When will trade return to the conditions we enjoyed in 1BC (Before Covid)? It’s the question that’s dominated global business throughout the last few years, and it’s the wrong one. Why would we want to go back to a time when, as we now know, supply chains were entirely unfit for purpose, and suffered a spectacular collapse in the face of a global Black Swan event? By James Stirk (pictured), CEO, Tradeshift
The better question is not when will trade bounce back, but how? Covid forced businesses to prioritise digital transformation efforts which, pre-pandemic, were often seen as a luxury — and rarely if ever as an existential issue. That lackadaisical approach to digital is changing fast, with enterprises now embracing resilience over just-in-time, and adopting new technologies in a bid to strengthen and diversify their trading networks.
This, then, is the context for judging global trade’s return to health: whether incremental, quarter-on-quarter improvements are sustained in the longer term, and whether they reflect the investment enterprises are making in digitalizing their processes and relationships. Because it’s not recovery we need, but a revolution where supply chains are reimagined to become fit for the 21st century.
Digital underpins global trade’s green shoots
Don’t take the champagne off ice just yet, but there are signs that global trade is beginning to pick up steam after a year or more in the doldrums. Tradeshift’s latest Index of Global Trade Health found a surge in order volumes in Q1 2024, building on nascent signs of recovery we first observed at the end of 2023. And we’re not the only ones seeing the green shoots of recovery begin to take root. The OECD predicts growth in global trade will more than double in 2024 compared to a slow 2023.
As always, there are a wide range of macroeconomic and geopolitical issues at play here, from falling inflation and falling oil prices, to the impact of government subsidies in major markets like China and the United States – all of which can change from quarter to quarter. Yet we’re cautiously confident that our latest figures reflect something more profound and sustainable, and that the supply chain is starting to undergo long-postponed, much-needed systemic change.
Tradeshift is the centre of a million-plus network of B2B enterprises, so we know that businesses have been investing heavily in digitalising their processes and reorganising their supply chains. That tallies with what others are reporting. For example, recent research found that 84% of supply chain executives have ‘significantly’ increased their use of digital technology, while analysts predict the market for these technologies will reach almost $14 billion by 2030 – higher than pre-Covid estimates.
If Tradeshift’s Q1 figures are sustained throughout the year, this will be the best indication yet that these initiatives are beginning to bear fruit.
Digital dividends
It’s important to stress that “more digital” does not instantly equate into “more better”. What’s significant for the longer-term health of global trade is how enterprises harness technology as a platform to build resilience back into their operations.
Process automation is one example of a transformational use case. Every day global trade generates upwards of 4 billion paper documents, from purchase orders, to bills of lading, to invoices. This reliance on manual processes has a range of consequences including regular operational blindspots and a lack of real-time information that makes smart, agile decision-making impossible.
Automating laborious, time-consuming and human-error-strewn processes eliminates potential pinch points, enabling businesses to accelerate and scale operational processes that would otherwise break in the face of sudden changes in trading or other macroeconomic conditions.
It also shows how resilience need not be the enemy of speed and efficiency. When business processes like invoicing and payments are more accurate and timely, it not only speeds up operations but fuels the engine of global growth by improving cash flow, while boosting liquidity that’s so often tied up uselessly within the supply chain.
And that’s just the start. Digitalization provides the platform for a new generation of technologies like embedded finance tools and marketplace-driven commerce that match supply with demand. These are transforming everything from speeding the supplier onboarding process to supporting new models of buyer-supplier relations that enhance the speed, resilience and liquidity of global trade yet further – in bad times as well as good.
Towards smart supply chains
The pandemic occurred pretty much synchronously with the emergence of business-ready AI and machine learning applications, which promise to speed the supply chain revolution further and faster than ever.
Their potential is difficult to overstate, but their impact will be felt far beyond the process level, all the way up to the realm of organizational strategy. Most signally, the analytical and predictive capabilities of AI models – combined with the wealth of data that becomes available when businesses are connected will speed the shift from static or reactive models to ones that identify or even anticipate emerging risks.
Before long, AI will even be able to provide suggestions on financing you may need, before you even know you need it, together with the relevant supporting data to show you why.
As we say, one-quarter of good news doesn’t mean we’re quite ready to break out the bunting. At the same time, the direction of travel is clear: businesses are beginning to see a return on their digital investment, and the benefits – as befits a global networked economy – will soon be felt in every corner of the world.
