2024-01-16 10:23:57
A new study conducted by The Economist Impact, the trade arm of The Economist Group, and DP World, showed that business leaders around the world are optimistic about the path of trade movement in 2024, despite the challenges witnessed in 2023 and the escalating geopolitical tensions.
The study, which was unveiled at the World Economic Forum, said that the main driver behind this optimism is the growing belief that technology will bring about a huge shift in the efficiency and flexibility of supply chains, as companies re-evaluate the risks in their supply chains and move towards geographical convergence strategies. “Friendly” centers of manufacturing and consumption and the adoption of dual supply chains, amid mounting concerns about protectionism, global fragmentation, and political instability.
The study, titled “Trade in Transition,” recorded the views of trade experts and senior executives in a variety of regions and sectors, noting that this period of unprecedented transformation, increasing geopolitical risks, the pressing realities of the impact of climate change, and significant advances in technologies, puts companies before… Complex challenges, but at the same time they open up horizons of promising opportunities.
A global survey conducted as part of the study, which included 3,500 business executives, revealed that technologies that improve the effectiveness and flexibility of supply chains are the main source of optimism for business leaders when asked to evaluate the future of global trade, and that the widespread adoption of artificial intelligence is a key factor in This optimism, as 98% of executives use artificial intelligence technologies to make a radical change in at least one area within their supply chain management operations, from finding solutions to inventory management problems, to reducing trade expenses, to improving transportation routes.
A third of the companies surveyed use artificial intelligence technologies to reduce the overall costs of business operations and enhance resource planning and supply chains, while more than a third of companies believe that enhancing the use of digital tools to improve inventory management represents the most effective strategy in reducing the overall costs of trade and supply chains.
Companies expect to increase their technological adoption further this year, which is a proactive approach that confirms the commitment to using innovation to deal with the changing business landscape by increasing efficiency and flexibility, while a third of the survey participants said that they will focus on advanced automation and robotics to enhance logistical efficiency, and 28% will move towards adopting Blockchain technology to strengthen tracking capabilities and data security, while 21% will rely on artificial intelligence, big data analytics, and predictive analytics to reach real-time insights and predict disruptions in trade movement. According to the study, the landscape of increasing geopolitical risks in a new era of globalization shapes global trade, as companies try to reduce risks in the supply chains they rely on, and more than a third of companies use geographical proximity strategies from “friendly” centers to shape commercial movement and supply chain operations, while 32% of companies create parallel or dual sourcing supply chains. In addition, more than a quarter of companies chose fewer suppliers, an increase of 16 percentage points, compared to the previous year, as companies consider the advantages of consolidation versus diversification, and control versus flexibility.
Concerns are growing that political instability, increasing trade disputes and global fragmentation will hinder growth, as officials in a fifth of the companies participating in the study are concerned about high customs duties, or uncertainty about customs tariffs in the main markets to which they export or import. In this context, 22% of executives highlighted the challenge of political instability in their source markets, while nearly a quarter (23%) expressed concern about increasing geopolitical uncertainty.
The Economist Impact conducted a quantitative trade analysis via the Global Trade Analysis Project (GTAP) platform to estimate the potential decline in global output from hypothetical scenarios of further “geo-economic fragmentation,” and in a scenario focusing on significantly increased trade barriers to goods. High-tech, a pivotal point in the current geopolitical climate, the Economist Impact predicted a 0.9% decline in global GDP.
Sultan Ahmed bin Sulayem, Chairman and CEO of DP World Group, said: “The results contained in this report show remarkable optimism, despite companies being forced to operate in an rapidly unstable environment. Governments can also enhance the benefits.” economic growth and reaching its maximum limits by providing the predictive ability that companies need, while reducing trade disputes. In light of this, tariffs must be reduced, in addition to cooperation with the private sector to expand the use of technological innovations, especially in the fields of digitization, automation, and artificial intelligence, which allows… Greater efficiency and clarity.”
In turn, John Ferguson, Global Head of New Globalization at The Economist Impact, said: “In 2024, we noticed a clear increase in the diversity of approaches adopted by companies in their supply chains, amid increasing geopolitical risks and the growing impact of climate change phenomena. This reflects a growing understanding that no single strategy can meet the needs of different companies. “It is already clear that technology is being used across supply chains to ensure that companies can adapt more quickly and more intelligently.”
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