There is optimism that the world economy will rebound in 2024 after a turbulent last few years, but this positivity isn’t necessarily trickling over to the logistics sector, where there remains a sense of uncertainty and apprehension among many global business leaders.
Amidst ongoing geopolitical conflict, labor disputes, and shifting supply trends, global trade leaders are bracing for a new year likely to bring new challenges. However, for leaders who have taken proactive action and worked to fortify their supply chains, there is hope they can play their part in a global trade rebound in the coming year.
To capitalize, supply chain leaders should be watchful of three trends that will impact their business, the global trade environment, and the world economy for the foreseeable future.
Ongoing threats to the global trade landscape.
The COVID-19 pandemic illuminated the importance of planning and diversification in supply chains, lessons that have been reinforced over the last several years. While backlogs and delays related to the pandemic have ended, ongoing global conflict is creating a new cascade of delays. Namely, the conflict in the Red Sea which is creating complexities around crucial shipping lanes which will impact capacity globally. Additionally, the Russia-Ukraine war continues to be top of mind for many shippers in and around Europe.
Beyond global conflict, unpredictability in weather patterns and the erratic nature of the global environment remains a common concern. The current crisis in the Panama Canal – where historic drought is triggering delays in a part of the world where 5% of global sea trade and over 40% of U.S. container traffic passes through – is a stark reminder of the volatility of the global supply chain. With the crisis expected to last well into 2024, supply chain leaders need to ensure they have visibility into their supply chain and a plan that can keep them adaptable and resilient in the face of changing circumstances.
A continued expansion of nearshoring activity.
Nearshoring has become a hot topic in the global economic landscape, and this trend doesn’t appear to be slowing anytime soon. Instead, nearshoring activity is ramping up, with Mexico alone seeing $29 billion of foreign direct investment in the first half of 2023, an increase of 5.6% from the year prior. But Mexico is one of many countries likely to see continued foreign investment. India and Southeast Asia are becoming hotbeds for business and economic growth.
Aside from a shift in foreign investment hubs, new industries aim to take advantage in 2024. The automotive industry and parts suppliers have been the main power players in the nearshoring boom up to this point, particularly among American and Asian companies. Still, other industries are strengthening their diversification through nearshoring activity. The healthcare and technology industries, namely electronic equipment and accessories, are expected to increase nearshoring activity this year.
For leaders looking to take advantage, it’s essential to consider many infrastructure and procurement requirements that must be weighed before investing in Mexico or another region. Fortunately, there are resources from those who have been shipping to/from these regions for decades and know the nuances and challenges that shippers need to be aware of. We’ve already assisted many shippers in these endeavors and developing a cross-border strategy that mitigates the risks of relocating their supply chain.
Increased business focus on sustainability.
Sustainability initiatives are now business priorities for many global companies. Increased consumer preference for sustainability practices coupled with new regional regulations and stricter ESG requirements from the European Union mean that all global leaders need to have, or at the very least be thinking through, a sustainability strategy.
Leaders must be aware of the new and pending regulations, most notably the EU’s Carbon Border Adjustment Mechanism (CBAM) law, which requires that all EU importers report carbon emissions related to the production of certain products. Additionally, as of January 1, 2024, carriers shipping to, from, or within the European Economic Area (EEA) are subject to the EU’s new Emission Trading System (ETS) regulations which expanded to include maritime shipping.
As more international shippers look for ways to address their own sustainability targets, logistics partners are expanding their capabilities to help. Tools like the Emissions IQ can allow businesses to understand their carbon footprint better and identify reduction areas. Digital tools can also help shippers build a long-term plan by developing key performance indicators and benchmarks that will keep the supply chain moving wherever they are in their sustainability journey.
The global logistics landscape is constantly changing, and while we don’t know everything that lies ahead in 2024, leaders should understand how these trends impact their business. Doing so will keep the supply chain agile regardless of whichever way the winds of the global economy blow.