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Keynote speaker Dr Patrick Dixon at conference organised by Seminarium in Santiago Chile on disruptions to supply chains. Trust is the most important thing you sell if you are a logistics or supply chain company. Manufacturing 4.0 is not enough, nor the hyper-connected world of Manufacturing 5.0. We need agility, rapid innovation and dynamic responses to disruptions in supply chains and global chaos. Yet in many ways, despite recent shocks, the fundamentals of successful logistics and supply chain management are changing relatively slowly. For example, before COVID, moving a container 150km by lorry from Birmingham to Southampton costs the same as moving the same container 10,000km by sea from Southampton to Beijing. It is cheaper to transport melons from Istanbul to Naples than to drive melons from a village up in the Italian mountains, to the same market. This overwhelmingly huge difference in freight costs will be one of the single greatest drivers of future global trade over the next 30-50 years, despite increased energy costs. It is the primary reason why global trade has grown at twice the rate of global production over the last 30 years. Now of course, we had huge supply chain disruptions during the COVID crisis, made worse by Russia's invasion of Ukraine. COVID caused the following supply chain disruptions 1. People spent far less on leisure, recreation, holidays, travel - locked down - resulting in crisis in these industries 2. Many then spent more than usual on improving life at home - new furniture, large TV screens, new kitchens etc etc - boosting demand 3. At the same time, Lockdown stopped factory workers from production, and also blocked container ports - with ships at anchor for weeks, unable to load or unload So the result of all this was that the costs for a typical container journey rocketing from $750 to over $9000 in a few weeks. These have been short term issues, and market forces will bring these costs right down towards normal - simply because there is so much profit to be made by shippers at much higher costs, which means more investment, more competition. Here is the wider picture for supply chain trends Look out for trade growth in Latin America and Africa – both of which have huge manufacturing potential close to the sea. All cities with major container ports will on average grow up to 40% faster over the next three decades than cities, regions or nations that are landlocked. Expect over $28 trillion a year of global trade by 2030, up from more than $18 trillion in 2019. Global economy will continue to grow around 25-35% faster on average than global trade, accelerated by recent events, which have encouraged large companies to keep supply chains shorter. For two decades, the use of shipping containers grew twice as fast as international trade, as companies seized the opportunity to be more efficient. But the container revolution is now complete, and so the growth difference will ease. Regional trade will grow – and global trade will slow Ten years ago, many global manufacturers were stampeding to move factories to China and other parts of Asia to save costs, while banks were shifting call centres and IT support to India. Several years ago I predicted that supply chain outsourcing would go into reverse, which exactly what has happened. Asia is becoming more expensive. Long supply chains are easily disrupted. Cultural gaps, tariff barriers and varying exchange rates can be troublesome. Local demand in Asia is growing. So we will see more clusters of regional suppliers, delivering components to make products to be sold in the same area. That is why ‘south to south’ trade will continue to grow significantly (e.g. India to Brazil, China to Malaysia, or South Africa to Tokyo). Such trade doubled from 12 to 24% of global trade from 2000 to 2011, and will increase to more than 40% by 2030. Half of all trade in Asia is already within the region. A significant amount of offshoring is already being replaced by nearshoring or reshoring of manufacturing – ‘jobs moving back home’. Jobs are also moving around Asia. So Intel has built a new $1bn chip factory in Vietnam, just a few miles from the border with China where labour is twice as expensive. Samsung switched almost all manufacturing of electronic goods out of South Korea to many other lower-cost locations within Asia. How to save money on logistics There are hundreds of ways to save money on logistics and some of them cost very little to implement. For example, it is a scandal that 30% of trucks on the road in the EU are empty, transporting just air over 150 million kilometres a year.

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