What Procurement Doesn’t Know Matters – Our Continued Analysis of DHL’s Global Connectedness Index

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One of the top trends in DHL’s Global Connectedness Index is a movement toward greater connectivity between countries, reversing trends from prior years. The authors note, for example, that “global connectedness started to deepen again in 2013 after its recovery stalled in 2012.”

Yet the rise of interconnectivity, as measured by trade, is still tepid. Specifically, “trade growth is sluggish … [and] capital flows have yet to recover to pre-crisis levels, and the overall depth of global connectedness remains quite limited – lower than many people think – implying trillions of dollars in potential gains from boosting it.”

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Perhaps not surprisingly, “Europe is the world’s most globally connected region, with 9 of the 10 most connected countries. European countries average the highest scores with regard to trade and people flows, and North America is the leading region on capital and information flows.”

From a procurement and supply chain perspective, the disconnect in leadership between “trade” flows and “capital and information” flows is important to distinguish. At Spend Matters, we have separated out the cash supply chain as part of global trade by dedicating a specific site, Trade Financing Matters, to exploring it. Yet, ironically, MetalMiner is probably our site most global in general orientation and coverage, at least of one key commodity market.

Regardless, our top takeaways for procurement regarding the above trends the DHL study surfaces hit on two key areas. First, when considering global supply chain opportunity and risk, explore both physical trade and capital flows (e.g., think about receivables and payables financing as a global tool to reduce supply risk and become a customer of choice). And second, consider the relative immaturity of trade understanding in the US.

How many procurement team members know how and when to open a letter of credit, for example, versus how to move to open account trade with a global supplier?

This is but one important questions to ask – given the general low global customs and trade literacy levels of those actually sitting on top of managing global supply chains!

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