The latest data from Tradeshift’s Q2 Index of Global Trade Health indicates a potential economic downturn, evidenced by a consecutive quarterly drop in order volumes across its platform. This trend reflects a broader pattern of decreasing transaction volumes in major economies worldwide, including the Eurozone, the United States, and the UK. While order volumes are declining, the cost of business operations continues to escalate. This is exemplified by a significant rise in US inflation, currently at 8.5%.
Tradeshift’s analysis reveals an 11% increase in the average invoice value on their platform since early 2022, a stark contrast to the 3.5% rise in 2021. Multiple factors contribute to this inflation, many linked to the ongoing pandemic. Supply chain disruptions remain prevalent globally, with COVID-19 outbreaks and lockdowns in China and the impact of Russia’s invasion of Ukraine exacerbating these challenges. These recent difficulties have also highlighted long-standing structural issues within the global economy.
The labor market, for instance, is undergoing a shift from a long period of low-cost, abundant labor to an era where labor is more expensive and scarce. This trend is prompting a reevaluation of automation, not just as a cost-saving measure, but as an essential component of risk management. The Association of Advanced Automation reports a record number of robot purchases by American companies, and a Gartner study shows 78% of CFOs are planning to increase investments in automation to mitigate long-term inflation risks.
Senior executives like Unilever CEO Alan Jope suggest that businesses should adapt to a ‘new normal’ of continual crisis, a perspective shaped by recent supply chain disruptions. McKinsey warns that a prolonged production shock could severely impact annual earnings, highlighting the need for resilience in business strategies. The pandemic has divided businesses into two categories: those that have digitized and maintained agility, and those that have not. This division is likely to widen, emphasizing the importance of connectivity, transparency, and agility in building resilient supply chains. Businesses that fail to adapt to these changes risk falling behind significantly.
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