There has been much talk about near-shoring production (political & economic reasons), given the figures reported in last year’s index suggesting that the world isn’t as globalised as we think, would near-shoring really be an issue?
Nearshoring can indeed be attractive if it is pursued for the right reasons. In our report, we show that trade has not become more regional in recent years, but we also show that the majority of trade has long happened inside major world regions. So, regionalisation and nearshoring are not really new phenomena, and the proximity and similarity of countries in the same region can often make regional production networks highly efficient. In my view, the key is for companies to choose between regional and global production based on the business fundamentals at hand, considering both the benefits and the risks entailed.
What should be avoided are decisions to regionalise because of the perception that there is a major regionalisation wave underway to which a given company will have to respond. Look carefully at what your suppliers and customers are actually doing, since the talk about supply chain shifts – especially during a crisis – can often get far ahead of the reality. [To see how most trade already happens within major world regions, refer to Figure 6 on p. 18 of the GCI 2021 report. Also, Figure 14 on p. 28 of the report shows that more than a half of merchandise exports take place between countries and their top five export destinations—many of which are often in the same region.]
If every country has untapped opportunities for increasing connectedness, with the potential for significant financial gains, isn’t this a good thing for DHL Express and peers? How would you capitalise on it? What initiatives have you got lined up?
With our new sustainability program GoTrade, we have made it our mission to help developing countries and their small and medium-sized enterprises (SME) access the global market. In line with our company purpose to connect people and improve lives, GoTrade is about expanding the reach and benefits of globalisation. Cross-border trade creates prosperity, improves life and connects people, but there are still major obstacles in many regions. Some countries and communities still do not participate as strongly in international trade as they could. A common problem in developing countries is inefficient import and export processes and unnecessary hurdles for businesses wanting to access global markets. Trade barriers, such as bureaucratic, non-transparent - and thus often corruption-prone - Customs procedures, hit developing countries particularly hard and make it more difficult for them to access world trade. This hinders the flow of goods and business growth, especially for SMEs, whose success is so critical to achieving sustainable economic growth and broad-based prosperity in these countries.
As part of our new sustainability program GoTrade, we are working determinedly with public sector partners such as national governments and international organisations to remove these hurdles. Merchants who previously sold their goods regionally get access to customers around the world. We leverage our core logistics competencies and know-how to help countries implement best-in-class policies and procedures at the border, help speed up Customs clearance and reduce the costs of cross-border trade. At the same time, we are training SMEs to be able to increase cross-border trade.
John has been with DHL for 35 years in various senior management positions. How has the world’s connectedness changed since then? What have the most important factors been? What are the most important factors today?
The world has become much more globalised over the past 35 years. The flows of trade, capital, information, and people have all increased strongly over this period. Among those, however, the biggest increase, by far, has been to information flows. The explosion of informational connectivity has fuelled increases in the other aspects of globalisation, boosting trade flows by supporting the development of global supply chains, connecting capital markets with real-time data flows, and making it possible to stay in close contact regardless of where we are physically located around the world.
Both John and Steven spoke about e-commerce and how it will only continue to grow as a market, how will this affect the high street? Will it survive? If so, how can it adapt?
In our view there will always be a place for both. However, the bricks-and-mortar stores would need to adapt to attract the right audiences to their stores, and of course many good examples are there already where merchants turn the high-street more into experience centres. E-commerce will keep growing, that is for sure, and in some shape or form this may eat out of the spend done at the high-street.
But on the other hand, we also see examples of pure e-commerce brands finding their way now to the high street and opening physical stores. We certainly don’t have a glass ball, but one thing is for sure: Retail has been changing a lot over the last decade, and most likely that (rapid) change will continue during the coming decade.
It was interesting to hear that in the USA the Shein app is now downloaded more than Amazon. How does shipping products for companies like Shein fit with DHL’s commitment to sustainability?
Shein is a well-respected customer, and our commitment to sustainability is something we do with and for all of our customers. Over the past 15 years, we have continuously improved our carbon efficiency. But it is still our duty as a globally operating company to reduce our footprint even more and make supply chains greener. We also have to ensure equal opportunities and a safe working environment, as well as comply with all regulations and stand up as a world-class role model for good corporate governance. We can't create a lasting positive impact unless we follow a clear strategy. That's why our roadmap to sustainability focuses on meeting three key commitments: Clean operations for climate protection, great company to work for all, highly trusted company.