Learn about supply chain risks
Supply Chain Risks The modern economy depends on the smooth operation of complex and evolving supply chains The ability to move materials, components and finished products in a timely and efficient manner has brought benefits to many: reducing the cost of manufactured products, improving access to advanced technologies or life-saving medicines, and opening new markets And new jobs for producers.
However, modern supply chains are also at risk. Transportation delays, theft, natural disasters, inclement weather, cyberattacks, and unexpected quality issues can disrupt freight flows, leading to short-term costs and delivery challenges.
Shifts in local, national and international trade and regulatory policies can upset the underlying economies of existing supply chains.
Supply Chain Risk
The supply chain has become a major issue at the highest levels of business, and the importance of the supply chain or the importance and necessity of knowing its risks cannot be denied. Here are the most important supply chain risks:
trade wars
Global trade tensions have resulted in new import tariffs on a wide range of consumer products and industrial components, while the biggest battle has been between the United States and China, other countries and regions, notably the European Union (EU), have also been drawn into the fray.
As the impact of the new arrangements began to emerge, companies began to adapt their supply chains in response.
Raw material shortage
As companies increasingly seek to pursue local or regional manufacturing strategies for finished products, production of many key raw materials remains largely problematic.
As such, the supply of some basic materials is vulnerable to widespread disruption caused by high demand or production bottlenecks.
An area of growing long-term concern is the materials used in lithium-ion batteries, which are used in a wide range of high-value products from mobile phones to electric vehicles.
Germany's Mineral Resources Agency predicts that demand for lithium will quadruple by 2035. Because two-thirds of the world's supply of cobalt, another key component in lithium-ion batteries, is mined in the Congo, some experts believe instability in the region could lead to shortages. supplies in the near future.
To secure their supply chains, Apple and some automakers have already begun purchasing cobalt directly on behalf of battery suppliers.
Recalls and Safety Issues
In highly regulated sectors such as pharmaceuticals and medical devices, interest in compliance and quality control is likely to rise, driven by a broader public awareness of quality and stricter enforcement issues by regulators.
Climate change
Atmospheric warming is associated with a range of problematic effects, including increased frequency and severity of drought conditions, periods of heavy rainfall, tropical storms, and devastating wildfires.
The timing and severity of climate-related disturbances can be as unexpected as they are dramatic.
For example, water shortages had a physical impact on supply chains in Europe during 2018, as lower water levels disrupted inland shipping, but in the longer term, climate change is expected to increase flood risks and extreme weather patterns.
Tighter environmental regulations
In steps aimed at tackling climate change, local air quality, and other forms of environmental pollution, authorities around the world are introducing new regulations and stepping up enforcement efforts.
Some of the most significant effects of these policies are expected to be felt in China, where strict rules were introduced to reduce emissions from coal burning, including forced production and factory closures.
Beijing has introduced a more flexible approach to its controls, allowing local authorities to tailor measures based on regional emissions levels, but major industries - including steel, aluminum and cement - all face increased scrutiny.
industrial disturbances
Industrial work is a constant hazard in transportation. Strikes, overtime bans, or 'rule labor' can affect virtually any mode of transportation, anywhere in the world. For shippers, the impact of these events can range from greatly disturbing to to a big limit.
The impact of industrial activity on freight operations varies by mode of transportation: in the aviation sector, strikes tend to be short and well publicized.
Port strikes can last longer, but their effects are usually less severe than air strikes because they affect cargoes of a less time-critical nature.
In the road transport sector, strikes are often organized with little advance notice, and disruption can lead to a wide-ranging and long-lasting cascade of residual effects.
Ultimately, the supply chain risk environment is dynamic and constantly evolving, risks are increasingly being articulated in the publicly presented financial statements of companies, and as supply chain strategy increases, disruptions turn into board-level problems.
Each year brings new challenges for companies, with different threats, unexpected events and unexpected consequences.
The intelligence provided here will help you reassess your risk environment. It aims to provide you with the insights you need to develop your strategy, adapt your networks and, ultimately, protect your bottom line.
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