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Sales & Operations Planning: A Long-Term Solution to Global Supply Chain Volatility

global supply chain

Sales & Operations Planning: A Long-Term Solution to Global Supply Chain Volatility

As companies strive to provide the highest quality and service at the lowest cost, global supply chains play a vital role. Companies often approach their global supply chain planning with a “do it and forget it” attitude, expecting that a detailed identification, verification and qualification process will not require frequent revisits of past decisions. Global political climates, tariff wars, and the recent COVID-19 virus outbreak continue to illustrate the urgent need for supply chain agility, risk management and contingency planning.

Sales & Operations Planning (S&OP) is a mid-term tool to ensure alignment among corporate strategic objectives, whereas Sales & Operations Execution (S&OE) is a tool to ensure balance among supply and demand. The flexibility of S&OP allows for an organization to look for imbalances at intermediate levels in a product hierarchy without getting “lost in the weeds” at detailed SKUs but not at too high of a level to be less meaningful.

In order to review this supply and demand balance, one must create supply planning groups and a structure based upon the critical success factors for delivering high levels of service. These planning groups could be internal manufacturing groups, make/buy items, a specific external supplier, or country of origin groupings. Given the extended lead times for international supply chains, S&OP is an ideal process for looking several months out into the future to perform risk analysis.

Strategic Considerations for International Sourcing

Companies initially evaluate their strategic objectives when pursuing an international sourcing initiative, but this should be revisited on a regular basis to ensure that the chosen supply chain continues to meet the companies’ needs. The lowest total cost of ownership is the primary objective, yet as manufacturing has declined in Western economies, the only source for production is often in the younger global economies such as China, India, Malaysia or countries of Eastern Europe.

Over time, labor rates and raw material costs in these countries have fluctuated due to global supply and demand. Combined with changing prices for the underlying commodities in those local markets, companies are facing more frequent price instability. Additionally, tariff uncertainty or increases force a regular review of the global supply chain to ensure strategic objectives have not changed and are still being fulfilled.

Supply Chain Complexity vs. Diversification

It is easier for a supply chain team to manage a single production site within a single manufacturer or at least from within a single country of origin. The obvious downside to that approach is that if that country is subject to a sudden tariff spike, an organization can quickly find itself with no choice but to accept the increase in costs and a likely impact to margins. As a potential alternative, a company can pursue a dual country sourcing strategy where it can cost-average its pricing to mitigate the short-term impact. Over a longer-term, a purchaser has the opportunity to switch volumes between suppliers/countries to mitigate those impacts.

How can S&OP help?

By its very design, the S&OP process is an ideal vehicle to prompt a company to ask the necessary strategic questions on a regular basis. In addition, a robust S&OP process takes into consideration changing costs and gross margin impacts to the bottom line to ensure gross margin or revenue targets are met. Stepping out of the day-to-day S&OE during the S&OP process allows for that broader perspective to evaluate “what-if” situations that could impact costs, demand, supply and margins before they reach fruition. In this manner, S&OP is a useful scenario-management tool to look at these cost changes, price increases and estimated adjustments to volumes at an aggregate level to quickly identify the potential impacts to the bottom-line without having to perform a time-consuming SKU-by-SKU analysis.

Contemporary S&OP tools often have scenario-modeling capabilities and increase the speed and accuracy of these strategic evaluation exercises. However, depending upon the scale and scope of a company’s supply chain, an expensive tool is not always necessary. Well-designed spreadsheet models populated by databases may be a sufficient starting point for a business. No matter what tool is utilized, the S&OP process is designed to identify potential issues and act as a launching point for projects elsewhere in the organization to identify methods for addressing those issues in the most cost-effective manner.

Companies with well-designed and utilized Sales & Operations Planning processes have well-demonstrated benefits of:

-Reduced stock-outs, driving higher service level

-Lower variable labor costs

-More efficient raw material, work-in-process and finished goods inventory utilization

-Lower transportation and material acquisition costs due to more stability

-Higher gross margins

-Increased top-line sales

Strategically including tariff management and other global supply chain variables in the S&OP process to evaluate possible impacts to the supply and demand balance, as well as cost structure, is critical to ensuring the continuity of supply necessary to provide high levels of service and cost management.

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Paul Baris is a supply chain expert with over 30 years of experience in the industry as a Vice President of Supply Chain for several companies as well as a consultant implementing Sales & Operations Planning, Inventory Strategy and Demand Planning practices.

Paul’s strengths include: Operational Performance, Root Cause Analysis, Lean & Six Sigma Methodology, Client & Vendor Liaison, Leadership, ERP, Strategic Procurement, Project Management, Warehouse Redesign/Implementation, Supply Chain Engineering, Statistical Process Control, 3PL Management, WMS, Demand Planning, Inventory Planning, Change Management, S&OP, and Operational Layouts. Paul is a certified supply chain professional from APICS and has a Certification in Supply Chain Management from the University of Tennessee. Paul’s professional certifications include: Change Management – Prosci ADKAR, Professional Negotiation – Karrass, Juran on Quality I & II – Kepner-Tregoe, Strategic Procurement – Stanford University, Statistical Process Control, Purchasing Strategy, Oliver Wight S&OP, and S&OP Implementation.

styrene

Global Styrene Trade Continues to Decline, with Exports Estimated at $11.5B in 2018

IndexBox has just published a new report: ‘World – Styrene – Market Analysis, Forecast, Size, Trends And Insights’. Here is a summary of the report’s key findings.

Global Styrene Trade 2013-2018

In 2018, approx. 9.4M tonnes of styrene were exported worldwide; a decrease of -8.6% against the previous year. In general, styrene exports continue to indicate a significant decline. Over the period under review, global styrene exports reached their maximum at 11M tonnes in 2013; however, from 2014 to 2018, exports remained at a lower figure.

In value terms, styrene exports amounted to $11.5B (IndexBox estimates) in 2018. The most prominent rate of growth was recorded in 2017 with an increase of 17% against the previous year.

Exports by Country

In 2018, the U.S. (1.8M tonnes) and the Netherlands (1.8M tonnes) were the major exporters of styrene across the globe, together recording near 38% of total exports. Saudi Arabia (1,073K tonnes) took an 11% share (based on tonnes) of total exports, which put it in second place, followed by South Korea (9%), Canada (6.9%), Singapore (6.8%), Japan (6%) and Taiwan, Chinese (5.7%).

From 2013 to 2018, the most notable rate of growth in terms of exports, amongst the main exporting countries, was attained by Canada, while exports for the other global leaders experienced more modest paces of growth.

In value terms, the largest styrene supplying countries worldwide were the Netherlands ($2.2B), the U.S. ($2.1B) and Saudi Arabia ($1.2B), together comprising 48% of global exports. These countries were followed by South Korea, Singapore, Japan, Canada and Taiwan, Chinese, which together accounted for a further 35%.

Export Prices by Country

The average styrene export price stood at $1,227 per tonne in 2018, surging by 2.7% against the previous year.

Average prices varied noticeably amongst the major exporting countries. In 2018, major exporting countries recorded the following prices: in Singapore ($1,312 per tonne) and South Korea ($1,304 per tonne), while Canada ($1,117 per tonne) and the U.S. ($1,128 per tonne) were amongst the lowest.

From 2013 to 2018, the most notable rate of growth in terms of prices was attained by Japan, while the other global leaders experienced a decline in the export price figures.

Source: IndexBox AI Platform

eggplant

Asia’s Eggplant Market Keeps Growing, Driven by Strong Demand in China

IndexBox has just published a new report: ‘Asia – Eggplants (Aubergine) – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The revenue of the eggplant market in Asia amounted to $68.4B in 2018, surging by 4.7% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).

Consumption by Country in Asia

China (34M tonnes) constituted the country with the largest volume of eggplant consumption, accounting for 67% of total volume. Moreover, eggplant consumption in China exceeded the figures recorded by the second-largest consumer, India (13M tonnes), threefold.

From 2013 to 2018, the average annual growth rate of volume in China totaled +3.7%. The remaining consuming countries recorded the following average annual rates of consumption growth: India (-0.9% per year) and Turkey (+0.0% per year).

In value terms, China ($43.4B) led the market, alone. The second position in the ranking was occupied by India ($20B).

In China, eggplant per capita consumption increased at an average annual rate of +3.2% over the period from 2013-2018. The remaining consuming countries recorded the following average annual rates of per capita consumption growth: Turkey (-1.5% per year) and India (-2.1% per year).

Production in Asia

In 2018, approx. 51M tonnes of eggplants were produced in Asia; growing by 2.9% against the previous year. The total output volume increased at an average annual rate of +2.0% from 2013 to 2018; the trend pattern remained relatively stable, with somewhat noticeable fluctuations being observed in certain years. The general positive trend in terms of eggplant output was largely conditioned by a moderate increase of the harvested area and a mild expansion in yield figures.

In 2018, approx. 1.7M ha of eggplants were harvested in Asia, while the average yield stood at 29 tonne per ha, growing by 2.4% against the previous year.

Exports in Asia

In 2018, the amount of eggplants (aubergine) exported in Asia stood at 88K tonnes, growing by 26% against the previous year.

In value terms, eggplant exports amounted to $94M (IndexBox estimates) in 2018. The total exports indicated buoyant growth from 2013 to 2018: its value increased at an average annual rate of +1.4% over the last five-year period.

Exports by Country

In 2018, Turkey (23K tonnes), distantly followed by China (15K tonnes), Malaysia (9.5K tonnes), Saudi Arabia (8.1K tonnes), Uzbekistan (8K tonnes), Thailand (5.1K tonnes) and Jordan (4.5K tonnes) were the key exporters of eggplants (aubergine), together constituting 82% of total exports.

From 2013 to 2018, the most notable rate of growth in terms of exports, amongst the main exporting countries, was attained by China, while exports for the other leaders experienced more modest paces of growth.

In value terms, the largest eggplant supplying countries in Asia were Turkey ($24M), China ($23M) and Malaysia ($5.1M), with a combined 54% share of total exports.

Export Prices by Country

The eggplant export price in Asia stood at $1,067 per tonne in 2018, picking up by 9.1% against the previous year.

There were significant differences in the average prices amongst the major exporting countries. In 2018, the country with the highest price was China ($1,510 per tonne), while Saudi Arabia ($352 per tonne) was amongst the lowest.

From 2013 to 2018, the most notable rate of growth in terms of prices was attained by China, while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

supermarkets

From Physical Retail to Online Business: Marketing and Logistics Principles for Supermarkets

Supermarkets and retailers around the world began distributing goods via order channels over a decade ago, often as a future-oriented addition to a minor business segment, complementing standard services. As such, ordering online and receiving groceries via delivery is nothing new. Caught off-guard by the COVID-19 outbreak, however, supermarkets and food-retailers today are facing the challenge of switching their business model from physical retail to online order and delivery with unprecedented urgency. With physical distancing measures in place across entire countries, people increasingly prefer to avoid purchasing their groceries as walk-in customers to safeguard their health and well-being.

In this situation, the supermarket industry finds itself in a fundamentally altered market environment. The changes required from them are profound. Their typical infrastructure, such as buildings and storage centers, was strategically designed to walk customers through a supermarket, positioning products on shelves as per marketing and product placement logic, factors that become obsolete in an online retail world. What matters now is safe, reliable, and fast supply of customers’ online orders via dedicated distribution services. Logistics is at the core of addressing these challenges and the interface between marketing and logistics indeed becomes vital for fast implementation in the current scenario.

For a swift short-term switch, the prerequisites are two-fold: On the one hand, the supply of selected products needs to be covered either through local production or through available imports. On the other, a functioning online ordering front-end needs to be made available to customers. Yet, especially for supermarkets, it is the seamless and efficient operation of the “pick and packing” functionality that has now become the bottleneck.

This has several consequences that can be addressed: First, online supermarkets cannot provide the full portfolio of goods to their customers, at least for the time being. Sales analysis is required to meaningfully reduce the portfolio of products available online, and hence decrease the complexity of assembling orders later on. Amid the current circumstances, food and canned products will have higher importance than non-food items, and any of the latter to be upheld would need to be chosen sensibly. While customers may have less choice, portfolio reduction will help significantly in maintaining capacity for faster, more reliable physical delivery.

Second, shortened product portfolios can be divided into two categories: High runners and low runners. High runners are regularly purchased in high volumes, and their turnaround is quick. Low runners might be appealing in the physical retail world, but have less meaning in the current landscape. Third, high-running products within a simplified offering need to be stored differently for now. Usually, they would be placed decentralized along strategic points throughout the supermarket to attract attention. In a recalibrated setup, identified high runners need to be stored centrally in a dedicated area of the market where employees have unhindered access for fast “pick and packing”. Fourth, the commissioning time needed for workers to assemble an incoming order, needs to be kept as low as possible by minimizing physical distances required to walk.

Fifth, in packing the online orders received and getting them ready for dispatch, standardized package box sizes can be used to further reduce complexity. Just like in a game of “Tetris”, utilizing uniform cubic sizes will allow for packages to be stored in delivery vehicles in the most effective fashion. This is particularly relevant for food retailers that do not rely on third-party logistics providers for reasons of quality and food safety assurance.

Sixth, physical delivery of the commissioned orders should be prioritized and planned in a calculated way. Typical linear concepts such as “first order in, first delivery out,” will not be efficient under the current circumstances. Seventh, because of the reduced product portfolio, the products offered should not be static, but optimized on a regular basis. In other words, the now required short-term shift should not limit the industry to short-term thinking. Requiring customers to order in excess of minimum order amounts, imposing high delivery charges, expecting customers to accept long delivery times, accepting the jamming of orders, amongst others pitfalls – all of which we are currently witnessing internationally, can be avoided by emphasizing the outlined marketing and logistics principles.

While it is clear that supermarkets are at the heart of consumer goods supply during the current pandemic, it would not be reasonable to compare them with established online giants such as Amazon and others. Their business model and logistical setups are different, from the outset. This naturally calls for customers to exercise patience and good-will with their supermarkets for a while. Supermarkets are logistical hubs, run by people, for people, through people, even if for the time being, they may appear as an anonymous online screen only.

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Frank Himpel is a faculty member of the Engineering Management and Decision Sciences division at College of Science and Engineering at Hamad Bin Khalifa University in Qatar. Prior to moving to Qatar with his family in 2018, Frank served as a professor of business administration and logistics in Germany, where he also received his academic degrees. His research into aviation and air transportation management has taken him to several countries around the world.

 About Hamad Bin Khalifa University

Innovating Today, Shaping Tomorrow

Hamad Bin Khalifa University (HBKU), a member of Qatar Foundation for Education, Science, and Community Development (QF), was founded in 2010 as a research-intensive university that acts as a catalyst for transformative change in Qatar and the region while having global impact. Located in Education City, HBKU is committed to building and cultivating human capacity through an enriching academic experience, innovative ecosystem, and unique partnerships. HBKU delivers multidisciplinary undergraduate and graduate degrees through its colleges, and provides opportunities for research and scholarship through its institutes and centers. For more information about HBKU, visit www.hbku.edu.qa.

disinfectants

Global Trade of Disinfectants Has Doubled over the Past Decade

IndexBox has just published a new report: ‘World – Disinfectants – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

Exports 2009-2018

In 2018, approx. 821K tonnes of disinfectants were exported worldwide; picking up by 3.6% against the previous year. Overall, the total exports indicated a resilient expansion from 2009 to 2018: its volume increased at an average annual rate of +8.4% over the last nine years. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, disinfectants exports increased by +106.7% against 2009 indices. The growth pace was the most rapid in 2010 with an increase of 14% year-to-year. The global exports peaked in 2018 and are expected to retain its growth in the immediate term.

In value terms, disinfectants exports stood at $2.3B (IndexBox estimates) in 2018.

Exports by Country

In 2018, Belgium (129K tonnes) and Germany (127K tonnes) were the main exporters of disinfectants in the world, together finishing at near 31% of total exports. It was followed by the U.S. (78K tonnes), France (66K tonnes), the UK (46K tonnes), Spain (44K tonnes) and China (43K tonnes), together mixing up a 34% share of total exports. The following exporters – the Netherlands (33K tonnes), Mexico (22K tonnes), Canada (20K tonnes), Argentina (20K tonnes) and the Czech Republic (16K tonnes) – together made up 14% of total exports.

From 2009 to 2018, the most notable rate of growth in terms of exports, amongst the main exporting countries, was attained by Mexico, while exports for the other global leaders experienced more modest paces of growth.

In value terms, the largest disinfectants supplying countries worldwide were Germany ($389M), Belgium ($362M) and the U.S. ($240M), together comprising 43% of global exports. The UK, France, the Netherlands, Spain, China, Mexico, Canada, the Czech Republic and Argentina lagged somewhat behind, together comprising a further 34%.

Export Prices by Country

In 2018, the average disinfectants export price amounted to $2,780 per tonne, rising by 7.4% against the previous year. In general, the disinfectants export price, however, continues to indicate a slight deduction. The pace of growth appeared the most rapid in 2011 when the average export price increased by 7.8% y-o-y. Over the period under review, the average export prices for disinfectants attained their maximum at $3,113 per tonne in 2009; however, from 2010 to 2018, export prices remained at a lower figure.

Prices varied noticeably by the country of origin; the country with the highest price was the UK ($4,649 per tonne), while Argentina ($1,237 per tonne) was amongst the lowest.

From 2009 to 2018, the most notable rate of growth in terms of prices was attained by Canada, while the other global leaders experienced more modest paces of growth.

Imports 2009-2018

In 2018, approx. 890K tonnes of disinfectants were imported worldwide; surging by 7.7% against the previous year.

In value terms, disinfectants imports stood at $2.5B (IndexBox estimates) in 2018.

Imports by Country

The imports of the three major importers of disinfectants, namely Germany, Belgium and France, represented a quarter of the total imports. It was followed by the UK (40K tonnes), mixing up a 4.5% share of total imports. The following importers – Canada (38K tonnes), the Netherlands (28K tonnes), Austria (23K tonnes), Mexico (23K tonnes), the U.S. (22K tonnes), Poland (21K tonnes), China (20K tonnes) and Spain (20K tonnes) – together made up 22% of total imports.

From 2009 to 2018, the most notable rate of growth in terms of imports, amongst the main importing countries, was attained by China, while imports for the other global leaders experienced more modest paces of growth.

In value terms, Germany ($236M), Belgium ($185M) and China ($144M) were the countries with the highest levels of imports in 2018, together accounting for 23% of global imports.

Import Prices by Country

The average disinfectants import price stood at $2,798 per tonne in 2018, jumping by 5.8% against the previous year. In general, the disinfectants import price, however, continues to indicate a relatively flat trend pattern. The pace of growth was the most pronounced in 2018 when the average import price increased by 5.8% y-o-y. Over the period under review, the average import prices for disinfectants reached their maximum at $2,888 per tonne in 2014; however, from 2015 to 2018, import prices stood at a somewhat lower figure.

Prices varied noticeably by the country of destination; the country with the highest price was China ($7,077 per tonne), while the UK ($1,478 per tonne) was amongst the lowest.

From 2009 to 2018, the most notable rate of growth in terms of prices was attained by Poland, while the other global leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

toilet paper

Global Toilet Paper Market – U.S. ($375M), Germany ($320M), and the Netherlands ($164M) Are the Biggest Importers

IndexBox has just published a new report: ‘World – Toilet Paper – Market Analysis, Forecast, Size, Trends And Insights’. Here is a summary of the report’s key findings.

The global toilet paper market revenue amounted to $60.4B in 2018, going up by 6.6% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).

The market value increased at an average annual rate of +2.9% over the period from 2007 to 2018; the trend pattern remained relatively stable, with only minor fluctuations being observed throughout the analyzed period. The growth pace was the most rapid in 2008 with an increase of 12% year-to-year. The global toilet paper consumption peaked in 2018 and is expected to retain its growth in the immediate term.

Exports 2007-2018

In 2018, approx. 2.1M tonnes of toilet paper were exported worldwide; going up by 4.9% against the previous year. Over the period under review, toilet paper exports continue to indicate a relatively flat trend pattern. The most prominent rate of growth was recorded in 2010 when exports increased by 5.3% against the previous year. Over the period under review, global toilet paper exports reached their peak figure in 2018 and are expected to retain its growth in the near future.

In value terms, toilet paper exports totaled $3.7B (IndexBox estimates) in 2018.

Exports by Country

China (229K tonnes) and Germany (222K tonnes) represented the main exporters of toilet paper in 2018, finishing at approx. 11% and 11% of total exports, respectively. It was followed by Italy (127K tonnes), France (113K tonnes), Poland (109K tonnes) and Sweden (104K tonnes), together comprising a 21% share of total exports. Canada (84K tonnes), El Salvador (80K tonnes), Mexico (73K tonnes), Slovakia (73K tonnes), the U.S. (71K tonnes) and Austria (70K tonnes) followed a long way behind the leaders.

From 2007 to 2018, the most notable rate of growth in terms of exports, amongst the main exporting countries, was attained by Mexico, while exports for the other global leaders experienced more modest paces of growth.

Export Prices by Country

In 2018, the average toilet paper export price amounted to $1,735 per tonne, increasing by 5.9% against the previous year. Over the period under review, the toilet paper export price continues to indicate a relatively flat trend pattern. The pace of growth appeared the most rapid in 2008 when the average export price increased by 15% y-o-y. Over the period under review, the average export prices for toilet paper attained their maximum at $1,903 per tonne in 2011; however, from 2012 to 2018, export prices stood at a somewhat lower figure.

Prices varied noticeably by the country of origin; the country with the highest price was the U.S. ($2,648 per tonne), while Slovakia ($1,346 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by the U.S., while the other global leaders experienced more modest paces of growth.

Imports 2007-2018

In 2018, the global toilet paper imports amounted to 2.1M tonnes, growing by 5.1% against the previous year. The total import volume increased at an average annual rate of +1.4% over the period from 2007 to 2018; the trend pattern remained relatively stable, with somewhat noticeable fluctuations being observed throughout the analyzed period. The most prominent rate of growth was recorded in 2010 when imports increased by 7.9% year-to-year. Over the period under review, global toilet paper imports attained their peak figure in 2018 and are likely to continue its growth in the immediate term.

In value terms, toilet paper imports amounted to $3.6B (IndexBox estimates) in 2018.

Imports by Country

The U.S. (208K tonnes) and Germany (199K tonnes) represented roughly 20% of total imports of toilet paper in 2018. It was followed by the Netherlands (100K tonnes), achieving a 4.9% share of total imports. The following importers – France (87K tonnes), China, Hong Kong SAR (83K tonnes), Denmark (72K tonnes), Saudi Arabia (66K tonnes), Canada (66K tonnes), Belgium (64K tonnes), the Czech Republic (60K tonnes), Norway (52K tonnes) and Austria (48K tonnes) – together made up 29% of total imports.

From 2007 to 2018, the most notable rate of growth in terms of imports, amongst the main importing countries, was attained by Saudi Arabia, while imports for the other global leaders experienced more modest paces of growth.

In value terms, the U.S. ($375M), Germany ($320M) and the Netherlands ($164M) were the countries with the highest levels of imports in 2018, with a combined 24% share of global imports.

Import Prices by Country

In 2018, the average toilet paper import price amounted to $1,747 per tonne, jumping by 3.1% against the previous year. Overall, the toilet paper import price continues to indicate a relatively flat trend pattern. The pace of growth appeared the most rapid in 2008 when the average import price increased by 9.5% against the previous year. Over the period under review, the average import prices for toilet paper attained their maximum at $1,937 per tonne in 2011; however, from 2012 to 2018, import prices remained at a lower figure.

Prices varied noticeably by the country of destination; the country with the highest price was Norway ($2,473 per tonne), while Saudi Arabia ($1,460 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by China, Hong Kong SAR, while the other global leaders experienced more modest paces of growth.

Source: IndexBox AI Platform