Conflicts, the Covid-19 pandemic and the climate crisis are disrupting global supply chains. In this environment, companies need to do more to mitigate the risk of disruptions and are investing in technology to manage increasingly complex networks.
The 5 factors that impact supply chains
The World Economic Forum identifies 5 Factors Disrupting Supply Chains :
- rising cost of living: with rampant inflation, millions of consumers are cutting back on their spending. This undermines demand. But it also creates uncertainty that makes planning difficult for supply chain specialists.
- social discontent: throughout Europe, many protest actions are carried out by employees who denounce in particular the decline in their purchasing power.
- energy shortages: rising energy prices are pushing businesses to save money. This limits production and makes the situation even more complex for supply chain managers.
- geopolitical uncertainty: there are also political tensions and conflicts that generate even more disruption and fuel uncertainty.
- extreme weather phenomena: all of this is in the context of the climate crisis with changes in regulations, but also the very real damage and upheaval caused by new weather patterns that we are all already beginning to feel.
These are major issues, but on the other hand, a study by the World Economic Forum also revealed that 77% of chief economists expect companies to tackle these challenging circumstances through innovation to optimize supply chains.
From chains to supply networks
In this context, should we be worried or optimistic about the ability of companies to provide us with the products and services we depend on? Ranjeev Menon is Group CEO of GWC, a large logistics and supply chain company headquartered in Qatar.
He believes that positive signs are visible on the horizon. “Global supply chains are recovering after three difficult years,” he indicates. “They have changed a lot: companies have adapted in different ways by diversifying their production and freeing themselves from a single source of supply or from a single country,” he specifies.
“When you look at today’s supply chains, they are more like a supply network: it increases complexity because you have multiple suppliers for the same products and it also impacts costs, but it reduces supply challenges or shocks like the ones we have experienced in recent times,” notes the manager.
The shipping industry invests in technology
Shipping continues to power a significant portion of the global economy. 11 billion tons of goods are transported around the world each year.
Antwerp in Belgium is currently the fastest growing port in Europe and it is investment in technology that has supported this development.
A futuristic building dominates the port and its architecture perfectly illustrates what the port authority is trying to deploy operationally. She wants to make this port one of the world leaders in digitization.
At the heart of this operation, Erwin Verstraelen, head of digital innovation and information at the port of Antwerp, oversees the establishment of what is known as the port’s “digital twin” which aims to facilitate operations at terminals, shipping lines and inland waterways.
“It consists of gathering this data and providing collaborators with an overview of the data set they need at that moment and they can modify it, add or remove part of it,” he explains.
“As this twin grows, it helps establish new use cases,” he continues, “and if there’s a new source of data that we can fetch, we bring it in. That triggers another cycle of innovation and we think that’s interesting,” he points out.
Communications dedicated to navigation are still done mainly by voice, via telephones and radios, which makes them difficult to trace. After the failure of a first project launched two years ago, using artificial intelligence to transform speech into text, the port has launched a second which, thanks to advances in technology, can even detect feelings in the voice and especially if two captains are arguing. “Individuals investigating an accident or event who today are looking for a needle in a haystack can query this database and, in 5 to 10 seconds, determine what happened,” he points out.
Covering nearly 130 km², the port of Antwerp is the fourteenth largest in the world and the second in Europe. Its dimensions give a colossal magnitude to the challenge of digitization.
High-tech systems to save space and time
Using high-tech systems to save space and time has become a multi-billion dollar business. But what exactly does logistics and warehousing consist of today? We ask Mark Manduca, Chief Investment Officer of GXO Logisticsone of the world’s leading innovators in this field. “Our business is the result of a number of acquisitions over the past 20 years; today it consists of over 900 warehouses operating in over 28 countries around the world,” he describes before adding: “We offer our customers more efficient, faster and more precise storage solutions than what they could do themselves.”
As for shipping, here’s how Mark Manduca believes it has evolved: “In the last 30 years, in terms of global trade, goods were mainly transported to Asia to be manufactured there and then sent back to consumers; this traditional business route has been strained, not only because of the pandemic or the zero-Covid measures, but also because wages, honestly, have increased dramatically. As a result, the gap between Eastern and Western markets has narrowed over the past ten years,” he explains.
The storm born of the climate crisis, the Covid-19 pandemic and conflicts has greatly destabilized global supply chains. But in planning, transportation and storage, technology is solving problems so fast that predictions are more nuanced and optimistic than many might have feared.