How the pandemic has reinvented trade

Covid-19 proved to be the most devastating setback the world collectively experienced in over a century. Yet every crisis brings with it a new dawn, new hope and new opportunities to help us emerge better and stronger.

In the realm of global trade, the pandemic reignited corporate appetites to improve supply chains. Over the last year and a half, buyers have sought greater inventory buffers and insulated supply networks to enhance protection against future disruption as they recognised that the current pandemic might not be the last macro-scale shock to global trade.

Shocks to supply chains are frequent, as illustrated by the blockage of the Suez Canal earlier this year by a container megaship. McKinsey & Company estimates that companies experience a shock that leaves them inactive for a month every 3.7 years.

Data from DP World’s Trade in Transition report clearly shows that 83 per cent of businesses polled have invested in reconfiguring their supply networks. They are switching locations to improve the production or purchasing outlook and seeking to shorten their supply chains.

Digitalisation also leads to increased visibility that helps manufacturers manage procurement while suppliers can track real-time updates on order backlogs for more accurate inventory organisation.

The demand for more seamless and end-to-end logistics services has risen dramatically to deal with market volatility. Without technology, bridging such gaps in trade flows would be impossible for supply chain operators.

However digital solutions are not a panacea to trade and must be supported by broader policy action. In addition, the need for government alignment has been heightened by the pandemic. The increase in customs and border checks has required trade entities to revitalise public-private cooperation to enable smoother cross border trade, along with accelerating knowledge transfer and capability building.

As we collectively navigate forward, the global economy is projected to grow 6 per cent in 2021 and 4.9 per cent in 2022, according to the IMF. The 2021 global forecast is unchanged from the April 2021 world economic outlook, but with offsetting revisions.

Nonetheless, the next two years will certainly offer new possibilities and avenues of growth for all, in particular the global trade and industrial sector, as countries across the world emerge from the throes of a pandemic.

Ahmad Al Haddad is the COO at DP World and will be one of the speakers at GMIS 2021