The digital transformation of the supply chain is increasingly necessary. In this QAD Precision Report we look at the current state of global trade and how an integrated supply chain helps businesses meet tomorrow’s challenges.

Global trade has experienced a series of unexpected challenges in the last twelve months. The Covid-19 crisis caused a deep slump in trade volumes, particularly in the second quarter of the year. The World Trade Organization’s Goods Trade Barometer, published this February, found that trade rebounded in the third quarter. World merchandise trade volumes growth was due to increased exports from Asia and rising imports in both Europe and North America.

Trade volumes remained strong in the fourth quarter. However, the WTO is pessimistic that expansion will continue during the first half of 2021.

The pandemic has also caused a global shortage of semiconductors. As the crisis took hold, factories shut down, creating shortages. Although production has resumed, the pandemic also created demand for electronic devices. Consumers sought new TVs, computers, 5G-enabled mobile phones and games consoles — all of which use semiconductors.

Semiconductors are also crucial for electrical vehicles. Ford, Nissan and General Motors have all experienced production halts or slowdowns due to the shortage. 

The shortage has also impacted the world’s largest electronics companies. Apple had to delay the launch of the iPhone 12 for two months. In mid-March, Samsung stated that it may need to postpone the launch of its latest high-end smartphone. The irony is that Samsung is also the world’s second largest manufacturer of computer chips.

The Clash of Giants

Geopolitical tensions remain between the world’s two largest economies, disappointing anyone hoping for a thawing of relations between Washington and Beijing. Officials from the United States and China met in Alaska this March, but talks got off to a chilly start.

Also in March, the European Union and the United Kingdom imposed sanctions on China. This was done in a coordinated action with the US and Canada. These sanctions targeted four Chinese officials for human rights abuses of Uighur Muslims in Xinjiang province.

China responded by imposing retaliatory sanctions. Beijing’s sanctions target a number of European and British officials, including members of the European Parliament and national politicians.

Added to the tit-for-tat sanctions and the war of words, is Brexit. The UK’s Office of National Statistics reported that UK exports to the EU fell 40.7 percent in January. 

Relations between the EU and UK are likewise strained. In mid-March, the EU launched legal action against the UK for unilaterally delaying the implementation of the Northern Ireland Protocol. 

In February, the UK stated it would waive customs procedures due to come unto effect on 1 April. These regulations require additional customs paperwork for food and agricultural products traded between Great Britain and Northern Ireland. 

Northern Ireland remains a part of the EU single market. This avoids a hard border on the island of Ireland. However, the EU has stringent rules about food products — making the checks a necessity from an EU perspective.

The Importance of Digitization

Geopolitical relations have always impacted how multinational companies conduct business. When you ship from and to multiple sites around the world, you need to be able to nimbly respond when sanctions and trade laws change.

Multinational companies must also adapt to unexpected crises in the global supply chain. Some can be planned for such as storms, fires or production slips. Others come out of leftfield, such as a global pandemic or a massive container ship blocking the Suez Canal. 

A recent survey by McKinsey & Company found that global executives are responding to the pandemic with a new focus on digitization. The respondents claimed that Covid-19 had accelerated the digitization of customer interactions and supply chain processes by several years. As the pandemic pushed people to online channels, businesses needed to respond.

According to the survey, global executives now see technology as strategically important and critical to business success. Technology is no longer just an enabler of cost efficiencies.

Almost a third — 30 percent — of respondents said that digital transformation would allow their companies to keep pace with competitors. A further 38 percent stated that technology gave them a competitive advantage over their competitors.

The Integrated Supply Chain

Business has changed, driven by digital transformation and globalization. These trends were already underway and have been spurred on by the necessity of adaptation due to the global pandemic. 

To meet this challenge, enterprises are looking to digital supply chain transformation. Specifically, the need for a connected end-to-end supply chain. This allows enterprises to digitize and integrate all their global trade and transportation operations — from sourcing to final-mile delivery. Companies can leverage supply chain technology to automate business processes, creating efficiencies and reducing costs.

Improved visibility from sourcing — including admissibility flags, tariff concerns and other regulatory requirements — reduces unexpected delays and costs.  

A further critical requirement is remaining in compliance with global trade rules and country-specific regulatory requirements. These trade compliance requirements are often siloed from transportation management and logistics operations. As a result, compliance and logistics do not work in harmony. This leaves a company vulnerable to compliance missteps, fines and increased cycle times.

Enterprises need to balance the competing demands of controlling supply chain costs while meeting customer expectations. Global trade is becoming increasingly complex at a time when customer expectations regarding rapid delivery are also increasing.

Automated routing along with multi carrier shipping allows enterprises to customer demands for on-time delivery, while controlling costs.

As companies move to mature their supply chain operations, they are turning to integrated global trade and transportation solutions to manage this complex process. 

Integrating global trade management with multi carrier transportation allows enterprises to:

• Improve classification processes 

• Gain early visibility into tariffs and other regulatory requirements

• Automate trade compliance checks and license determination

• Leverage real-time insights across trade and transportation operations

• Increase visibility from sourcing to final mile delivery

• Improve logistics ROI by eliminated expedited shipments 

• Reduce costs by auditing freight invoices

• Improve customer service by increasing on-time deliveries 

With an integrated supply chain, companies improve every step of the process from your supplier’s supplier to the end customer.

LET’S KEEP IN TOUCH

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Further Reading

3 MINUTE EXPLAINER: WHAT IS RESTRICTED PARTY SCREENING?

THE BENEFITS OF INTEGRATING COMPLIANCE AND MULTI CARRIER SHIPPING SOLUTIONS

3 MINUTE EXPLAINER: WHY YOU SHOULD AUTOMATE TRADE COMPLIANCE