A DP World study of private sector perspectives finds that 83% of companies are reconfiguring their supply chains
A global study of private sector perspectives commissioned by DP World highlights how international trade flows have remained robust despite the pandemic.
On average, companies allocated 32% of revenue from the first half of 2020 to help them switch suppliers or logistics providers and change production or purchasing locations. Consequently, 42% of companies saw international revenue expand in the first half of 2020. 19% reported no year-on-year change from 2019.
The study was commissioned by DP World and conducted by the EIU at the outbreak of Covid-19 in Q1 2020, and updated in Q4 2020. Despite the disruption to supply chains, it found optimism about future growth is widespread and assuming the pandemic does not worsen, and protectionist polices remain restrained, 77% of companies expect international sales to expand.
Capturing the perspectives of business leaders across six regions (North America, South America, Europe, the Middle East, Africa, and Asia Pacific), the study found 83% of companies are reconfiguring their supply chains, including diversifying the countries they intend to trade with. In Europe, companies expect international sales from North America to increase from 14% in 2019 to 21% in 2020. Conversely, in the Middle East international sales from North America have decreased while revenue from Africa is expected to increase by 50%.
The study also revealed a resurgence for particular sectors that helped to support international trade. Globally, 58% of companies in construction reported a rise in international trade, particularly from North America following a demand for home renovations. Supported by data from the ITC, South African exports of pulp (the raw material for toilet paper) increased 163%. In Europe, during the first half of 2020, exports of cereals (particularly to the Middle East) and pharmaceutical products from the continent increased by 23% and 12% respectively. The movement of consumer goods across the world is also helping the global trade and logistics industry to rebound. 81% of major consumer goods manufacturers expect exports to have expanded in 2020.
While 40% of companies indicated that trade flows had decreased due to declining demand, 32% were affected by supply shortfalls and 28% by constricted logistics – 43% of companies still anticipate trade flows to recover to pre-pandemic levels in under two years.
Businesses around the world have accelerated their digital transformation. In response to the pandemic, 40% of companies were implementing cloud computing for the first time. 38% were using IOT, 34% have adopted big data and analytics, 17% were introducing machine learning and 16% automation and robotics.
One in six respondents (16%) said enhancing their firm’s responsiveness to change through real-time/predictive data analytics would be the most important factor determining how their company will conduct international trade transactions in the future.
DP World chief executive and chairman Sultan Ahmed Bin Sulayem said “International trade has shown remarkable resilience during the pandemic and will play a critical role in facilitating the global recovery. The business community is more optimistic for the future than many expected, and the supply chain challenges exposed by the pandemic have acted as a positive agent for change. We expect the result will be global flows of trade that are more efficient and more robust.”
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