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Weekly Roundup - Issues in Procurement, Air Cargo Demand and Red Sea Attacks

Yulia Fedorova

22 Dec 2023

Looking ahead to 2024, procurement professionals are advised to remain vigilant, adaptable, and strategic, much like the challenges they faced in 2023. Key issues in procurement during that year included economic uncertainty, political shifts and trade dynamics, supply chain risk, and sustainability and ESG compliance. In 2024, supply chain resilience will continue to be a top priority, with a focus on diversifying suppliers, mitigating risks, and leveraging advanced technologies for real-time visibility. Technological advancements such as AI, machine learning, and blockchain will reshape procurement processes. Global market volatility, including inflationary pressures and geopolitical tensions, will require professionals to stay informed and respond accordingly.

Global air cargo demand increased by 5% YoY in November, driven by a surge in e-commerce volumes from China and Hong Kong, according to Xeneta's Clive Data Services. Shein and Temu, two e-commerce giants, accounted for the majority of the increase in airfreight volumes and rates. However, this surge is not indicative of a fundamental shift in the global market. The demand for air freight, especially in e-commerce, is growing, but questions remain about its long-term sustainability. The low-value nature of products being transported raises concerns about the viability of delivering inexpensive goods globally. Despite the increase in demand, the overall air cargo market trend remains weak, and it is expected that air freight capacity will exceed market demand in 2024. This is attributed to weak consumer spending and ongoing recovery of belly capacity due to passenger travel.

Several major liner companies, including Maersk, MSC, CMA CGM, HMM, and OOCL, have suspended their Red Sea routes due to increasing attacks on merchant vessels in the region. This decision will affect approximately 1.7 million TEU of goods, similar to the impact seen during the Suez blockage earlier this year. The Red Sea is a crucial shipping route, with about 15% of the world's shipping traffic passing through it en route to the Suez Canal. As a response to the attacks, the US is planning to launch an expanded maritime protection force involving Arab states. Moody's warns that these disruptions could have significant implications for global supply chains and the shipping industry.

Mark Morley, Senior Director of Product Marketing at OpenText, predicts that there will be explosive growth in the use of generative AI solutions in the supply chain sector by 2024. This will enable businesses to obtain greater value and insights from the data exchanged across their business ecosystem. Morley highlights the importance of smart business ecosystems and actionable insights for companies of all sizes. He mentions that supply chain improvements will include accelerated supplier onboarding, optimized logistics flows, and better inventory management. Morley also emphasizes the shift from traditional supply chain control towers to intelligent command centers that provide users with enhanced insights and guidance. Additionally, he discusses the utilization of digital product passports and digital twins to drive sustainability projects in line with government regulations, such as the European Union's Ecodesign for Sustainable Products Regulation.

The Constellation of Champions, a new coalition of major corporations, financial institutions, and consultancies, has been formed to promote transparency in global supply chains. Led by Bankers for Net Zero and Rewired Earth, the initiative aims to expand the monitoring and reporting of supply chains worldwide. The coalition includes renowned organizations such as Microsoft, HSBC, PwC, and Ordnance Survey. By developing impact methodologies and metrics, the coalition intends to reveal the true impact of organizations on people and the planet. The partners have committed to collaborating and providing tools and insights to guide sustainable efforts and investments.

Read more on recent highlights
Dive deep into research

"Research opportunities in preparing supply chains of essential goods for future pandemics" by ManMohan S. Sodhi, Christopher S. Tang & Evan T. Willenson (2023)

"Supply chain vulnerability assessment for manufacturing industry" by Sharma, S.K., Srivastava, P.R., Kumar, A. et al (2023)

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Weekly Roundup