, CTRM).
With this software, companies can digitize and automate office management processes and start building their business based on data rather than intuition. The use of cloud technology allows access to work information 24/7 from any device and guarantees the safety of all data history.
The negative factor is that most companies are not yet aware of the value of implementing such products in their business, preferring to use Excel spreadsheets in the old fashioned way. Such software remains the privilege of companies that practice modern approaches to management. Again, this gives them a competitive advantage over other market players.
Thanks to cloud technology and the Internet things, grain traders can solve another problem related to grain quality control and preventing theft.
The topic of preserving the quality of grain during storage and transportation, as well as preventing theft, is particularly relevant, because traders’ income depends on whether grain gets wet, what its temperature is and whether it is not infected with microorganisms, as well as if it reaches the buyer in safety.
Information about the condition of the goods is recorded by video cameras and special sensors and is transmitted via the cloud to the company’s server. Thus, the leading traders can monitor the condition of the goods online.
Read on: The element of surprise: grain quality mismatches at the port and how to avoid them
FACTORS HINDERING GRAIN TRADING DIGITALIZATION
As we may see the current level of technologies development lets us digitalize grain trading and take it to a new development stage. The main condition today for this to happen is the acceptance and understanding of this idea by most industry participants. So far, it turns out that technology remains an “expensive toy” in the hands of big business, without working for the benefit of the entire industry.
And this thesis concerns not only Ukraine but all over the world to somewhat lesser extent and somewhere to a greater extent.
Today we can identify several main reasons that prevent the spread of digital technology in the industry:
- high cost of technology (any modern technology costs money, business is in no hurry to spend it on the implementation of something new, which, in its opinion, is not yet the fact that it will benefit);
- conservatism of the industry (grain trading itself is a very conservative business, the participants are afraid of fraud, and do not want to disclose data on their business activities or share their experiences);
- lack of information about the transformational possibilities of technology in grain trading (technology for grain trading is developed by independent vendors in the context of disparate, fragmented information about the products. It is difficult for traders to understand the essence of the solution and what it gives – there is no body or association, which would carry out explanatory work in this direction at the international or regional level, the governments of the countries also do not pay attention to this issue);
- complexity of processing transactions and reporting on them to the state (unlike retail trade, where the registration of purchase has no difficulties, in grain trading in most cases we are talking about export sales of large consignments of goods, which is accompanied by complex customs registration. This factor has a negative impact on the full-scale operation of blockchain platforms for grain trading, as there is a matter of recognition of virtual transactions by customs authorities of countries).
As we can see, many of these factors are quite objective and their solution just takes time. But a lot depends on the grain traders themselves, and this can be changed right now. Traders should understand that investments in technology and transition to new standards of work are profitable for themselves. Because it will increase business margin, which is constantly falling, reduce costs and unpredictable losses. And in the global perspective, it will help to improve the general architecture of the market.
Dmitry Mykhalchuk, founder and CEO of GrainTrack