5 ways digitization is driving change in the global commodity market

If there is one important lesson that enterprises in the global commodity market can take away from their experiences in the last 12 months, it has to be a renewed appreciation for the power of digitalization.

In this two-part blog series, we will take a closer look at the primary focus areas for digitalization that we are likely to witness in the post-COVID world. In the first instalment, we looked at two significant ways technology is meeting the needs of an evolving workforce: enabling remote work and providing self-service solutions.

The COVID-19 pandemic has elevated the urgency for digitization as the shift to new ways of working has modernized core business processes in the global commodity market. But there are strategic, long-term benefits that make digital transformation an important imperative for many companies.

Traditionally, the global commodity market has not been known as an early adopter of innovative enterprise technology solutions but advances in analytics, connectivity, and mobility underscore the value of a more connected value chain.

In the second instalment of this blog series, we will look at three strategic incentives for digital transformation in the global commodity market.

3) Visibility

When the pandemic first struck, the priority for most organizations was understandably to ensure the safety of their employees, partners, and suppliers. However, once the focus shifted to business continuity, the lack of visibility in the face of an unprecedented crisis and inability to respond quickly revealed the importance of a digital value chain.

Since most processes for trading, procurement, and supply chain execution were hindered by disconnected systems, procurement teams were ill-equipped to assess the supply chain risks and company-wide impact of the situation adequately. Remote workers and siloed communication channels further complicated the process for companies in the global commodities market.

Beyond this, global commodity market players also realized that the value of predictive insights that could help forecast shifts in demand patterns in these unusual circumstances where consumption patterns changed drastically and supply chains were broken. In the future, with the constant threat from climate change and other global factors for example, predictive capabilities can enable farmers to prepare unusual weather or other disruptions, for example.

For  companies that lacked visibility into the shifts in demand patterns or logistical challenges as transportation came to a halt, they had to scramble  to meet the demands of 2020. In the future, this lack of transparency will limit future efforts of predictive analytics, AI-based automation to sustainability efforts.

4) Digitalization at Scale

Rather than piecemeal efforts at building digital capabilities, the pandemic made it clear that organizations in the global commodity market need to pursue a far more aggressive agenda to digitize their operations. A 2020 McKinsey survey of global supply chain leaders found that 85% of respondents struggled with inefficient digital technologies in their supply chains.

For instance, several procurement organizations across multiple industries including agriculture, food and beverage, and chemicals still rely on legacy ERP systems to digitally transform their processes. Instead, they need to rapidly scale their efforts at modernizing their infrastructure and adopting the latest technologies in order to achieve the flexibility and agility needed to survive and thrive in this new environment.

5) Better Decision-Making Support

Organizations will also need to continue their digitalization efforts to support smoother operations and better decision-making. For example, IoT sensors embedded in everything from shipping containers to soil sensors enable businesses to access unprecedented levels of data and gain visibility at a granular level. This data, when combined with real-time market feeds, weather reports, product movements, news, manufacturing and shipping schedules, inventory levels, and more, can help enable  easier and more effective decision making. Commodity traders as well as the entire ecosystem could also gain valuable intelligence and insights through powerful analytics engines that can process the data in real-time.

Similarly, blockchain can help provide where every member of the value chain instant, accurate visibility into the entire value chain. This can be valuable to help all parties negotiate quickly and effectively, track commodities in transit, and settle invoices in a timely manner.

In addition, the increased utilization of advanced technologies whether blockchain, AI/ML, or low code/no code automation can also help mitigate skills shortages across the various teams.

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While the benefits of digitalization have been well-established, the unprecedented events brought about by the COVID-19 pandemic have rapidly accelerated the pace of change in the global commodity market and made it imperative for organizations to embrace new technologies to brace for this dynamic new world.

Read Part 1 of this blog here.