Can modernity save global supply chains?

The pandemic had a particularly bad effect on global supply chains. AFP

From fresh produce and pharmaceuticals to parcels and packaged goods, consumers, businesses and governments all rely on complex supply chains for essential goods that stimulate trade.

Logistics is at the doorstep of a digital revolution. Advanced technology must be included at every step of the supply chain to increase efficiency and create a resilient economy.

It is critically needed. Recent supply chain disruption has limited the availability of certain products. The Ports of Los Angeles and Long Beach saw a record 105 container ships waiting to berth in January 2022. To illustrate the danger of such delays, it is worth remembering that around 90 per cent of global trade moves by sea. In many parts of the world, logistics still relies heavily on manual, paper-based processes that other industries have largely phased out. The sheer complexity of global supply chains makes these old approaches particularly cumbersome.

Although the logistics sector globally is grappling with immediate challenges, these disruptions have acted as catalysts for innovation that can release such bottlenecks.

Semiconducter manufacturing, crucial for modern industry, is reeling from supply chain disruption. Getty

The UAE’s cutting-edge ports infrastructure, technology capabilities and favourable location – the country is within an 8-hour flight of 80 per cent of the world’s population – makes it an attractive place to test smarter supply chains.

According to the UAE’s Ministry of Economy, trade in recent years has been growing at record levels. Non-oil foreign trade achieved a record-breaking milestone in the first half of 2022, exceeding Dh1 trillion – a growth rate 17 per cent higher than the second half of 2021. The UAE’s non-oil exports achieved approximately Dh180 billion for the first time in history during the same period.

As people were forced to work remotely during the pandemic, consumer spending increased, placing greater pressure on supply chains. The acceleration of e-commerce and digital transformation over the past two years has encouraged logistics companies to prioritise modern practices such as automation, internet of things and blockchain.

Progress is being made. Abu Dhabi’s HOPE Consortium is an example. It brought together partners such as Department of Health – Abu Dhabi, Etihad Cargo, AD Ports Group, Rafed and SkyCell to distribute vaccines globally. Further afield, the Port of Los Angeles co-created the first port community information sharing system in the US.

Investment is critical to loosening bottlenecks and getting more success of this kind. A recent report found that most organisations transitioning from linear to digitised supply chains saved around 7 per cent on costs and generated almost 8 per cent more revenue annually.

ADQ, an Abu Dhabi-based investment and holding company that focuses on Mobility and Logistics, is playing a leading role in the digital transformation of the Middle East’s supply chains.

The UAE's ports occupy a particularly strategic position. Getty

One of ADQ’s portfolio companies, AD Ports Group, which generated 21 per cent of Abu Dhabi’s non-oil GDP and created more than 210,000 jobs nationwide in 2021, was recently listed on the Abu Dhabi Securities Exchange to accelerate growth and position Abu Dhabi as a premier logistics and transport hub. AD Ports Group’s implemented the first purpose-built Port Community System (PCS) in the UAE, which is an electronic platform that optimises, manages and automates logistics through a single submission of data.

AD Ports Group is already making substantial investments in promoting a data-driven supply chains. Through Maqta Gateway, the Group has completed more than 30 million online transactions and is developing the Advanced Trade & Logistics Platform that will integrate trade via sea, land, air, rail and zones in Abu Dhabi. Building on these investments, Maqta Gateway also launched Margo, the UAE’s digital marketplace for logistics. This one-stop portal further enables consumers to import goods.

Increasing resilience in the supply chain is imperative to withstand economic volatility and promote efficiency in the global logistics industry. While the immediate benefits are a reduction in trade costs and quicker shipment, it also enhances trade that bolsters economic resilience.

Harmonising the flow and reporting of electronic information is a great first step towards digitising the global supply chain. The efficient and valuable handling of digital information, however, is fully reliant on systems that are inter-operative and fully compliant with regulations. Multimodal supply chain integration can only be achieved if the logistics sector prioritises and encourages public-private-partnerships between all the parties involved in the global supply chains, including ports, logistics companies, freight forwarders, customs authorities and governments.

We also cannot ignore investment of developing homegrown knowledge and skills. Capitalising on the UAE’s strategic location, robust infrastructure and distribution channels will help ensure supplies are uninterrupted.

At the core, there is a great opportunity to invest in a resilient supply chain and drive leadership in a sector that strengthens global trade. In doing so, it will reinforce Abu Dhabi and the UAE as facilitators of growth both at home and abroad.