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Measuring risk and reward in the global marketplace: 2018 promises to be an "exciting year" for supply chain managers, say analysts at Panjiva Research. The think tank has published a series of eight reports investigating the opportunities and challenges in the global marketplace.

The Chinese curse, "may you live in interesting times," gains added meaning when supply chain managers consider the complexity of trade laws and government policies coming into play this year.

According to analysts at Panjiva--an online search engine with detailed information on global suppliers and manufacturers--2018 may not only be interesting, but also exciting.

An "alphabet soup" of multilateral trade deals are in progress as 2018, partly in response to a U.S. desire to pursue bilateral arrangements. Many of these overlap and conflict, and may therefore struggle to make progress, analysts note.

For example, the Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement between the ten member states of the Association of Southeast Asian Nations (ASEAN).

"This is the largest deal but has been delayed by the 11 countries of the Trans-Pacific Partnership (TPP) who are set to sign their pact in Chile in March, but without an original partner, the United States," observes Panjiva's CEO, Josh Green.

At last report, this was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Mexico is also trying to reach a deal with the European Union, which in turn is trying to complete deals with Mercosur (an economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela) and India.

"Oh, and there's Brexit to contend with," adds Green. "The most hope lies in Africa, where the Continental Free Trade Area (CFTA) could make a meaningful difference to the economies of the region.

Gathering pace of disruption

Meanwhile, technological change in the supply chain support industry is "gathering pace," say Panjiva analysts, who note that emerging trends ranging from seaport automation to cyber security will become more disruptive in 2018.

"Blockchain technologies will have to prove they can deliver real efficiency for bills of lading, insurance and end-to-end product provenance applications," says Panjiva's research director, Chris Rogers. "Ethereum is an open source, public, block-chain-based distributed computing platform and operating system featuring smart contract (scripting) functionality. We are tracking this trend closely."

A big challenge is capacity, analysts add. There are 1.1 million twenty-foot equivalent units (TEUs) of containerized freight handled daily across just 10 countries, while Ethereum's total capacity is 1.2 million transactions per day.

The use of exchanges brings more transparency for supply chain managers, while port automation should bring increased capacity and faster delivery times. The specter of cyber security remains ever-present in the wake of hacks on Maersk and FedEx operations in 2017. Panjiva maintains that an industry-wide approach is needed. Finally, preparations for 2020 environmental limits will require significant investment from supply chain stakeholders.

New metrics service

In a related development, DHL and Accenture have jointly developed a new and unique early indicator for the current state and future evolution of global trade.

The DHL Global Trade Barometer is based on large amounts of supply chain data that are evaluated with the help of artificial intelligence. Since global trade fuels the world economy, the DHL Global Trade Barometer is designed to provide an outlook on future trade and on the prospects for global economic growth.

According to Tim Scharwath, CEO of DHL Global Forwarding, Freight, "the DHL Global Trade Barometer shows how digitalization--with the use of Big Data and predictive analytics--opens up entirely new opportunities that the company can use for the benefit of supply chain managers.

"Accenture will provide data modelling and predictive analytics to forecast future trade trends for DHL," he says. "DHL will receive one unified view of the insights which will give them a stronger understanding of current and future state of global trade."

The DHL Global Trade Barometer--published quarterly--is based on import and export data for a number of intermediate and early-cycle commodities that serve as the basis for further industrial production, such as brand labels for clothes, bumpers for cars or touch screens for mobile devices. Sources for the index are aggregated market data from air and containerized ocean freight in seven countries, which account for more than 75% of world trade. Using artificial intelligence and various statistical methods this data is compressed to a single index value, which is published on a global level and individually for the seven countries evaluated.

The DHL Global Trade Barometer index represents the weighted average of the current growth and the upcoming two months of global trade. An index value above 50 indicates a positive development; values below 50 point to a decline in world trade. Tests with historical data have revealed a high correlation between the DHL Global Trade Barometer and real containerized trade, providing a three-month forward-looking estimate.

Similar to the intelligence aggregated by Panjiva, the DHL Global Trade Barometer is designed to provide deep insights into specific issues, for example the main macroeconomic factors that are affecting trade trends or the countries and regions that are driving global trade. By breaking down the global supply chain, volume trends within industry sectors could be identified, pointing to outperforming and declining sectors.

Moreover, DHL itself will leverage the indicator to fine-tune its own resource planning for its international supply chain operations. Due to the high quality of the data, the company believes that the DHL Global Trade Barometer has a high significance also beyond supply chain management. Because it is an indicator for future trade and economic growth worldwide, the index could be integrated into forecast models by banks, associations or economic research institutes.

"In a world characterized by volatility and uncertainty, we are contributing to greater transparency and predictability--for the benefit of our business and society," concludes Scharwath.

Patrick Burnson is the executive editor at Supply Chain Management Review. He welcomes comments on his columns at pburnson@

Caption: FIGURE 1 DHL Global Trade Barometer: World 2013-present
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Title Annotation:Global Links
Author:Burnson, Patrick
Publication:Supply Chain Management Review
Date:Mar 1, 2018
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