Saturday, December 4, 2021

How to make fragile global supply chains stronger and more resilient

In 2019, global supply chains transported over US $ 19 trillion worth of export goods. The production and sale of many of the items we need and use, including toys, clothing, food, electronics and home furnishings, depend on global supply chains.

For most of us, supply chains are no longer an abstract concept. The COVID-19 pandemic has raised our awareness of the interdependence of our economies. We now understand how these chains directly affect our lives.

The pandemic has also exposed the fragility of global supply chains, as US President Joe Biden and others warn of the impact on the global economy of persisting supply chain bottlenecks.

WATCH: According to the expert, cooperation between the state and the private sector is necessary to eliminate bottlenecks in supplies.

A supply chain is a collection of organizations, such as suppliers, manufacturers, distributors, and retailers, that work together to provide end users with a specific product or service.

A supply chain becomes global when a product or service crosses multiple international borders. The organizations in the global supply chain are directly or indirectly dependent on each other.

A cascade of supply chain problems

Global supply chains are traditionally focused primarily on achieving financial efficiency. The result is chaotic and fragile global supply chain systems.

In practice, the decisions and actions of each organization affect the efficiency of the entire supply chain. A problem at any point feeds other problems at different points in the chain.

For example, a product shortage in a retail store can be caused by unexpected problems such as staff problems, raw material shortages, or clogged ports.

Semiconductor shortages are destroying the automotive industry. Meanwhile, the cost of shipping a container from China to the west coast of North America is estimated to have increased by 650 percent since before the pandemic.

Race to the bottom

The quest for financial efficiency has shifted global production to low-cost regions, increased cargo flows, congested ports and undermined the resilience of supply chains. Reducing costs, first of all, turned into a race to the bottom. This has resulted in a global economy with limited duplication, contingencies and guarantees.

Fragile global supply chains are exacerbated by fragmented decision-making processes, limited cooperation between buyers and suppliers and transaction management. There is no obvious centralized business or authority to manage and control these chains. Instead, several companies collaborate and compete for the value created.

Global supply chains also contribute greatly to greenhouse gas emissions and affect air, land and water biodiversity and geological resources. The supply chain of a typical company accounts for 80% of greenhouse gas emissions and more than 90% of greenhouse gas emissions from the production and distribution of consumer goods.

One billion metric tons of emissions could be reduced if key suppliers of the world’s 125 largest buyers increased their renewable energy consumption by 20 percent.

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The impact of supply chains extends to society. For example, the issue of forced labor is well documented in today’s global supply chains, leading to several controversies about modern slavery. More than 24.9 million people are documented to work in slavery in these chains.

Companies in global supply chains are facing increasing pressure from various stakeholders to adopt sustainability principles and disclose their implications. A Dutch court recently ordered Shell to cut its carbon emissions 45 percent from 2019 levels. In the future, information disclosure and supply chain transparency will become the norm for good governance.

Demand for reliable supply chains

The world needs reliable supply chains based on sustainability, collaboration, trust, transparency, transparency and supply diversification. This new supply chain model can help combat economic fragility, climate change and inequality.

Global supply chains connect businesses and markets at all levels of economic, social and ecological systems. This means that customers, governments and other stakeholders must encourage the emergence of reliable and resilient supply chains.

Responsible decision making in supply chains can contribute to economic progress and social well-being while maintaining the ecological integrity of the planet. Our preliminary study on sustainable blueberry supply chains, to be published shortly, shows that sustainability contributes to sustainability.

Supply chain management is a team sport. Current research provides ample evidence that collaboration benefits global supply chains. Buyers and suppliers can get better service, more product availability and significant cost savings if they work together.

READ MORE: Congestion at UK’s Busiest Merchant Port May Cause Shortages Over Christmas

Additional scoping research we have conducted on personal protective equipment supply chains in British Columbia, which will also be published in the coming weeks, shows that supplier-customer collaboration reduces costs and risks by at least 17 percent. Effective collaboration contributes to the resilience of the supply chain and helps avoid future disruptions.

Building effective collaboration means rewarding responsible long-term management of global supply chains and avoiding short-term benefits. Global supply chains must facilitate the sharing of benefits and suffering between buyers and suppliers.

Incentives need to be created to encourage this cooperation. The digitization of the economy will also contribute to greater transparency and traceability in global supply chains.

However, moving towards robust global supply chains is challenging because historically they have focused on short-term rewards. For decades, we have justified the development of fragile and fragmented global supply chains in the name of economic growth and financial efficiency. This may have brought short-term benefits, but led to the current supply chain crisis.

Will this crisis open the way forward?

This article is reprinted from The Conversation under a Creative Commons license. Read the original article.

Nation World News Desk
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