Davos, Switzerland, 16 January 2024: New research by Economist Impact and sponsored by DP World reveals that businesses are reconfiguring their supply chains in response to concerns about falling demand, trade disruptions and geopolitical uncertainty in 2024. Despite these challenges, businesses in this sector are still optimistic due to technological advancements in supply chains.
With rising concerns about political instability, transport costs and uncompetitive pricing in key markets, businesses in the automotive sector are reconsidering risks across their supply chains, as they turn to alternative sourcing strategies such as friendshoring and dual supply chain strategies. Coupled with optimism about the impact of technologies such as AI on the efficiency and resilience of supply chains, businesses in this sector are focused on navigating the challenging economic and geopolitical landscape.
The fourth edition of Trade in Transition, commissioned by DP World and led by Economist Impact, captured the perspectives of automotive trade experts and senior executives globally.
2023 was a pivotal year in supply chain innovation as technology drives optimism for 2024
The global survey of 3,500 executives found technologies that improve supply chain efficacy and resilience to be the main source of optimism for business leaders when asked to assess the future of global trade. At the core of this sentiment is the widespread adoption of AI, with 100% of executives in the automotive sector using AI to revolutionise at least one aspect of their supply chain operations.
From solving inventory management issues and reducing trade expenses to optimising transport routes, the tangible benefits of integrating AI are evident. Almost a third of businesses are utilising AI to deliver a reduction in overall trade operation costs and the same amount to enhance resource and supply chain planning and reduce disruptions. 29% are using AI to identify new sources of supply and/or demand. While, over one-third of companies in the automotive sector view boosting the use of digital tools for enhanced inventory management as the most effective strategy in cutting overall trade and supply chain costs.
Looking ahead, 32% of companies anticipate implementing advanced automation and robotics in 2024 to enhance logistical efficiencies. Additionally, 25% plan to integrate blockchain technology to enhance traceability, security, and data protection and almost 20% expect to adopt 3D printing to enhance product customisation and decentralise production.
Supply chains adapt as geopolitical tensions weigh
In a new era of globalisation, a landscape of heightened geopolitical risk is shaping the contours of global trade as businesses attempt to reduce risks across their supply chains. 39% of companies in the automotive sector are creating parallel or dual sourcing to shape trade and supply chain operations amid current geopolitical events, and just under a third are deploying friendshoring strategies. In addition, almost a quarter are opting for fewer suppliers; a 10-percentage point increase from the previous year, as businesses weigh the advantages of consolidation against diversification, and control against risk, with the primary driver being to reduce supply disruptions.
And concerns that transport costs, falling demand and political instability could hamper growth are increasing. More than a quarter of businesses are concerned with higher transport costs hindering exports in 2024, while a fifth worry about political instability in key export markets and another fifth are concerned about the uncompetitive pricing in key markets. And 25% of companies in this sector are worried about political instability in their sourcing markets. In contrast, only 16% cited supply shortages of key production inputs as a limitation on exports in 2024.
Bill Garrett, Global Head of Automotive at DP World, said: “Against a backdrop of trade disruptions and geopolitical uncertainties, automotive companies are proactively embracing new strategies to fortify their resilience. Artificial intelligence has emerged as a key tool, while new technologies underscore optimism in the face of global uncertainties.
“These strategies need to be considered in tandem with the existing complex nature of automotive supply chains, OEMs and the rise of electric vehicles. At DP World, we are building seamless connections and are ready for the electric vehicle revolution with our battery expertise by integrating innovative facilities and multimodalities into an end-to-end supply chain.”
To view the full report, please click here.
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