World exports as a percentage of global GDP showed a continuous growth trend from the mid-eighties of the last century, until 2008. Since then the growth stopped.
Another indicator for trade, global capital flows between countries, achieved its highest point seven years ago. But times are changing. Growth will still be there, if you know where to find it.
According to McKinsey, approximately 600 cities are likely to realize 65% of the global GDP growth by the mid-twenties. By then, the growing cities are predicted to add up to $30 trillion to the world economy. Incomes in developing economies never rose faster or at a greater scale in history, and about a billion people are becoming part of consuming classes in roughly ten years’ time.
Macro-economic changes and shifts in trade patterns have their impact on global supply chains. They provide opportunities as well as challenges. Let’s have a closer look at some developments in logistics that are directly or indirectly caused by changes in trade patterns, in GDP growth or in customer behavior.
- Growth patterns: Growth in the logistics industry is no longer driven by exports from Asia to North America and from Asia to Europe. It will come from elsewhere, and will be more fragmented, more unpredictable and more volatile. Economic and population growth will be increasingly centered in cities. Infrastructure is becoming a major determinant for growth.
- Flexibility: Meeting consumer’s requirements at multiple locations with multiple transport modes at different times requires a flexible supply chain that can adapt easily to unexpected changes and circumstances.
- Globalisation: International, mature and emerging markets have become a part of the overall business growth strategy for many companies. Going ‘international’ has become the standard and logistic solution providers need to enable that trend.
- Near shoring: As labor costs in Asia and transportation costs rise, increasing amounts of manufacturing are being brought closer to the end user.
- Multi-channel sourcing: End-consumers increasingly source via multiple channels, ranging from brick & mortar shops to e-commerce. The logistics industry needs to support multi-channel strategies of their customers.
- Information technology: The growing complexity and dynamism of supply chains requires increasingly advanced Information Technology solutions.
- Continuity: To be able to secure speed to market and to reduce risk of delays, alternative transport modes and routes are required to support the continuing trend of outsourcing of logistics services.
- Sustainability: Customers increasingly prefer products that are made and sourced in ‘the right way’; minimizing business’ social, economic and environmental impact on society and enhancing positive effects.
- Compliance: Anti-bribery and corruption legislation is having an increasing impact on supply chains, since multinational companies demand that no facilitation payments are made during the export of their goods, yet still seek to source from low cost countries, which are often also at the bottom of Transparency International’s global corruption index.
- Partnerships: Manufacturers continuously search for supply chain innovations and gains through partnerships with logistic service providers.
- End-to-end visibility: Complete visibility of the entire supply chain aspires to achieve true demand-driven planning, allowing efficient response to changes in sourcing, supply, capacity and demand.
- Complexity: Supply chains are becoming increasingly complex and dynamic with sourcing locations being changed increasingly quickly and purchase orders becoming smaller and more frequent.
These developments will have their effect on day-to-day logistics, and companies will need to prepare for ‘the new normal’ in supply chain management. With all these changes, staying up-to-date on the latest trends in logistics is more important than ever.