As economic headwinds continue to disrupt global supply chains, a new study by ports operator DP World, released at the World Economic Forum annual meeting in Davos, has found that as many as 96% of companies are incorporating changes to their supply chains due to geopolitical events, cost reduction, and disruption risks.
According to the report titled Trade in Transition 2023, nearly 40% of companies in South America, 36% in the Middle East, 32% in Asia-Pacific, and 18% in Africa are looking to outsource within their regions.
“By bringing production closer to the final customer, firms can reduce the number of touch points involved in the supply chain and build greater resilience into the flow of cargo around the world,” said Sultan Ahmed Bin Sulayem, Chairman and CEO of DP World Group.
Companies said they were reducing the length of their supply chains due to geopolitical events such as the war in Ukraine, while another 33% plan to expand into more stable and transparent markets.
The widespread and increasing technology adoption is another way to build resilience in the supply chain. Approximately 35% of respondents said they were currently implementing Internet of Things (IoT) solutions to facilitate the tracking and monitoring of cargo; 32% of companies were adopting digital platforms to enable direct business with customers or suppliers, the report stated.
The persistent threat of inflation was cited by 30% of the executives as having the most significant negative impact on trade over the next two years. Inflationary pressures are seen in input costs — from supply shortages – and transport through high energy costs and shipping capacity constraints.
If inflationary pressures continue, exports in the Middle East will likely be hardest hit, falling by 3.52% and 2.74%, respectively, per the report.
At least 10% of respondents said the fragmentation of the world into trade blocs was limiting the growth of international trade.
In a scenario of monetary tightening, companies across Europe, North America, and Asia-Pacific expect exports to be 1% lower than under a business-as-usual situation due to decreasing production and demand.
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