Global logistics giant DHL recently launched the Global Trade Barometer, a first of its kind solution that helps in predicting cross-border trade flows and growth in global trade based on logistics big data and artificial intelligence models. In that regard, FreightWaves caught up with Tim Scharwath, CEO of DHL Global Forwarding, to discuss the prospects of the Global Trade Barometer and what it means to DHL and its customers.
“The DHL Global Trade Barometer is a tool which has been developed together with Accenture, that puts us in a position where we can predict trade flows, the air and ocean freight flows - based on the data we have and on what is important for our business,” says Scharwath.
The need for a global trade predicting tool has never been more relevant, believes Scharwath. “If you go back a few years to the time before the financial crisis, volume development was very predictable, because we had China as a production powerhouse and the consumers were in the U.S. and Europe. Thus, growth was predictable,” he notes.
“But with the years that followed the financial crisis, the market has been volatile from the ups and downs of volume development. This has made the industry difficult to read. We believe that with the Global Trade Barometer, we have found something that predicts trade growth two months ahead of the third month, which is something that brings value to the discussion. This is because it is based on facts and not based on opinions or gut feelings on how trade or growth will be in different aspects.”
And like with all models that run on machine learning and artificial intelligence, the Global Trade Barometer would require immense amounts of data, for which DHL has partnered with Accenture. The latter has acquired a company called Seabury; a services firm concentrated in the aviation industry. This acquisition strengthens Accenture with import and export customs data that has been sourced from different countries, helping them to have a large database to look into.
“Accenture has the ability to cleanse this data and sort it out in such a way that it is usable,” adds Scharwath. “We then put our algorithms and AI models - which we have in-house - on top of the data, to produce the index in the Global Trade Barometer, which is a single number. The number is between a 0 and a 100. Anything above 50, equals growth. So anything below 50 shows a shrinking global trade, and above 50 shows it is growing.”
The idea here is to help DHL and its customers to anticipate growth and make better-informed decisions based on facts. For example, if a high-tech business sees the air freight volume growing out of Asia in the peak season, then it needs to make sure its service provider gets more capacity, because with growth in the market, capacity will be an issue.
“The import and export data that we work on with Accenture represents 75% of global trade. Using this data, we plan to create the index four times a year,” adds Scharwath. “The knowledge will be used internally to understand how markets will develop which helps us to plan ahead. We have done this in the past and will continue doing this in the future - be it for the staffing situation, warehouse management - for our own capacity planning or for our customer base.”
DHL customers can use the data in a way they see fit and can understand how trade will develop in the most important markets around the world. Also, if a customer already is in the process of developing algorithms and models in-house, they could use this data within their models. DHL encourages its customers to be creative in aspects concerning data usage.
Since the data that DHL is sitting on is of high quality, the company believes the index can be leveraged across different niches and can be integrated into forecasting models of banks and economic research institutes. “We have been testing the data for the past three years to see how well it is, so that we would be comfortable showing it to our customers,” concludes Scharwath. “We found that the data that we predicted and the reality, later on, worked really well. Also, this tool offers value to more than just transportation businesses - logistics together with digitalization and artificial intelligence brings the value for everyone who works in the supply chain arena.”
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