Ocean logistics and carriers, lessons from the year: What carriers must adopt for 2024

Geopolitical risk has become a dominant global corporate risk. The physical locations of premises, complex supply chains, mobile workforces and cyber connectivity have led to greater risk exposure emanating from the cross-border transfer of goods and currency exchange, employee and customer movement and increased technical integration of businesses.

Internationally, it poses increasing management challenges; however, the shipping industry continues to show resilience despite significant global crises, such as the war in Ukraine. According to a report published by the United Nations Conference on Trade and Development (UNCTAD), Maritime trade volumes dipped 0.4% in 2022 but after adapting to new, lengthier trade routes, are on track for a 2.4% rebound in 2023 and above 2% growth through 2028.

However, despite its resilience, enterprise risk managers who can establish a sophisticated exposure monitoring tool and modelling approaches will be better equipped to help minimise the negative impact on their business. For example, what kind of monitoring and modelling tool would allow them to get ahead of an evolving risk, such as the Suez Canal getting blocked again? What's the right thing to do from a re-routing perspective? Using tools such as Insurwave's platform can help insurers maintain a real-time view of their aggregate exposure across their portfolios to help them become more proactive during increasing geopolitical uncertainty and market volatility.

Through Insurwave's live location tracking of assets on an interactive risk map, the insurer gains easy access to monitoring and alerts before any risk event. As a result, insurers can become more efficient, provide better-informed underwriting decisions and gain a far higher awareness of their risk exposure.

As the geopolitical landscape continues to evolve, bringing new and unanticipated risks, the ability to adapt swiftly and make agile decisions has become crucial to success. Companies that can pivot quickly in response to changes in consumer behaviour, customer demands, or even employee dynamics have a competitive edge over those that struggle to do so.

Furthermore, Gartner predicts a substantial surge in the adoption of real-time decision execution within supply chains over the coming 3-5 years. In light of these emerging trends, companies must prioritise flexibility and diversification in their selection of transportation modes, ensuring they can efficiently cater to evolving market demands.

As global trade dynamics continue to shift, influenced by various factors, including trade agreements, political alliances, and evolving consumer preferences, strategies like near-shoring and regional trade agreements are already redefining traditional trade paradigms.

For example, Mexico has become a manufacturing hub due to its proximity to the U.S. and advantageous trade agreements like the United States-Mexico-Canada Agreement (USMCA). Meanwhile, freight shipments within the Asia-Pacific region continue to rise as trade pacts like the Regional Comprehensive Economic Partnership (RCEP) promote more trade between member nations. As traditional trade lanes change with the emergence of new strategies, shippers must stay adaptable to these changes, ensuring they have the freight capacity they need in the right lanes.

Businesses are considering ways technology can help drive growth, create economic value quickly and help them weather the economic storm. These innovations range from AI-enabled planning and forecasting tools to the implementation of robots in warehouses and assembly lines.

On the automation side, technology can help ocean freight professionals reduce costs and increase efficiency by automating tasks, improving transparency and security, and providing real-time insights into the movement and condition of goods. For example, using automated cranes and other equipment at ports can reduce labour costs by up to 50%, according to a report by McKinsey & Company. Automation and AI can help ocean freight professionals make better, faster decisions via data analysis and real-time insights.

This innovation can be seen in practice with global shipping and logistics company Maersk partnering with an e-commerce software company to produce an AI-driven, automated fulfilment centre for e-commerce to help its customers streamline their supply chains end-to-end.

Successful companies also adopted a regionalised approach to production and distribution/fulfilment. This shift in supply chain strategy involves bringing production closer to home and, for certain retailers and e-tailers, establishing distribution and fulfilment centres closer to end customers.

As a result, there is an increased demand for middle-mile, warehousing and distribution (WnD), and last-mile services. As seen in my previous example in Mexico, this change in geographic footprint is driven by reducing risks and enhancing customer satisfaction through faster and more localised delivery capabilities.

Ultimately, the reality is a business can't prevent geopolitical risk, but they can understand it, and they can understand the impacts. It is asset and exposure monitoring and modelling that enables us to make these risks tangible and to come up with actionable strategies around how you would minimise negative impacts to your business as and when they materialise.