Bogotá — The global logistics sector has seen a sustained recovery since the supply chain was impacted by the pandemic, leading the industry to become more resilient, adopt a more collaborative approach and focus on service as new challenges emerge in the face of lost consumer confidence and inflation, DHL Global Forwarding CEO Tim Scharwath said in an interview with Bloomberg Línea.
The leader of the German firm’s air and ocean freight forwarding services division said in a video call from Germany that the global supply chain has already recovered in terms of shipping goods, leaving behind the disruptions that affected international trade during 2021 and 2022.
However, there are “some problems in the internal supply chains of some of the big customers, because a lot of products or raw materials were being shipped” at a time when their warehouses did not have the capacity to handle the volume that suddenly came in once the markets reopened”, Scharwath said.
According to the World Bank’s Logistics Performance Index (LPI), which analyzes supply chain performance in 139 countries, a container on potential trade routes takes an average 44 days from the time it enters the port of the exporting country until it leaves the port of destination, with a standard deviation of 10.5 days.
“That time lag represents 60% of the time required for international merchandise trade,” the World Bank notes.
Scharwath said that, despite the fact that freight transport has been normalizing, the volume of trade is still below the 2019 level as a global average, although it is now very close to matching it.
He added that the biggest risk for the sector would be if demand remains very low.
“We see low demand in big markets like Europe and the US based on consumer insecurity. This is based on the inflation we have globally,” he added.
Overall inflation in Latin America and the Caribbean would be 11.8% this year, but, excluding Argentina and Venezuela, it would fall to 5.4% in 2023.
And by 2024, Latin American inflation is estimated to fall to 7.7%, while excluding Argentina and Venezuela, it would be 3.7%, according to International Monetary Fund (IMF) projections.
“People have uncertainty about their future, and if this happens they spend less, they save money for hard times, and then that means we ship less,” he said.
The CEO of DHL Global Forwarding also said there are concerns in international logistics on account of high energy prices, stemming in large part from the war in Ukraine that continues to influence uncertainty in Europe.
He said that certain types of shipments take longer than before because it is no longer possible to fly over Ukraine between Europe or Asia, so “you have to make a two-hour detour, which makes transportation more difficult” and more expensive.
“I think all these things together make people a little bit uncertain about what their future looks like, what might happen, what kind of costs might affect them. So they are a little bit more careful when they spend money, and I think that could be the biggest risk in the way that we see consumption not recovering, which would mean that volumes would not grow in the second half of the year,” he said in the interview.
“When it comes to infrastructure, I think Latin America can do a little bit more to become better.”Tim Scharwath, DHL Global Forwarding CEO
Asked about the situation in Latin America, he said that “the logistics industry has been doing a very good job in the last two years, and has always found ways to move goods”, highlighting businesses such as Colombian flowers.
However, he said that for economies to develop from an export point of view in Latin America, there needs to be more technology to boost production, and for countries to invest more in infrastructure.
China, for example, “increased their production capabilities also based on the fact that they have this infrastructure in place, which facilitates shipping, compared to what we find in other parts of the world. When it comes to infrastructure, I think Latin America can do a little bit more to become better,” he said.
He explained that the high costs of shipments between Latin American countries in international trade may also respond to the imbalance between supply and demand, as well as the available capacity to meet the high volumes, while on the side of express service providers, he said they must invest large sums in assets in the face of the same logistical challenges, and this makes it a service in general with a high operational burden.
Technology in logistics
Scharwath is optimistic about the future of technology however, and the added value it can bring to a sector in which it is increasingly difficult to find people who want to work because “international transportation and logistics are not very attractive”.
He says that often people do not receive the recognition they would have if they worked for a technology company.
“So we have to be pioneers in the use of functionalities and other ways to improve this industry,” he said, referring to the potential of artificial intelligence (AI).
He added that tools such as AI hold promise for reducing repetitive and distracting activities from more important tasks, for example, in day-to-day interactions with customers and suppliers, as well as in optimizing operations.
At its Digital Summit last year, the German company unveiled progress regarding the adoption of predictive functionalities for shipping.
“We use data from the shipping companies, but we have some algorithms on the back-end that check the data and, based on historical data, can make an estimate of when the ship would actually arrive. This is better than the data that is automatically obtained from the carriers,” he said.
This year the company made changes to the myDHLi platform, which is used to manage logistics and transportation needs, with updates to document management, greater visibility into environmental footprint and carbon emissions data.
According to World Bank figures, digitization in the end-to-end supply chain, “especially in emerging economies, is enabling countries to shorten port delays by up to 70%, compared to those in developed countries.”
“In addition, demand for green logistics is increasing, with 75% of shippers looking for environmentally friendly options when exporting to high-income countries,” Scharwath said.