Even in the increasingly connected and digitalized times we live in, the shipping and logistics industry is often an afterthought to many outside of the trade, as many people generally do not stop to think how many of the products they enjoy reach their hands. While some are becoming more cognizant of the role the industry plays, the amount of interaction shipping and logistics continues to play in other businesses and industries around the world is only increasing. It’s simple really; raw materials need to be sent for processing and finished goods need to be delivered to shelves around the world, and as global trade and markets have continued to broaden, so has the reach and importance shipping and logistics plays.
As such, the shipping and logistics trade has generally been a viable way to measure the overall health of economies around the world, even being able to foretell future market conditions. For example, a depression in the shipping industry often meant that months down the line other industries and markets would be hit with economic lethargy.
However, this method of predicting future market conditions is just painting broad strokes across every industry and is only a general indicator of the health of the market. In these increasing technologically sophisticated times we could be doing so much more.
That’s where global trade enabler DHL stepped in and began to innovate with new technology not yet seen on the market. Their DHL Global Trade Barometer was launched earlier this year as a way to develop a predictive model for customers looking to better optimize their supply chains. The system utilizes artificial intelligence (AI) and machine learning, as well as DHL’s expertise to interpret and provide insights on what the data means for supply chain planning and management.
We spoke with Ir. Dr. Kelvin K Y Leung, Chief Executive Officer Asia Pacific for DHL Global Forwarding to learn more about this early indicator tool for the current state and future development of global trade.
A New Perspective
The push for utilizing big data in all kinds of applications is becoming increasingly apparent with large corporations beginning to see the value in the mountains of data they may possess. The real trick though is being able to sift and sort through it all to obtain relevant and useful information, and is something that only recent computing power and technologies could enable.
That’s why it’s exciting to see companies like DHL investing into their new Global Trade Barometer. Working behind the scenes with Accenture for years, they have decided now is an optimal time to beginning releasing their findings.
DHL says the tool is based on import and export data for a number of commodities that serve as the basis for further industrial production. The aggregated market data from air and containerized ocean freight comes from seven countries: China, South Korea, Germany, India, Japan, UK, and USA. These countries account for more than 75 percent of world trade.
Most importantly, all of DHL’s data is evaluated using AI and statistical methods that helps to further refine and validate their findings. The data is compressed down into a single index value that represents the weighted average of current growth and the next two months of trade. For instance, the latest report states that global trade has continued to improve, and the trade barometer has increased to 66, up from 64 points in January. DHL says that values above 50 represent firm and positive growth, and the noticeable uptick is a good sign for positive momentum moving forward into the later part of the year.
Dr. Leung said, “We release a new report every quarter, and the latest report shows that the outlook for the next 3 months remains positive. The way we do these reports is different from other institutions that release similar findings, like banks, Purchasing Managers’ Indices (PMI’s), and other trend indicators. The difference is that most of these other reports are based on surveys of hundreds of individuals from the industry. Because it’s all based on individual guesses, there’s of course going to be an air of bias as it’s feelings based. If everyone thinks the same, of course the tendency is truer, but it’s still just a perception.”
“The difference in what we do is that we’re leveraging the latest technologies. Firstly, big data and secondly, data analytics. We have established mathematical models based on machine learning and the system calculates based on the historical data to see if our predictions are correct. We look back through nearly a decade’s worth of data to ensure our system is as consistent as possible. The other part of it is we make use of customs data from 7 major economies that account for nearly 75% of global trade.”
“We can then go into even more detail and focus on particular industries. We collectively gather hundreds of thousands of different components based on all the data and predict how many different commodities and products are being produced as we speak. This then indicates how many products will be completed, and once they’re finished the goods need to be shipped out, and that’s how we establish the global trade index number.”
Implementing the Data
The next logical step is applying the information that DHL’s Global Trade Barometer gives us into actionable real-world applications. One of the biggest benefits the report gives is the way it enables a business to better optimize their own supply chain. For example, businesses are better able to see in advance the likely hood of demand for their product which defines how much product they need to produce, staff to hire, and space to book on a vessel.
Dr. Leung explained, “Businesses in our industry are often hard at work and have a distinct focus on their output, as they should. However, because they are so focused it’s hard to see the bigger picture and plan for the future because they are so close to the supply side. It’s tough, as they don’t know how many ships or how much free space on the aircraft or on vessels will be free for them. That’s the bottleneck that creates the peak season.”
“What we provide is actionable information that, say from Germany to the US, in the next 3 months this is the expected trend, not just for your factory or your industry, but across all industries. This offers much higher accuracy and predication and enables customers with the ability to negotiate with the shipping lines, the trucking companies, or the airlines much more in advance to obtain better rates, service, and to ensure their space.”
The first two reports released have already pointed to the momentum swinging upwards currently for global markets. This is somewhat of a relief, as over the last few years’ global trade has been down. Even in the current climate of protectionism, Dr. Leung see trends continuing upward.
“The last two decades of globalization has seen production become so complicated and intertwined between countries that all benefit from working together for increased trade growth. My hopes for DHL’s Global Trade Barometer are that many of the stakeholders in the supply chain will realize the benefits it brings and implement it into their business. With the ability to plan, benchmark, developing new business opportunities, as well as give insights into future market conditions gives those who implement the Global Trade Barometer a leg up on the competition.”