Digital transformation of the wholesale trade and Singapore’s journey
Wholesale Trade | 20 May 2021
The wholesale trade industry specialises in lowering transaction costs, matching supply and demand, and creating real added value for all stakeholders in a marketplace crowded with buyers and sellers. When e-commerce started in the 1990s, many predicted that the wholesale industry would eventually die out. That prediction seems to be playing out with the downward trend in pricing, market players increasing their productivity to offset stagnant sales, and digital transformation continuing to erode traditional business models. Singapore too showed a negative trend in wholesale trade index year-on-year.
Digital transformation, including the emergence of new online platforms, is not only disrupting wholesale companies, but also challenging the traditional view of trade and retail customers. With lower pricing, logistical expertise, and easy access to increasingly tech-savvy customers, online platforms are becoming serious competitors to traditional wholesale companies. Online purchasing will likely be the norm in time to come.
In this article, we look at how Singapore’s Wholesale and Trade industry has been adapting to keep pace, survive or even thrive.
Digitalisation accelerated by COVID-19
The COVID-19 pandemic has exposed inequalities in all industries, especially in the supply chain. Many companies with global footprints were caught by surprise, and unable to react to the sudden factory closures and supply chain disruptions at the start of 2020. The disruptions have led to companies looking to innovate with digital technology to strengthen the entire supply chain and ensure business continuity. The lockdowns across the world have accelerated the need to change as the restrictions have not only limited people’s movement but also their access to traditional sources of food supply.
The global digital revolution of the supply chain
Digital technology’s role in the world’s food supply, from farm to table, is growing. Consumption patterns have changed with consumers seeking out reliable food delivery services, as they try to shorten the supply chain and cut out the middleman. Farmers, seed and fertilizer suppliers, as well as food wholesalers and distributors have moved to online services as distribution and marketing channels. E-commerce and other smart logistic fulfillment services are used to match supply and demand for agricultural produce. We look at some examples of the digital transformation in the wholesale trade industry from around the globe before zooming into Singapore.
An Indian online grocery platform has moved to a community selling model where it is asking apartment complexes to put orders together for their residents. This helps the company meet consumers’ demand despite having a small workforce.
In 2020, Malaysia’s Movement Control Order resulted in vegetables from the Cameron Highlands being discarded by farmers. An e-commerce platform provided a solution by connecting vegetable farmers, delivery service providers and consumers in Kuala Lumpur.
Commodities such as fruits, vegetables and livestock products are perishable and sensitive to labour shortages on farms and when sorting, packaging, and processing. Restrictions which limit labour availability can rapidly derail supply chains. An example was at the onset of COVID-19, where meat processing plants in the United States and Europe had to close due to infections among staff.
In China, the lockdown resulted in large amounts of unsellable seasonal vegetables and fruits backlogged or even unpicked in farms. The disruptions to the flow of seeds, fertilizers, and labour jeopardised farming productivity. Regular distribution channels, e.g. retail and wholesale touchpoints, were disrupted and hit by plunging demand from the shutdown of food and beverages businesses. E-commerce enterprises then created dedicated agricultural product or labour platforms, which helped reduce the mismatch of supply and demand throughout the region. For instance, Thai durian was sold through an e-commerce platform to customers in China during Thailand’s lockdown.
Singapore’s digital transformation of the wholesale trade industry
Digital transformation is now well in progress and places real demands on wholesale companies. Many wholesalers find it difficult to keep pace with digital transformation, where their customers, employees, suppliers, competitors, and service providers are all becoming increasingly digitalised.
According to Intershop’s white paper, nine out of 10 wholesalers believed that digitalisation would be the dominant topic by the end of 2020. However, a majority felt inadequately prepared to take the necessary steps. When discussing digitalisation, some wholesalers may ask: What do these changes mean for my company? How do we compare with others? Where should we start? What is the best approach?
In 2020, Enterprise Singapore’s Trade and Connectivity Challenge 2020 (TCC 2020) was launched with calls for solutions to enhance the supply chain by standardising processes and system integration. Solutions may provide live data on asset management tracking, and automate labour intensive and time consuming procedures. The prospect of innovative solutions which may be applied to global challenges resulted in more partners from around the world participating in TCC 2020.
Singapore’s Wholesale Trade Industry Transformation Map
Amidst the changing landscape and the need to digitalise, the Wholesale Trade Industry Transformation Map (ITM), launched in September 2017, charts out strategies to ensure that the wholesale trade sector remains relevant. Aligned to the ITM, the Wholesale Trade Industry Digital Plan (IDP) is part of the SMEs Go Digital programme which aims to make going digital simple and accessible for SMEs.
- building trade connectivity through digital marketplaces and platforms
- strengthening enterprise capabilities
- growing a vibrant trade ecosystem of wholesale trade enterprises in Singapore
- developing industry-ready talent equipped with deep skills for digitalisation and internationalisation.
Examples of Singapore wholesale trade companies on their digitalisation journey
Against the backdrop of a global decline, startups and their innovations have an important role in tackling challenges, adapting and exploring growth opportunities. We look at some examples of companies whiich played a part in digitally transforming the wholesale trade sector.
F-Drones, a local drone startup, proposed new ways to provide ship-to-shore deliveries. Capitalising on their innovative drone technologies, it successfully aerial delivered items such as 3D printed parts, vitamins, and bunker samples to maritime companies such as Bernhard Schulte and Eastern Pacific Shipping. In addition to helping companies better manage their labour costs, their solutions are contactless and have helped businesses adhere to social distancing measures.
DiMuto is a Singapore-based startup that helps agri-food players digitalise their supply chain. Through their supply chain visibility technology, Californian oranges, lemons and grapefruits are finding new buyers across Asia and the world.
At Fancher Creek Packing, an outfit in San Joaquin Valley, DiMuto’s DACky (Digital Asset Creation) device, hovers above the production line and snaps image of fruits in cartons as they roll through. DACky is an IoT device that works together with DiMuto’s artificial intelligence (AI) engine.
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Within seconds, every fruit and every carton have a unique QR code and “digital identity”, which can be linked with traditional trade information such as purchase orders and shipping documents on DiMuto’s blockchain-powered platform. Wholesale buyers and traders can then track any item through the entire supply chain journey, with clear oversight on food safety, security and background.
Fresh produce trade disputes, for instance a buyer not receiving the specified product, can lead to losses of 5-10 percent on every order. In addition, the UN Food and Agriculture Organization estimates that about one-third of the food produced annually is lost or wasted. DiMuto’s end-to-end, 24/7 visibility system can mitigate food wastage and solve fresh produce disputes by enabling agri-food traders to penetrate new markets and helping them redirect supply to demand effortlessly and dynamically.
A joint venture between Temasek and Swiss transport and logistics company Kuehne + Nagel invested in PROWLER.io, a UK-based firm. PROWLER.io uses an AI Decision Engine and employs a unique combination of sophisticated probabilistic modelling and decision-making libraries that empower businesses to use readily available data to make better decisions.
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In the logistics sector, PROWLER.io worked with a leading pooled pallet company that needed to decide daily how many trucks to send to each retail customer for pallet collection. The available historical data marked the status of previous collection attempts either as “failure” or “success”. A “failure” means fewer pallets were available than expected, and a “success” means at least as many pallets expected were available. PROWLER.io then simulated a range of scenarios, which the decision maker may choose with the available data. As a result, PROWLER.io was able to identify an opportunity for the customer to reduce failed collections by 33 percent, resulting in the potential to significantly improve pallet utilisation and reduce transportation costs.
What else is Singapore doing to promote innovation in the wholesale trade sector?
In December 2020, Singapore announced plans to sustain investments from 2021 – 2025 – this will amount to about 1 percent of Singapore’s gross domestic product (about $25b) – for research, innovation, and enterprise (RIE) activities.
The plan will build on the progress of previous RIE investments, as the Government has identified that science and technology will be key to Singapore’s ability to meet future challenges and to respond to shifts in the global economy. The plan has expanded to include new areas identified as strategically important such as aviation, sea transport, logistics, and wholesale trade.
Through the Global Innovation Alliance, Singapore also plans to build stronger connections with global innovation hubs to strengthen the access of enterprises to key technology solutions, talent, and markets. Additionally, Singapore launched the I&E Fellowship Programme (IFP), with partners including SGInnovate. Under RIE2025, the full-fledged IFP will provide participants with mentorship and on-the-job training in tech commercialisation. These opportunities will be made through attachments with public and private sector I&E platforms, including corporate laboratories, private sector incubators and accelerators.
Interested to find out more? Look out for our upcoming industry profile where we give you a more in-depth analysis.
- Enterprise Singapore. (2020, July 22). Trade and Connectivity Challenge 2020 – Digitalisation, the next frontier for trade connectivity.
- SGInnovate. (2020, July 13). Supply Chain Digital Transformation: Enhancement of Supply Chain Visibility for the Post-COVID-19 World.
- Infocomm Media Development Authority. (2021, March 15). Wholesale Trade Industry Digital Plan
- Zhang, QF., Hinrichs, J. (2020, July 9). How COVID-19 could accelerate the digitization of the food supply chain. Asian Development Blog.