In a statement this September, the IMF predicted that any form of Brexit (hard or soft, deal or no deal) would be damaging to the UK economy. The focus of discussions so far, both in industry and in media, has been the western trade border with the EU. However, the big picture shows that another shift in international trade is also happening. While the western borders of the EU have been embattled with Brexit, the eastern boundaries of Europe have been experiencing a boom. The shining jewel in the crown is the post-industrial German town of Duisberg, whose inland port now receives 80 percent of European trade originating from China.
From tech to toys and everything in between, China’s status as the new manufacturing superpower has been firmly cemented over the past few decades. In fact, China exported $200 billion of goods each month on average in the 2017-2018 financial year. Although their largest market continues to be the US, it looks as though politics might cool Chinese enthusiasm for the States. What’s more, the Belt and Road Initiative has now revived a key trade corridor into Europe, creating new trade opportunities between the two markets.
So, what does this mean for logistics in the UK?
As the Western trade paths that have dominated logistics for the past three decades begin to crack, it’s time for logistics firms to look to the future. Political uncertainty around Brexit is making the question of our trade relationship with the East more pressing. The changing international landscape means that supply chains are evolving too. Logistics teams are looking to expand their networks beyond their traditional heartlands. But in such uncertain times, it seems unwise to start expanding.
Yet a new breed of supply chains is empowering logistics providers to do just that. The development of global trade networks, supported by real-time data exchange and cloud-based software, allow potential partners worldwide to develop closer relationships than ever. Without the costs of new infrastructure, personnel and other assets, companies can now explore new markets and trade routes with relatively lower risk. By helping companies to ‘test the waters’ in this way, businesses looking to grow can build mutually beneficial relationships. Likewise, harnessing vertical or geographical specialist knowledge allows supply chains to expand and transform with the introduction of new thinking.
Will rail rule now that China has revived the Silk Road?
One of rail freight’s key benefits is also a challenge to logistics firms. Their inter-country routes allow them to cross vast distances relatively efficiently. However, with a diverse set of customs procedures to comply with, how can logistics teams keep goods moving to time? Moving from legacy systems to cloud-based, multimodal solutions will be key, because they reduce some of the geospatial limitations. There’s nothing to say that the documentation itself needs to be completed and delivered on location. With the advent of systems that can share data in real time, it is possible to collect, organise and complete documentation ahead of time. This also allows companies to share updates with their partners and customers without having to prepare or calculate manually.
However, rail still has some of the same limitations as a hundred years ago. It cannot cross oceans, for example. For this reason, rail must exist as part of a global multimodal ecosystem. After all, the rail Belt of China’s favorite project is accompanied by its road haulage sibling. By expanding the modes of transport in the supply chain, logistics companies can find more time and resource efficient route to suit the products they are dealing with.
As with global expansion, the overheads of developing a multimodal supply chain can also be vastly reduced by a more collaborative supply chain model. Businesses can then locate the resources needed on demand, providing capacity wherever customers need it. Using macro-optimization strategies such as these delivers the speed and flexibility needed to compete in today’s market by supplying access to multimodal transportation to partners around the world. With fluctuations in both supply and demand catered for, the supply chain is transformed from a perceived ‘cost center’ of business, into a money-maker.
China means business
Whereas the winds of international politics may be out of our hands, international collaborations needn’t be. There are plenty of ways to explore new markets through global trade networks and partnerships powered by dynamic resource planning. With its drive to develop supply chain links with the EU, China may pose an interesting option to explore for UK logistics firms. By embracing the benefits of local knowledge and a global reach, there are practically no limits to the extent of any organisation’s supply chain.
By Mohit Paul, SVP EMEA at BluJay Solutions