Global Trade Index Q1 2024: Final Thoughts

Volatility hasn’t gone away, but businesses are learning to adapt

James Stirk, CEO, Tradeshift

For the latest insights on what’s happening in global trade read the Q1 Index of Global Trade Health here

War in Ukraine, snarled supply chains, geopolitical tension, and a trade war between the world’s two largest economies. That was the picture two years ago when we started to observe a steep decline in global trade activity. Fast-forward to the present day and the landscape has barely changed. 

And yet, while the macroeconomic picture bears more than a passing resemblance to the one we described two years ago, the prevailing narrative within business and across global trade is markedly more positive. In fact, experts at the OECD, IMF and WTO are now predicting global trade growth to recover sharply in 2024. So, what’s changed? 

Economists may attribute the current recovery to factors like cooling inflation and declining energy prices. Speaking to customers and partners on the front lines of global trade, however, it’s clear that something more fundamental has shifted, and that businesses are beginning to plot a path back to growth amid a familiar set of variables. 

A positive interpretation of this quarter’s positive results is that they reflect systemic improvements in global supply chains undertaken in response to the trauma of the pandemic. Looking back to the dark days of 2020, it was remarkable how quickly supply chains began to unravel. Businesses learned valuable lessons about the opacity and fragility of linear supply chain models whose function relied heavily on a patchwork of manual and paper-based processes. 

Changing these models is complex and requires time, so it’s no surprise that the quarter-by-quarter progress we’ve seen has been fitful and slow. At the same time, adversity is a great motivator of creativity. The pandemic proved a catalyst for the most significant and sustained period of supply chain recalibration and renewal we have seen since the introduction of containerization. 

Resilience has become the yardstick by which successful organizations are measured.

Investment in digitalizing previously disconnected supply chain ecosystems is enabling organizations to identify and react to emerging challenges in real-time. 

Automation of heavily manual processes is eliminating potential pinch points, enabling businesses to accelerate and scale operational processes that would otherwise begin to break down when faced with a sudden change in trading or other macroeconomic conditions. 

The long-delayed revolution in supply chain models is not just a matter of technology, though; just as important is a change in mindset. To optimize resilience and efficiency, global enterprises are now prioritizing the health and diversity of supplier relationships. Single-sourcing models have given way to a much more networked set of relationships between large organizations and diverse groupings of suppliers. Technology has of course played its part in facilitating this transition, enabling businesses to identify, vet, onboard, and manage suppliers on a scale that would have been impossible just a few years ago. 

Today, next-generation technologies like AI and machine learning are poised to further enhance the transition towards resilient supply chains. Their impact goes far beyond improving processes, transformative though this is, and extends into the realm of organizational strategy. The most valuable applications of new technology in the supply chain are when they contribute to the shift from static or reactive models to ones that identify or even anticipate emerging risks, based on real-time insight between the participants of all-digital trading networks. There is still some way to go before global trade gets an ‘early warning system’ that would eliminate all but the most cataclysmic events – but at the same time, that’s clearly the direction of travel.   

What does such a future look like? 

Imagine a scenario where emerging risks or long-term vulnerabilities would trigger an interactive dashboard to display alternative sourcing options in different geographies. The AI would pre-vet selected suppliers according to pre-set criteria using data collected from various sources. Organizations that engage in complex manufacturing may establish controls for product quality and design specifications. In light of the heightened scrutiny that businesses face regarding sustainability in their supply chains, many may also opt to select vendors based on verified ESG credentials.

We’re already seeing this becoming a reality in digitalized environments like B2B marketplaces, where there’s ample clean, structured data on factors like cost, quality, reliability, and carbon footprint. AI also has enormous potential in embedded finance, analyzing vast data sets to identify issues that may impact supplier cash flow and offer financing options to vulnerable suppliers.

While the backdrop remains fraught with uncertainty and complexity, the metamorphosis underway in global supply chains is unmistakable. Technologies like generative AI promise to take this to another level entirely. Adaptation, resilience, and digitalization are not just buzzwords but imperatives for survival and sustainable growth.

For more detailed insights into how macroeconomic conditions are impacting trade across your region or sector, read the latest Index of Global Trade Health here