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Upcoming risk trend brings renewed focus to supply chains

Supply chain disruptions are increasing at alarming frequency. In fact, 94% of Fortune 1000 companies reported seeing supply chain disruptions from the global COVID-19 pandemic. For many companies, it is only a matter of time before an inevitable risk threatens production, delivery, profitability, or even the reputation. Coming off a risk-riddled year, companies have not only had to deal with compounded impacts from the global pandemic, including containment measures, border closures, and production halts but have had to manage a multitude of issues ranging from supplier financial distress to constraints in air cargo. And, just recently, the Suez Canal blockage has already had immeasurable impacts on global shipping routes and passage of goods.

Insight into the next risk trends can help companies navigate the uncertain and ever-changing business environment. If you could see further, then you could act sooner.

This incessant stream of risks calls for a change in the way companies think about and prepare for risk. With robust risk analytics, it is time for companies to get in front of what’s ahead and restart their risk management strategy and execution planning. In Everstream Analytics most recent report, we highlight the top 5 risk trends for 2021. 

Upended by COVID-19

Before looking forward into the looming risks, it is essential to recognize the stream of consciousness burdening supply chain leaders who are trying to prepare for disruptions amid ongoing challenges.

As many of us are aware, supply chains were not entirely spared from the economies and societies that were upended by the ongoing COVID-19 pandemic. And even with hopes that 2021 will be a year of recovery brought on by mass vaccination rollouts, businesses are still facing the ripple effects of disruptions like flight cancellations, quarantine requirements, and labor availability; not to mention recent disruptions like the aftermath of the Suez Canal blockage or the Colonial Pipeline closure.

COVID-19 has shone a spotlight on the importance of supply chains and has determined the crucial role technology and data analytics will play in risk management. Success of the supply chain hinges upon the effective foresight created through end-to-end visibility and predictive analytics. And, recent research from the BCI Supply Chain Resilience Report, points to a rise in supply chain managers increased commitment to planning and business continuity as a response to the global pandemic. 

Navigating the Risk Landscape

One event has had a profound effect on worldwide economic and social activity; the COVID-19 crisis dominated the 2020 supply chain risk landscape, but it was by no means the only contender for supply chain transformations within the last 12 months. 

In the past year, major incidents by month in 2020 were largely tied to the COVID-19 outbreak and unpredictable spread as disruptions spiked significantly in March when business and transport activities came to a halt, yet the highest number of supply chain incidents was recorded in the last three months of the year, coinciding with related restrictions in several regions as governments tried to contain a second wave of infections beginning in October.

These major incidents predominantly fell into the Security (33.11 percent) risk category in connection with pandemic related events. This highly noted event also showed by far the highest overall increase in incident numbers in a year-on-year comparison showing from 2019 to 2020 a high increase (414.44 percent). The second largest risk category Fire (19.92 percent) did not fall far behind, accounting for industrial and non-industrial fires as well as explosions and being most frequently recorded in Europe (44.11 percent). Explosions at industrial sites, logistics hubs, or their surrounding areas can threaten the global movement of goods by destroying production facilities or critical infrastructure needed to transport finished goods.  

The impact of destructive weather events was widely reported and acutely felt in 2020; globally, the frequency of extreme weather events has increased significantly in the last decade, in particular concerning floods, storms, extreme temperatures, and droughts.

From world-wide government-mandated restrictions and industrial fires to natural disasters and extreme weather events, companies must look ahead to supply chain horizons both with and beyond the pandemic.

Trend Watch: Near-Shoring

Looking forward into the coming months, how can companies strengthen agility and maintain resilience? The COVID-19 pandemic has exposed supply chain challenges and one trend to watch is the reignited debate about near-shoring and re-shoring initiatives over the past year, especially as over-reliance on a single country’s manufacturing facilities and supplier networks, i.e., China, exacerbated the impact of regional disruptions on global companies.

However, the ongoing pandemic is not the only source for this changing risk landscape.  Growing trade pressures mainly in the form of tariffs and other types of trade restrictions have also contributed to discussions around creating shorter supply chains. And, recent trade agreements such as the United States Mexico Canada Agreement (USMCA) have incorporated regional content requirements aimed at encouraging re-shoring and/or near-shoring.

To better prepare for large scale disruptions in the future, global companies note contemplations about possible long-term adjustments to their supply chains. With this, re- and near-shoring is likely to remain a valid option that could result in the reshuffling of some global supply chains.

We saw this risk trend play out most recently in the Suez Canal – one of the world’s busiest shipping arteries. The ultra-large container ship MV Ever Given (Evergreen) ran aground and caused all traffic to be blocked off. The accident is already causing considerable impacts on global supply chains, and authorities estimate that the shutdown of the canal has impacted as much as 15 percent of the world’s container shipping capacity.

This timely trend is only one of the five top supply chain risks outlined by the Everstream Analytics Annual Risk Report. The report’s comprehensive predictions also explore continued cyber-attacks on production sites and logistics operators, persistent air cargo constraints, and the increasing use of multimodal solutions. Even with the remarkable adaptability of businesses, looming risks can create an uneasiness for supply chains without visibility into these future disruptions. 

Looking Ahead

Business leaders may have learnt to cope with the “new normal”; however, the unpredictability of the virus spread – and associated disruptions to transport and business operations – will continue to be a defining feature of global supply chains well into the coming year.

Everstream Analytics provides an end-to-end supply chain risk assessment and monitoring solution and ensures business continuity, mitigates risks, and turns potential disruptions into a competitive advantage. The recently published 3rd Annual Risk Report is designed to provide a comprehensive overview of the current supply chain risk landscape, predict the top supply chain risk trends for 2021, and profile regional risks that have taken place over the last year.

To see further, supply chain risk management must be end-to-end, combine multiple sources of risk data, be dynamic, and be predictive.

You can download the full 3rd Annual Risk Report 2021 here

Published: May 2021

Images: AdobeStock