Ongoing global challenges create further risks across European supply chains

AS WE move into 2023, the outlook of a perfect storm gives rise to even greater concern for businesses and the expected volatility across supply chains caused by:

• The Russia-Ukraine conflict
• Growing tensions between the West and China
• Continued COVID-19 lockdowns in China
• Global production and shipping delays
• Brexit and labour shortages
• Cost-of-living crisis and looming recession
• Climate crisis
• Regulatory changes (German Supply Chain Act, EU Supply Chain Law)
• Growing scrutiny to demonstrate ethical practices and legal compliance

Key drivers of supply chain disruptions

Already struggling to keep goods moving as a result of the COVID-19 pandemic, the impact of price volatility, production stoppages and other bottlenecks have created a ripple effect across supply chains. The key drivers of disruption - which increased 46% in the first half of 2022 - have been: 

• Factory fires - up 131%, driven by regulatory and process gaps as well as a shortage of skilled labour in warehouses
• Geopolitical events - rising more than 500%, with the Russia-Ukraine conflict a top disruptor
• Labour shortages - with 37% of large businesses reporting they had struggled to hire enough staff
• Manufacturing delivery times hit record highs, with the IMF estimating a 25% increase in global travel times
• Input costs have risen faster than at any point in the decade prior to the pandemic
• Port congestion has significantly slowed the movement of ships, containers, and other transport assets
• Little recovery time before the next challenge – the system was severely affected by the six-day Suez closure and shutdown of the Yantian port in South China

Weathering the storm

With more risky times ahead in the face of escalating challenges, it’s vital that businesses are prepared so they can revitalise and mitigate supply chains disruptions.

Having clear oversight of risk management and putting in place effective mechanisms will be vital for businesses to rebuild. Increasingly, technology is being used to predict, monitor, record, analyse and report on supply chain disruptions, rising from 43% in 2019 to 56% in 2020.

Businesses need to consider what might come next to help weather current and future disruptions. Here are some proactive steps towards mitigating supply chain risk:

• Implement a risk-based assessment to help identify specific risks that could impact the productivity of your supply chain
• Conduct an assessment of direct suppliers and their suppliers to gain visibility across all Tiers to understand region-specific risks that could impact supply availability
• Continuously monitor risks so you have a complete view of your supply chain
• Identify alternative suppliers if suppliers operate in high-risk regions
• Invest in technology and analytics to better manage supply chain risk and make informed decisions

To find out how you can identify risk in your supply chain, explore Alcumus’ Supply Chain Compliance solution.