At the 2024 Global Infrastructure Initiative (GII) Summit in Dubai, McKinsey senior partner Amadeo Di Lodovico spoke with Yuvraj Narayan, the group deputy CEO and CFO of end-to-end supply-chain-solutions company DP World, during a keynote presentation. Narayan has witnessed the evolution of trade, end-to-end supply chain operations, and globalization more broadly over the past two decades, as well as some of the changes that have occurred in the past four years. In this conversation, Di Lodovico and Narayan discuss how technology, climate, and customer expectations have influenced trade, as well as the pockets of opportunity that have emerged as a result. An edited version of their conversation follows.
Amadeo Di Lodovico: What do you perceive as the most significant drivers affecting the global infrastructure industry and trade?
Yuvraj Narayan: Over the past two and a half decades, globalization was enabled by a free flow of money and thereby a free flow of trade. All barriers to the markets dropped, and there was a free flow of money and free settlement of trade almost everywhere. In many ways, globalization and free trade followed the free flow of money and capital.
COVID-19 was an eye-opener, obviously. China had become a major manufacturer for the world, but the pandemic prompted many countries to look for alternate sources of supply. It also made people understand that the most important piece of infrastructure was the supply chain, not isolated assets; connecting your assets multiplied their value. There was a massive amount of intermediation that existed in the supply chain, which increased costs and, consequently, excluded a large part of the global population from the benefits of globalization. People began to understand that a lot of value was left on the table if they were not connecting their infrastructure assets.
Climate has also changed trade. More climate-related incidents are having an impact on humanity and will have an impact on transportation, which is a key element within the supply chain. Costs will rise among transportation assets across road, rail, and marine. Overcoming the challenge of reducing those costs can happen in two ways. One is to use other fuels. The second is to shorten the supply chain. If the cost arbitrage of creating massive distances between production and consumption is lost by way of climate-related cost, then that must change. There are far too many steps and middlemen involved in the supply chain that don’t need to be there. The traditional east-to-west trade route may become more north-to-south.
Last, political uncertainty has made trade no longer free, which challenges the way in which people conduct business. We spent the past 30 years building global businesses, and now we’ve started thinking, is global going to work? Will it remain global? Free flow of capital, free trade of settlement, and falling barriers to trade were fundamental to a global world. Globalization took billions of people out of poverty, but it left many more billions in poverty. So, had all these other events not happened, we could have been focused on including more people in the positive aspects of globalization.
A repercussion of this is that this multilateral world is now full of bilateral deals, which have added complexity to settlement of trade as more nations are settling in each other’s currency.
Amadeo Di Lodovico: Given this future, what are the opportunities, challenges, and areas of innovation for a company like DP World?
Yuvraj Narayan: Necessity is the mother of invention. A lot of innovation will have to focus on climate as the regulatory environment starts imposing costs. For instance, across the supply chain, we need to look at alternatives to fossil fuels through electrification and couple that with shorter supply routes. If you can use green fuel on 11,000 kilometers, versus fossil fuel across 23,000 kilometers, it’ll make a big difference.
Global uncertainty has also been a major constraint on free flow of trade. So nearshoring and derisking from a single supply source need to happen.
Technology will lead this disruption, as well, in terms of reducing middlemen and paperwork and increasing transparency. For instance, DP World helps large movers of cargo keep track of their cargo, which they had a hard time doing before. They were airlifting cargo because they didn’t know it was lying 100 kilometers or 200 kilometers from where they needed it. The opportunity in that space was massive.
As a whole, the industry must make sure the world doesn’t change in a way that will become costly for everybody.
Amadeo Di Lodovico: What are your observations on the role of the United Arab Emirates and Dubai specifically in all of this?
Yuvraj Narayan: There’s a huge opportunity for the Emirates to remain neutral, focus on business and trade, and de-emphasize politics.
Obviously, I’m simplifying things, but a lot of today’s global issues stem from leadership. Leaders should do everything they can for the people they are responsible for—but not at the expense of other people. For instance, I am responsible for the more than 100,000 people who work in DP World. But should I fight for their lives at the expense of somebody who works somewhere else? No. That’s the simple lesson the world needs to learn.
Regarding Dubai, Dubai used to be a small trading center, largely for traders from India connecting to Africa. Dubai was able to respond to changing circumstances and create solutions very quickly. Dubai has also excelled in maintaining standards for quality, availability, and connectivity. For example, when Chinese products started moving to Dubai, people could place an order and the product was shipped the next day because Dubai is so central.
Dubai is a place where leadership is focused on what they can do for people who want to establish businesses in Dubai. As the world gets more and more complex, they keep making it easier for everybody.
Amadeo Di Lodovico: What do you look to for innovation and inspiration? What do you think the future could hold?
Yuvraj Narayan: Ten years ago, automation became very important, and the labor environment became more difficult. From an efficiency standpoint, automation was not as efficient as semiautomation, but we had to evolve toward automation because the labor environment dictated it. So we sacrificed a bit of productivity to make sure we could still have an affordable product out there. Then there was equipment automation, operational automation, and even gender diversity changing the market.
Port operators had a very dirty working environment. It was hot; there was grease everywhere; and you had to sit 40 to 60 meters above the ground handling cranes and boxes. But if you go to the terminal today, you will notice two things: first, nobody is working on the terminal, and second, frontline jobs can be done in a center for crane operations, which is air-conditioned. We’ve been able to open jobs for women through the advancement of technology.
We also started working around climate issues. We started converting all our diesel equipment into electric equipment to reduce our carbon footprint. We are already at a 28 percent reduction in emissions from five years ago. Additionally, in India, we are trying to take trucks off the road and start moving cargo via rail because it’s more environmentally friendly. Environmental targets are going to be much stiffer as we go forward.
These kinds of changes are constantly happening and are dictated by pressures from business and social expectations. Today, automation is coming at an increased pace. Customers also want total transparency. They want not only to be able to track their product via container number but also to see what is inside a container and where it is at any given point in time.
These are areas in which the supply chain is moving in terms of business, social, cost, and efficiency expectations. We have invested almost as much in technology in the past three years as we did in building ports—and this is a trend that will continue.
