CareCredit - Women's Health April 2024

Digital Innovation, Global Tensions Define Davos, Industrial Economy

The World Economic Forum’s annual Davos meeting is taking place against a complex backdrop.

The geopolitical and geoeconomics complications being discussed by world leaders are far from foreign concepts to the executives of the businesses powering today’s industrial economy.

Ongoing macroeconomic headwinds, trade tensions and labor realities are undermining supply chains and constraining 2024 growth roadmaps — and have been for some time.

Per The World Bank’s latest Global Economic Prospects report, the global economy is set to rack up the slowest half-decade of GDP growth in 30 years by the end of the year.

“Global trade growth in 2024 is expected to be only half the average in the decade before the pandemic,” the report said. “Meanwhile, borrowing costs for developing economies — especially those with poor credit ratings — are likely to remain steep with global interest rates stuck at four-decade highs in inflation-adjusted terms.”

How should businesses manage their supply chains in an era of growing tensions between the U.S. and China? How should they adjust proactively and effectively to the closing of the Red Sea and possibly the Strait of Hormuz by Iran and its proxies?

Like most chains, supply chains can be brought down by single points of failure — by their weakest link. And conflict is bad for free trade.

Still, the two topics dominating discussions in Davos, geopolitical unrest and artificial intelligence, are the same two topics that will define the operational realities of the back end of the industrial economy for years to come.

Read also: How the World’s Most Urgent Risks Could Impact Payments

The Macro Realities Transforming Supply Chain Operations

As Delta Air Lines CEO Ed Bastian said on his company’s December quarter and full-year 2023 earnings call Friday (Jan. 12), “The level of volatility we see is giving us the caution in our 2024 numbers… There are a bunch of macros that we need to see how they play out, the geopolitical front continues to be quite testy, it’s an election season around the world, energy prices are volatile. And to me, the supply chain costs and constraints continue unabated.”

It is a story increasingly being played out across sectors.

To effectively adjust workflows and processes to provide the agility needed to navigate ongoing uncertainties, firms have been increasingly leaning on connected, digital experiences that provide end-to-end visibility over their supply chains.

“Digitizing supply chains provides a solution to the fragmentation of the freight market by unifying what is normally a disorganized process to be visible all in one place,” Fernando Correa, CEO and co-founder of international digital trade company Cargobot, told PYMNTS. “With a myriad of supply chain issues the freight industry continues to face, a smooth, standardized process for managing freight digitally is a clear solution.”

Many organizations that have been using older models to predict behavioral supply-demand patterns are upgrading those to drive better outcomes, tapping existing innovations like AI to streamline historical frictions and surface data-driven insights in real time.

As PYMNTS CEO Karen Webster wrote Sept. 18, digital transformation is about the physical world becoming an extension of the digital world, not a bolt-on or a separate channel that is the stutter step to the analog processes that define business today.

After all, most challenges come with their own set of opportunities for the discerning eye.

See also: Industrial Economy’s Recent Advances Were Built on Ancient History

The Technical Transformations Pushing Trade Forward

Already, the marketplace is responding to the need for more intelligent solutions to longstanding problems.

RXO, a provider of asset-light transportation solutions, launched Tuesday (Jan. 16) an AI-powered check-in system for trucks arriving at warehouses and distribution centers, removing the need for the manual recording of trailer numbers and matching appointments upon truck arrival — an error-prone process that often led to delays and backups.

“AI at its core is an optimization model, trying to optimize a set of variables … and within transport, where companies are moving goods from point A to point B, it provides a context where AI will be very effective,”  Jamie Tabachnik, co-founder and CEO of trucking FinTech Solvento, told PYMNTS in an interview posted in December.

“A lot of the tasks done within the industry on a daily basis can be automated, first of all,” he added. “And second, you can [use] data to make better decisions to optimize your products.”

Still, as RELEX Solutions Co-founder Michael Falck told PYMNTS: “You don’t need to go all sci-fi to do something that provides huge gains in efficiency…”

“There’s a lot of technology that is still working fine, and the main problem isn’t to come up with new ideas — it’s to start actually getting what already works implemented into workflows,” he added.

Amid ongoing macro uncertainty, one thing is clear: There’s a tremendous amount of opportunity for firms to get better.