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Supply Chain Roundup - Week 33-34 - 2023

Aug 27, 2023
4 min read

Updated: May 19, 2024

1. The Dynamics of Global Trade

 

Burgeoning Trade Between India and the UAE

Last year marked a significant uptick in commerce between India and the UAE, with bilateral trade soaring by 23% to reach approximately $85 billion. This robust growth has revitalized partnerships and expanded ocean service networks. Prominent shipping companies such as Maersk, MSC, and ONE have rapidly increased their regional services to capitalize on this trade revival from Gulf ports. DP World, a major terminal operator, is also investing in enhancing its logistics capabilities in both regions, particularly through initiatives like the Jebel Ali Free Zone, anticipating further growth in trade volumes. DP World projects that tariffs on over 10,000 products and services will be abolished over the next decade, significantly impacting trade flows within the Gulf region. Nevertheless, the increasing demand for cargo has prompted shipping lines on the Middle East-Europe/Mediterranean route to raise freight rates, with recent hikes announced by carriers like Hapag-Lloyd and CMA CGM.

 

Europe's Strategy for Critical Raw Materials

In March 2023, the European Commission unveiled the Critical Raw Materials Act (CRM), targeting the diversification and sustainability of Europe's rare earth supply chain. This initiative is critical as the demand for these materials intensifies, driven by advancements in green technologies and strategic industries such as aerospace and defense. The CRM outlines goals for enhancing domestic capabilities in extraction, processing, and recycling of strategic materials by 2030, aiming to lessen reliance on monopolistic suppliers outside the EU and streamline regulatory processes to boost the region's competitiveness in these vital sectors.

These measures set definitive domestic capacity targets for 2030 across strategic raw material supply chains, stipulating that at least 10% of the EU's annual demand should be met through domestic extraction, 40% through processing, and 15% through recycling. Additionally, it is specified that no single third country should supply more than 65% of the Union’s needs at any stage of processing. Another vital aspect of this strategy is the simplification of permitting processes. The Act is designed to minimize administrative challenges and facilitate smoother operations within Europe's rare earth supply chain. The strategy's final elements include significant investments in research and innovation focused on critical raw materials and the promotion of a circular economy.

 

Trends in Global Supply Chain Capacity

A July survey by GEP highlighted the growing issue of excess capacity within global supply chains, exacerbated by diminishing demand and widespread destocking. The GEP Global Supply Chain Volatility Index indicated a notable decline to -0.50 in July from -0.26 in June, reflecting prolonged low demand across Europe, in stark contrast to more stable conditions in North America.

According to Jonathan Kinghan, vice president of GEP's supply chain consulting, this trend offers businesses in Europe an opportunity to negotiate more favorable terms with suppliers for the upcoming years.

 

2. Advancing Sustainability and Compliance


Elevate Limited has launched an interactive tool aimed at helping global businesses adhere to evolving supply chain regulations like the EU's Corporate Social Responsibility Directive (CSRD). This digital resource provides real-time updates and a detailed overview of pertinent regulations in over 18 countries, helping companies navigate the complex landscape of due diligence requirements. The tool's functionality is similar to BVRio’s platform, which tracks agricultural compliance with Brazil's Forest Code in the soy production sectors of the Cerrado region, covering over 92,000 farms.

 

3. Integration of Technology in Supply Chains

 

Emergence of Robotics Over Drones in Warehouses

According to a Gartner report, the integration of mobile robots within warehouse operations is expected to outpace drone deployment due to the more mature state of the technology. By 2027, it's predicted that a vast majority of companies will have embraced some form of robotic automation, driven by advancements in machine learning and AI. While drones are increasingly used for specific tasks like inspections and critical deliveries, robots are set to dominate the automation landscape, with companies like Walmart expanding their drone delivery systems to enhance last-mile services.

 

Pharmaceuticals Embrace Digital Compliance Platforms

Qualifyze, a leader in pharmaceutical supply chain compliance, has secured an €11 million investment to enhance its digital audit platform. This platform aids pharmaceutical companies in maintaining rigorous compliance standards and managing supplier audits more efficiently, a crucial factor as regulatory pressures mount.

Since its launch in 2019, Qualifyze has audited thousands of suppliers, going beyond the traditional file-and-forget audit report mentality. By capturing audit data at scale and offering a digital platform to manage audits end-to-end, Qualifyze has already supported more than 1,000 pharmaceutical manufacturers to improve supply chain compliance and reduce supplier qualification costs.

Recently, Qualifyze also launched its “Supplier Intelligence“ suite, providing pharmaceutical companies with statistics on supplier compliance levels and audit observations to predict trends and develop compliance risk mitigation strategies.

 

Fashion Industry Leverages AI for Growth

AI adoption in the fashion industry has surged, with patent filings in retail and apparel witnessing significant increases. Innovations are primarily driven by the need to enhance supply chain operations and customer experiences, with companies like NIKE and Pretty Little Thing utilizing AI to improve product fit and search functionality.

The biggest AI moves in the last decade have come from digital native eBay. In 2019, eBay’s vice president of applied research stated that AI investments were increasing sales by $1bn per quarter. In recent years more apparel and footwear brands have jumped on the AI train and as GlobalData projections reveal AI is set to be worth $908.7bn by 2030, more are likely to follow suit.

Technology firms are also increasingly involved in the fashion sector, focusing on automating manufacturing processes and handling returns more effectively.

The apparel supply chain patent assignee top 10 list for July 2023 is awash with technology companies wishing to innovate within the sector, according to GlobalData.

Data compiled by GlobalData suggests technology and science-based companies are eager to innovate within the apparel supply chain sector as they make up the entire top 10 list of apparel supply chain patent assignees between 1 July and 31 July 2023.

South Korean technology company Samsung Group submitted the most patent publications within the period (755).

Source: GlobalData

The long list of technology companies issuing patent applications suggests they have identified the fashion sector’s weaknesses and want to create solutions.

Earlier this year Frank Henderson, CEO of Henderson Sewing Machine Company told Just Style: “Technology has finally got to a point where we can use its advantages today.”

 


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© 2023 by Daniel Cherouana.
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