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Weekly Roundup - Effects of Red Sea Disruptions, Tesla Production Suspension and Implementation of GenAI

Yulia Fedorova

12 Jan 2024

The European Union's economy is feeling the effects of disruptions in the Red Sea shipping routes, with the latest Kiel Trade Indicator reporting a 3.1% drop in imports and a 2% decrease in exports in December. Germany, as the world's third-largest exporter, experienced a 1.8% decrease in imports and a 1.9% decline in exports. The decline in global trade by 1.3% last month can be attributed to various factors, including a significant drop in containers passing through the Red Sea due to attacks by Houthi militants, resulting in strains on European companies' inventory management plans and shipping delays for UK-based businesses.

The shipping delays could potentially lead to inflation on consumer goods, as indicated by Tesco's CEO, while analysis suggests that European cargo owners may face extended waiting times for goods from Asia. Despite surging freight rates, it is believed that there will be no noticeable impact on consumer prices in Europe. However, the industry is expected to face challenges, including increased transportation costs and longer delivery times for products from the Far East.

Tesla announced the suspension of most car production at its Berlin factory from Jan. 29 to Feb. 11 due to component shortages caused by disruptions in transport routes following attacks on vessels in the Red Sea. Analysts anticipate that other automakers could suffer from the fallout of the Red Sea conflict, particularly those heavily reliant on key components from Asia, such as Tesla, which heavily relies on China for battery components. The disruption adds pressure on Tesla, coinciding with a labor dispute with Swedish trade union IF Metall, and has raised concerns about the company's ability to meet demand.

Gartner's survey reveals that half of supply chain leaders plan to implement generative AI in the next 12 months, with an additional 14% already in the implementation stage. Chief supply chain officers are allocating an average of 5.8% of their function’s budget to GenAI. 65% of respondents intending to hire dedicated staff and experts to help deploy the technology in 2024. This demonstrates a serious commitment to making progress on GenAI solutions.

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"What is next? The effect of reverse logistics adoption on digitalization and inter-organizational collaboration" by Faisal Rasool, Marco Greco, Gustavo Morales-Alonso, Ruth Carrasco-Gallego (2023)


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Weekly Roundup