Transportation costs drive regional divide

New research shows that business is feeling the effects of inflation, geopolitical tension, port congestion and transportation costs in dramatically different and regionally specific ways, with those in South America and Africa facing a more negative business outlook.

The study, conducted by Economist Impact, surveyed executive-level participants representing businesses in 26 major countries across the globe. The research was commissioned by DP World, global logistics company and a key participant in the World Logistics Passport.

In South America and Africa, executives have a more negative outlook on the impact of transportation costs on business outlook – even when compared to other developing countries.

For example, 42.5% and 49.5% of executives surveyed in South America and Africa respectively identified higher transport costs as the top limitation for increasing exports. This compared to 19.9% for those in China, 27.5% in India and 25% in the UAE.

Mahmood Al Bastaki, General Manager of the World Logistics Passport, said: “This new data tells us that different countries and regions are having remarkably different experiences of the same supply chain pressures. With export prospects for businesses in South America and Africa more likely to be impacted by rising transport costs, the private sector is in need of solutions that will help increase efficiencies and lower these costs to help ease inflationary pressures.”

Improvements in port and logistics infrastructure are cited as a key route to trade growth – for imports in particular. Nearly one in three (31.7%) business leaders across the identified markets indicated that improved port and logistics infrastructure are drivers of import growth.

Both hard and soft port and logistics infrastructure are part of this important driver of growth – with trade routes, technologies and streamlined partnerships being examples of soft infrastructure. For example, over half (55.7%) of executives said that their company had either implemented digital solutions to enable seamless movement through customs and border control in 2021 or planned to do so in 2022.

Improved customs processes have been shown to be important in helping speed the flow of goods and keep trade moving and reducing time-to-trade – therefore boosting cost efficiency.

And while the end of globalisation has been heralded as an expected consequence of geopolitical tensions between Washington and Beijing, the research revealed that companies are instead further diversifying their global trade networks rather than retrenching or regionalising – presenting opportunities for markets able to capitalise on diversifying procurement strategies.

Nearly one in two (47.9%) executives around the world are seeking more diversity of supplier base regardless of location, with approximately three in five executives (59.2%) saying that choosing suppliers and markets based on the lowest possibility of being caught in a geopolitical dispute is ‘absolutely critical’.

This has been a boon for economies such as WLP members Vietnam and Mexico, which even pre-pandemic had benefitted from increased diversification of manufacturing bases due to geopolitical tensions.

Al Bastaki continued: “Despite the headwinds out there for all to see, there are opportunities for countries to boost trade. In particular, these can be found through investment in trade solutions that help facilitate faster movement of goods, such as improved soft infrastructure and digital solutions.

“Additionally, countries that are part of growing trade networks and already have the soft infrastructure to service new markets will be in a better position to capitalise on the diversification of suppliers.”

75% of logistics professionals see room for improvement

Transporeon and Adrian Gonzalez, President of Adelante SCM and Founder of Talking Logistics, just published the Transportation Pulse Report 2022. In light of the capacity shortages and delays within global logistics due to the COVID-19 crisis, the report identifies solutions for rebuilding trust in the supply chain. It combines quantitative insights from more than 280 shippers, carriers and 3PLs with the opinions of industry experts. A rising number of logistics professionals (25% compared to 18% in 2020) believe that there exists “very large” room for improvement in the way transportation processes are designed and managed. Another 48% of respondents see “large” room for improvement (compared to 47% in 2020).

More specifically, respondents consider the biggest room for improvement to reside in the physical (68%) rather than the digital supply chain (32%). “It’s obvious,” comments Dr. Thomas Lieb, Chairman of the Supervisory Board of Hellmann Worldwide Logistics, former CEO of DB Schenker and member of Transporeon’s Advisory Board “it’s currently the physical supply chain that is causing all the headaches, which is why building trustful and reliable relationships with your supply chain partners, having real-time visibility, and taking care of your people are so important.”

Overall trust among trading partners is low with more than half of participants “agreeing” or “strongly agreeing” that “you can’t be too careful when dealing with people across your supply chain”. This coincides with the problems identified in digital supply chains: 58% of respondents state that the lack of transparency and data sharing among trading partners was in need of fixing. Almost half of the respondents also state that a lack of real-time visibility was a problem.

Hermann Ude, former CEO of DHL Global Forwarding, Member of the Board of Deutsche Post and today Chairman of Transporeon’s Advisory Board notes that “The response is more sharing of data and information, as well as joint optimization. All of these solutions that are available now, like real-time freight visibility and Transporeon’s Trust Center, are valuable because they provide transparency, they are an investment in building more trust. Having everyone looking at the same data will enable joint optimization, which was not possible in the past.”

This opinion was also mirrored in the answers of the survey respondents who stated that “Matching demand with capacity more efficiently” was the highest priority for them in 2022. “Enabling greater visibility to real-time demand, rates & capacity” and “Eliminating manual & paper-based processes” were their second and third priorities. Reducing the carbon footprint also became more important since 2020.

Further results of the study show that the integration of technology and logistics was strengthened within the last year. Software still matters, but the platform approach has become even more important with 77% of respondents stating that size and scope were “very important” or “important” criteria when selecting a TMS or logistics service provider.

Industry expert Adrian Gonzalez summarizes: “What we do know is that very large opportunities for improvement still exist in transportation, and that to achieve them, the logistics industry needs to become more data-driven, and there needs to be greater transparency of data across all stakeholders.”

CLICK HERE to access the full Transportation Pulse Report 2022

Report: only 12% of companies have resilient supply chain

A new report by global consultancy partnership Kearney and the World Economic Forum has found that only a minority (12%) of leading companies globally are sufficiently protected against future supply chain and operational disruptions. The remaining 88% urgently require additional measures aimed at building resilience, with 52% of businesses in this group considered mainstream players while 36% are ‘resilience laggards’.

A variety of drivers are affecting companies’ resilience. Around three-quarters of executives globally (76%) indicate COVID-19 as a significant disruptor, though this was less felt by executives at UK companies (40%).

Meanwhile, emerging technologies, geopolitical tensions, trade barriers, political uncertainties, social injustice and the implications of climate change are also acting as barriers to resilience building for many firms globally. For example, among UK companies in particular, the majority (84%) of executives believe geopolitical tensions will be disruptive to their company’s value chain within the next five years. Furthermore, executives globally expect the impact of disruption on corporate value to increase by 15-25% over the next five years.

Despite its challenges, COVID-19 is helping to prompt change in this area, with 60% of executives surveyed in this report saying that the crisis has encouraged them to pursue long-term resilience and prepare for future disruptions. Additionally, 75% see the pandemic as a dress rehearsal for further disruptions to come.

However, the majority of companies will require support when it comes to building long-term resilience in a variety of key areas. Consultations with senior executives in operations and supply chain suggest that resilience in product portfolio, customer orientation, financial viability and go-to-market channels is needed if businesses are to satisfy customer demand. Furthermore, resilience in logistics, manufacturing, suppliers and planning is also necessary so that companies can secure the supply to be able to run production.

Only 12% of those surveyed by Kearney said they have heavily invested in their customer orientation, while a mere 14% have mastered the development of a robust logistics system, for example.

12% of companies representing a healthy mix of industries and regions were classed as ‘resilience leaders’ in this report, who consistently outperformed the remaining 88% across all areas of resilience, further indicating the importance of resilience in securing a strong and future-proof business model. No company in any single sector or region is insulated from supply chain disruptions and, as such, every business needs to adopt the relevant strategies that will help them tackle this.

Per Hong, Strategic Operations Partner and leader of the study at Kearney, comments: “Though the world is opening up, the challenges from COVID-19 are far from over, from ensuring safety and security on the shop floor and facing supply and demand disruptions, to accelerating digital transformation and reskilling to build resilience.

“So far, we have explored where resilience leaders are excelling and observed how companies can chart their own path; however, no company can manage the repercussions of large-scale disruptions alone. This is where collaboration between different players in the ecosystem becomes vital to enabling a rapid response.

“Organisations need clear and accessible support to identify priorities, manage risks and confidently define sustainable strategies to navigate disruption and uncertainty. Next generation operations and supply chain leaders will be defined by their ability to withstand and quickly adapt to increasingly disruptive headwinds, and the priority for many businesses now should be accelerating the resilience-building process so they can best respond to future disruption.”

The World Economic Forum’s Platform for Advanced Manufacturing and Production and Kearney, will continue engaging leaders across different industry sectors such as healthcare, automotive, consumer goods, and transport and logistics, as well as government, academia, and civil society, to jointly design globally-coordinated responses and build resilient value chains for the future. Forthcoming work will offer in-depth archetypes of resilience leaders to further the mission of building global resiliency and identify priority areas and actions for organisations.

Successfully navigating myriad global logistics challenges

Events such as the Icelandic volcano eruption in 2011 that grounded thousands of flights and the more recent Suez Canal blockage illustrate that there is an almost infinite number of points at which things can start to go wrong with global logistics, writes Yaseen Khan, Chief Executive Officer NSC Global.

Enterprises that are undertaking IT logistics globally no longer just face the traditional challenges of transport, they must now carefully traverse local customs and cultures, regulatory differences and the impact of digital transformation – making up-to-date and expert knowledge essential.

In our connected and globalised world, there are numerous parties involved to get an item from where it is manufactured to its end destination. Businesses operating in a globalised economy, need to understand that cultural differences can impact how they perform in the local markets. With a sound working knowledge of local cultures, enterprises will benefit from faster transit when transporting goods within a country.

Regulatory differences

Regulatory knowledge is essential to ensure certainty of movement and avoid goods being rendered useless in the destination country. Although speed-to-market is key, don’t let that be a substitute for poor planning. Where possible consolidate loads to ship more effectively and look for flexible services.

Sea-freight may be one-fifth of the cost of airfreight door-to-door, but if you don’t have the correct clearance requests and product-specific licenses/permits, pay the right taxes and duties and meet the varying audit requirements, you risk delaying or even stopping the clearance of goods.

Almost all countries charge taxes on imported goods, but it’s rarely a flat rate even within countries. Having the knowledge to take advantage of tax exemptions or discounts can be extremely economical; equally, so can knowing when not to ship goods, but to purchase them in the country where they’re required.

The impact of digital transformation

Efficiency, optimisation, speed and timing have always been crucial in global logistics. The digitalisation of logistics, can reduce fraud, facilitate seamless transactions, enhance accuracy and will allow for an accurate recording of data. This level of transparency provides absolute clarity on where goods have come from, where and what slows down the supply chain, how it can be made more economical, and where accountability for supply chain failures lies.

The digitally accumulated data can also help to address ethical concerns around child labour, origin of materials and packaging waste while enabling faster action related to changing customer demand, optimum routes, fuel consumption and overall turnaround times.

 

Cloud Computing

The pandemic has accelerated an already existing trend – Cloud Computing. Mandatory stay-at-home orders made remote work a basic requirement for almost all organisations seeing Cloud spending soar 37% in the first quarter of 2020 alone.

Cloud computing now extends far beyond storing data and files off-site. Enterprises could choose to streamline many of their logistics needs meaning for some businesses their entire IT service stored to just one location, raising the question of whether bulky servers and other technology goods will need to be transported in the future.

What is clear is that in order for businesses providing global logistics to continue to thrive in a globalised economy, they must invest the time to address and understand cultural and regulatory differences, and the outstanding growth opportunities and competitive advantages for companies that are willing to embrace these new technologies.

Supply chain costs have a huge impact on a business’ P&L and requires careful management. By retaining some supply chain expertise within your business to oversee your supply chain solutions, and working with a global IT logistics expert that provides an end-to-end service, businesses benefit from the efficiency of single partner with the expert knowledge of local customs and legalities even in complex and unusual locations.

 

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