In a world characterized by volatility and uncertainty, the logistics industry can use big data and predictive analytics to deliver more transparency and predictability on global trade and the world economy. Here’s how.
Global trade is the fuel that drives the world economy. And when the world trades, the growth that follows stretches well beyond pure economics. Ideas spread and communities thrive. People’s lives improve.
Today businesses both big and small are trading more than ever before. There still is a need for more trade-friendly policies and agreements as well as fewer regulatory barriers. However, comprehensive and fast logistic networks today foster the free movement of much-needed goods, technology, and innovation around the world. But in a time of more volatility and disruption, it’s becoming increasingly difficult to predict future trends from the patterns of the past.
Harnessing the power of AI
What if I told you that you could take the import and export data for a number of intermediate and early-cycle commodities – things like clothing brand labels, car bumpers or mobile device touchscreens – to reliably predict trends in global trade? Until recently, you could have responded with skepticism. After all, economists have been tracking worldwide maritime trade for years to assess global economic health – and with some success, though the data has always had its limitations. The Baltic Dry Index, for example, has declined in popularity as a predictor of trade trends among analysts, mainly because the oversupply of capacity on the oceans has had a larger impact on shipping rates than demand for commodities. Due to recent advances in digitization, however, we can now harness the power of Artificial Intelligence (AI), big data and predictive analytics to analyze and interpret logistics data from both air and ocean freight in order to foresee trends.
Global trade is the lifeblood of the world economy.
Enter the DHL Global Trade Barometer (GTB) – a new and unique early indicator of the current and future trends in global trade that utilizes these state-of-the-art technologies. Issued by Deutsche Post DHL Group, which has developed the tool in cooperation with Accenture, the GTB monitors real trade in intermediate goods and early-cycle commodities to generate predictions for future patterns in global trade. Because global trade is the lifeblood of the world economy, the GTB can assess the current health of the global economy, anticipate turning points in trade and deliver a valuable insight into near-term developments.
A bottom-up-based barometer
The DHL Global Trade Barometer sources aggregated market data from air and containerized ocean freight in China, India, Japan, Germany, South Korea, the United States of America and the United Kingdom. These seven countries represent the lion’s share of global trade – some 75%. The amount of high-quality air and ocean freight data leverages the predictive power of this tool.
The DHL Global Trade Barometer shows impressively how digitalization opens up entirely new opportunities.
Using big data and predictive analytics, the data is compressed into a single index value for each individual country and the world economy as a whole. These values represent a weighted growth average for air and containerized ocean freight to and from the seven countries. The result shows us the weighted average of the current growth and the upcoming two months of global trade.
Tests run on historical data dating back to January 2012 reveal a high correlation between the GTB and actual trade. Because supply chains obviously move ahead of production and ultimate industrial value creation, we can use the barometer to make reliable predictions on trade flows for the coming three months.
New, deep insights and greater transparency
The DHL Global Trade Barometer can also provide insight beyond global trade in general. By breaking down international supply chains, we can take a deep dive into regions and countries, sectors and industries, and macroeconomic factors. Which countries and regions are driving international trade dynamics? Which sectors are currently outperforming, and which ones are in decline? The GTB can answer these questions and more.
That’s going to benefit a lot of stakeholders, providing greater transparency and predictability in a world characterized by volatility and uncertainty. Economists will have access to more reliable data, which could be integrated into the forecast models of banks, associations and economic research institutes. Likewise, logistics buyers will be able to optimize business processes, improve capacity planning, and identify new business opportunities. Obviously the barometer is also going to help DHL, giving us a powerful tool to fine-tune our resource planning, especially at my division – DHL Global Forwarding, Freight – but also at DHL Express and DHL Supply Chain.
As the world’s leading logistics company, DHL has both a deep understanding of the driving forces behind global trade volumes and the industry expertise to analyze and interpret market data. Our network, knowledge and experience uniquely position us to understand global supply chains in order to derive a global trade outlook. The DHL Global Trade Barometer shows impressively how digitalization – with the use of big data and predictive analytics – opens up entirely new opportunities that we can use to leverage logistics and forecast the future.
Released for the first time in January 2018, the DHL Global Trade Barometer currently indicates that global trade will continue to grow in the next three months. The January index scored 64, which shows growth on a very high level, but is down slightly compared with previous months. The decline is due to the weakening prospects for German and US trade, which are only partially offset by the improved prospects for Indian trade. Get the January barometer results here