Trade wars, shortage of raw materials and quality concerns are the top three risks for 2019, according to a DHL report.
The report, Resilience360 Annual Risk report, said rising demand for raw materials due to political instability and supplier collapses would limit supply, while recalls and safety scares could affect quality.
Global trade conflicts are expected to cause manufacturers to restructure supply chains in response to changes such as possible Brexit import tariff increases in UK, and new arrangements between the US and China. These are all part of the top ten risks, according to the report.
Shehrina Kamal, director of risk intelligence at Resilience360, said: “Modern supply chains are vulnerable. Transportation delays, theft, natural disasters, inclement weather, cyber attacks and unexpected quality issues can disrupt cargo flows, creating short term costs and delivery challenges.”
Last year, the world’s top three risks were uncertainties in trade flows, cyber security incidents, and extreme weather or climate change issues.
Trade flows then were affected by uncertainty from political instability and disputes, such as the US and China trade tensions and Brexit uncertainty, which is still raising concerns over possible border congestion and delays at ports, said the report.
Cyber security risk was also prevalent, caused by events in manufacturing operations and transport systems, due to trade secret leaks, blackmail, or economic disruptions, according to the report.
The third top supply chain risk in 2018 was “severe weather-related disruptions”, with high impacts from earthquakes, wildfires, droughts, low water levels, and melting ice.
Regionally, air and ground transportation incidents were the biggest risk in Europe, making up 44.7% of incidents, including two train accidents which caused delays for more than two weeks.
The second highest disruptor in Europe was civil unrest, accounting for 12.9% of events, including Labour Day and yellow vest protests in France and Belgium which interrupted supply flow to highways, ports, borders, and industrial areas.
This year wider public awareness of quality issues and stricter regulations could cause increases in recalls and safety scares within highly regulated sectors such as pharmaceuticals, according to the report.
The US Environmental Protection Agency is expected to announce new requirements, and environmental regulations will increase costs for businesses in a number of industries, which may put further pressure on supply chains, it warned.
The top ten predicted threats to supply chains for 2019:
1. Trade wars driving manufacturing network restructuring.
2. Rising demand & fragile supply creating critical raw material shortages.
3. Recalls & safety scares putting quality under scrutiny.
4. Increases in climate change impacts.
5. Consequences of tougher environmental regulations.
6. Economic uncertainty & structural change threatening SMEs.
7. Industrial unrest threatening to disrupt transport operations.
8. Hazardous transport like shipping containers pressuring maritime dependent supply chains.
9. Border battles increasing costs and waiting time.
10. Close-proximity drone strike incidents risking the safety of aviation logistics operations.
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