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Supply Chain Risks Are Magnifying in an Uncertain World

Great article from BRINK that underlines the need for digitalisation, standardisation and interoperability in the supply chain, the theme of GTDW China Trade Development Week, June, Shanghai, the only multimodal program dedicated to Making international trade safe, efficient & secure

Manufacturing organizations are facing an unprecedented array of risks to their supply chains in the next few years. If not managed well, these risks may result in severe supply chain disruptions and delivery failures, with consequences for both manufacturers and customers. 

There are five key risks to supply chains, especially in manufacturing industries: shortages of raw materials, tougher regulatory regimes, armed conflict, natural disasters and IT breakdowns and cybercrime.

Raw Materials Shortages

Consumption of raw materials, parts and finished goods is rising at a steady pace, even with limited natural resources. Despite efforts to reduce, reuse and recycle materials via technology, such efforts have failed to keep up with rising consumption. 

For example, the supply of copper is limited and unstable. Copper is a key component for electric motors, and it cannot be easily replaced by other materials. Such raw materials shortages can have multiple implications, ranging from cost increases in the final product to the inability to fulfill customer orders — and ultimately to armed conflict.

Tougher Regulations

Globally, regulations will generally continue to toughen for the foreseeable future. And it is expected that regulatory enforcement in emerging markets will gain momentum. Regulations — ranging from environmental rules and directives to food safety measures — can have a huge impact on the supply chain.

In addition to regulatory regimes, government actions also present supply chain risks. For example, EU and U.S. trade sanctions against Russia and vice versa as a reaction to the Ukrainian crisis have disrupted supply chains, as have the U.S.–China tariff wars. Brexit is just one of many examples of the increasing pressure that is currently put on multilateralism.

Armed Conflicts

The number and the intensity of interstate, intrastate and non-state armed conflicts around the globe are on the rise. The Middle East and Northern Africa, once regarded as promising markets, are today plagued by war and terrorism, with disastrous economic effects. These conflicts have a negative impact on sales and also disrupt the supply of raw materials and transport routes. 

Companies are forced to invest in security measures, resulting in higher logistics costs, or even to completely pull out of certain countries. More importantly, armed conflict has negative consequences across regions, as conflict often does not stop at country borders.

Natural Disasters

Due to climate change, the number and the intensity of major adverse weather events – including earthquakes, hurricanes, flooding, droughts, and tsunamis – are increasing, a trend that is likely to continue unless companies and governments take drastic measures. 

Supply chains will be affected by, among other things, recurrent shortages, particularly of agricultural products. In addition, public and private infrastructure in certain locations is more likely to get damaged or destroyed, disrupting supply chains unless redundancy arrangements are in place.

GTDW China Trade Development Week, 16-18 June 2020, Shanghai Pudong, China

"Digitalisation, Standardisation & Interoperability of Trade Technologies"

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