THE ECONOMIST

The challenge of globalisation

20 years ago

Theres little debate that the changing circumstances of globalisation have, and will continue to, affect world trade. Prices for goods and services are dropping while quality is on the rise.

The consumer benefits, but there is growing pressure from all sides, and change and uncertainty are on the rise. The smart shipping manager will be informed, flexible, and open to shifts in strategy and operational trends.

For 2006, container trade volume is growing at more than double the rate of overall world economic growth. Although trade volume growth rates will see a drop in 2007 before levelling off, the world economic growth rate remains relatively unchanged. Deepsea container trade of full boxes, excluding transhipments will grow from 98m teu in 2006 to 106m teu in 2007, and that growth rate will continue, according to research from Global Insight.

There is no overstating China’s impact. From 1995-2005, China’s share of total US containerised import teu shot up from about 15% to almost 40%; during that same period, China’s share of transpacific shipments more than doubled, from less than one-third to about two-thirds of the total. This growth is continuing.European imports remain in double digits despite weak consumer demand.

The growing world economy and the increase in trade will threaten to use up available capacity and increase congestion; travel times and delivery reliability may suffer; costs will rise. Inadequate public financing and investment in freight infrastructure will make it harder for shippers and ports to operate efficiently and productively.

As a result, supply chains need to be forecasted further out. New technologies and modelling will help critical decision-making, but supply chain integration must be strengthened, particularly through adoption of new technologies and standards for planning, management, and security. There will need to be greater flexibility in shipment and delivery practices to meet the changing natures of the diverse international workforce, carriers, and transportation networks.

Globalisation will continue. All of these pressures present both opportunity and risk, but in the end, it’s the informed managers, those willing and able to be flexible enough to foresee and prepare for the continued change, who will gain the most.