Four Key Trends Impacting Global Trade in 2011

Posted by Nathan Pieri on Thu, Oct, 21 2010 @ 1:17 AM

Look for these key trends to impact your global trade strategy in 2011

1. Technological innovation drives gains in operational excellence

Market complexity and volatility are driving new levels of investment in technologies that better manage and control global operations and processes. Importers and exporters need a greater degree of visibility to improve agility, such as corrective action in response to a supply chain disruption or the monitoring of priority shipment to a needed delivery date. Advances in information and communications technologies that automate forecasting, supply and production management, transport, and logistics processes have stepped up to provide the necessary visibility and also flexibility to accommodate and also take advantage of market volatility, rapidly changing demand, and emerging markets. Trading partners and groups interconnect dynamically and reconfigure as either opportunities or constraints require.

2. The need to manage volatility (and risk) will increase

Most experts agree that global market volatility is here indefinitely. If not driven by sudden demand disruptions, than by supply or other vendor disruptions, or weather anomalies, or wars and terrorist attacks, or a list of other economic and market constraints. The foundation of any risk management system and the key to managing volatility is to have an "early warning" system. It is critical to link supply chain processes outside the four wall of your enterprise and develop a shared set of metrics to manage success and to highlight the need for implementing contingency plans when performance goes South.

3. Sourcing strategies take into account total landed cost and increased flexibility

Rising fuel and resource costs, aging economies, and market turbulence have motivated proactive global traders to rethink their sourcing strategies. Companies are becoming more fluid about their sourcing policies in order to save on transportation costs and also to pursue new and profitable markets. Companies sourcing from China may switch to sourcing from Mexico in order to serve NAFTA customers. They also may source the same product elsewhere to serve European or Asian customer or trading group locations. Or they may continue to source from China or Asia, but ship materials and subassemblies to be assembled closer to the delivery point. Sourcing and manufacturing/assembly locations may change again as demand changes, in what is becoming a continuously dynamic trading mode.

4. The rise of emerging markets and trading blocs

Intra-Asia shipping is booming as China and its 10 ASEAN trading partners (Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand, Viet Nam, Lao PDR, Cambodia and Myanmar) see significant sales increases. From January to August this year China-ASEAN imports were up 54 percent and exports up 40 percent year-over-year (U.S. Bureau of Transportation Statistics, 7/2010). Companies looking for growth opportunities are shifting to these emerging markets – not only the Asia Pacific, but also India, Russia, and Eastern Europe -- where double-digit sales are out-performing the typical established-market sales in the U.S. and European Union.

Increasingly global trade is becoming more concentrated in specific areas such as the China-ASEAN bloc, in much the same way as trading within the Western Hemisphere became focused within NAFTA for the U.S., Canada, and Mexico. However, the emerging high-demand areas are currently attracting more manufacturing and logistics-related service infrastructure, and the attention of global exporters and their networks.

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