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Blog March 2022 Updated July 2022

How is the World of Logistics Affected by Globalization?

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Conor Dowd Product Marketing Manager

How does globalization impact logistics? 

The globalization of trade is one of the driving forces of the world economy in this century raising income levels in rapidly developing countries and creating an interconnected global trading system. 

In recent years, the trend for increasing globalization has been tested by the impact of the COVID pandemic on international supply chains leading to goods shortages and price spikes and this in turn has put on a focus on the resilience of these supply chains.

However, we continue to live in an interconnected world where manufacturers source raw materials from many different countries and regions. 

Increasingly, Governments are looking at increasing use and flow of recycled materials across geographies’, especially through policy such as plastic packaging taxes and other incentives to retain valuable resources locally for national manufacturers. 

With consumer and industrial goods manufactured in multiple countries, with parts and raw materials sourced from a variety of other nations, the recycling market needs to act as an integral part of the supply chain. This means you need to understand how to understand the current trends underlying globalization so you can manage your recycling logistics efficiently. 

What are the five factors driving change?

The globalization of the recycling trade is in flux with multiple factors shaping both its growth and direction. 

In North America and Europe, one-way major businesses are also responding to these pressures is by investing in recycling solutions either in or closer to their home markets.

“We've noticed that large companies are shifting their production closer to Europe's borders, showing a preference for the Middle East over Asia. I have identified nearshoring as a clear trend in the logistics industry because of the coronavirus pandemic,” says DB Cargo management board member for sales Pierre Timmermans

“This is how the supply of basic goods has been ensured even during the pandemic.”

In the recycling sector, this trend for nearshoring has also been driven by global legislation. For example, new rules under the Basel Convention meant that many plastics could only be traded without notification between OECD countries. In Europe, this has effectively meant that plastics trade is between other European nations and Turkey.

The impact of legislation to promote recycling close to source is also impacting global flows of material.

For example, the proposed European Union changes to the Waste Shipment Regulations will make trade with other non-EU nations difficult, if not impossible. Organizations such as EuRIC (European Recycling Industries Confederation) are lobbying for measures that punish illegal exports, without dismantling global trade of recycle materials as part of the circular economy. 

Destination countries for recyclate are also raising barriers to trade to secure local materials for their own manufacturing sector and to ensure that the recycled raw materials they receive are of higher quality.

The fallout from COVID pandemic continues to challenge global recycling flows has led to supply chain squeezes such as congested ports, shipping logjams, increased freight rates and shortages in shipping containers.

These problems have been further exacerbated in recent months with the energy price spike and the impact of the war in Ukraine. 

The potential of a singular event such as the Evergreen ship blocking the Suez Canal can illustrate how fragility and vulnerability of global logistics to small disruptions that cascade across the world trade. 

In addition, freight costs have soared as demand has recovered sharply post COVID and this is illustrated by the fact that the average cost of shipping a large 40 -foot sea container is over $10,000 in 2022 compared to $2500 a year ago.

The environmental impact of global shipping has come into sharp focus in the fight to combat climate change. It is estimated by The Economist that global shipping accounts for 2.7% of global CO2 emissions and the sector is under pressure to decarbonize with a shift to greater efficiency and cleaner fuels. 

In addition, the value chains and direction of resource flows of the global economy are being re-drawn with the growth in demand coming for emerging markets with 

Consultancy McKinsey estimates that two thirds of the world’s manufactured goods will be consumed by emerging markets by 2025, with products such as cars, building products, and machinery leading the way. 

By 2030, developing countries are projected to account for more than half of all global consumption.

The emerging circular economy is a response to this growing demand on our finite planet resources by aiming to keep valuable resources in circulation at their highest value and moving away from our wasteful linear model of take, make and dispose. 

Digitalization is one way to seize the global trading opportunity and combat some of the challenges involved in exports. It allows companies that export recycled materials to fully understand what materials they have, the quality of it, where it is, and ensure paperwork is in place for regulatory and customs authorities.

Indeed, manufacturers globally are digitalizing their processes to ensure they have the supply of raw materials and components they need. For the recycling sector to be part of this process, it needs to match the digital methods suppliers of virgin raw materials operate to work with their customers. 

This means investing in technologies to track supply chains, introducing digital inventory forecasting and dispatch, and implementing comprehensive capacity planning. These are tools offered by the AMCS Platform for the recycling sector. 

The potential of artificial intelligence and machine learning to automate and digitize global logistics is exciting as it could be part of the solution to reduce global supply chain congestion and to reduce freight costs. 

Indeed, digitalization of logistics and supply chains was supported by the World Trade Organization Global Supply Chains Forum. At the event, International Chamber of Commerce secretary general John Denton added: “If you want resilience, you have got to ensure access to digital skills, but also digital platforms. 

Why and where you should digitize to seize the opportunities? 

Investing for globalization

Global recycling logistics patterns are changing. Whether that is the trend for onshoring in the Global North, or the rapid economic growth of certain Global South economies, supply and demand pressures for finite resources will remain global.

Those recycling and waste management companies that have clear data on their inventories, strong intelligence on customer buying patterns, understand currency fluctuations and have software designed to maximize trading will have a clear advantage when it comes to taking the opportunities that globalization offers.

While the COVID pandemic and the crisis in Ukraine have tested supply chains, it has also demonstrated the need for investment in innovative technologies that will ensure resource use is maximized in a globalized and economically growing world.

Learn more here about how some of the world’s largest recyclate trading companies have digitalized their  global recycling logistics with the AMCS Recycling Platform. 

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