10 supply chain risk predictions for 2019 - Just Style
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10 supply chain risk predictions for 2019

By Patrick Scott 09 Apr 2019

10 supply chain risk predictions for 2019

An array of potential threats could add costs and uncertainty supply chains in 2019 and beyond – including raw material shortages, more recalls and safety scares, and increasingly tough environmental regulations – a new report suggests.

Among the specific risks for textile and apparel firms is the low supply of adiponitrile (ADN), a precursor chemical in the production of nylon 6,6 polymer, used in a range of applications including yarns and fibres.

The forecast is included in the first annual Resilience360 Risk Report from global logistics specialist DHL, and is based on risk and incident data collected by the company through its Resilience360 cloud-based tracking platform.

Anticipating supply chain risks in 2019

The report suggests a number of trends that could shape the risk landscape in 2019. First, rising demand for raw materials, coupled with a fragile supply caused by political instability and supplier shutdowns, may result in raw material shortages for crucial materials.

Second, recalls and safety scares may increase, as wider public awareness of quality issues and stricter enforcement by regulators subjects products to higher scrutiny. Lastly, anti-pollution measures may be expanded in 2019 to a broader range of industries across Asia.

The US Environmental Protection Agency is also expected to announce new requirements – meaning tougher environmental regulations will increase costs for businesses in a number of industries. All of these developments have the potential to put suppliers under threat and force significant changes throughout supply chains.

Among the potential supply chain disruptors in 2019:

1: Trade wars drive manufacturing network restructuring
Brexit, new import tariffs and other trade barriers will continue to reshape manufacturing supply chains, building on trade uncertainty in 2018 due to disputes between the US and other countries, in particular China, including the imposition of new import tariffs on a wide range of consumer products and industrial components. The still-open question of the UK’s withdrawal from the EU is also contributing to uncertainty, as companies fear border congestion and delays at ports. As the impact of the new arrangements begins to bite, businesses are starting to adapt their supply chains in response.

2: Rising demand and fragile supply create critical raw material shortages
Political instability and supplier shutdowns are likely to impact the supply of crucial raw materials such as lithium, cobalt, and adiponitrile. The production of many key raw materials remains highly globalised – and as such, supply is vulnerable to disruption caused by demand spikes or production bottlenecks. For example, adiponitrile (ADN) is manufactured at only five plants in the world, and shortages have been driven by operational problems and maintenance shutdowns. Textile companies are among those who may be forced to switch to other products, at least temporarily.

3: Recalls and safety scares put quality under scrutiny
In highly regulated sectors (such as pharmaceuticals and medical devices), attention to compliance and quality control is likely to rise, driven by wider public awareness of quality issues and stricter enforcement by regulators.

4: Climate change impact heats up
Companies are also likely to face an increasing number of weather-related disruptions, since 2019 is forecast to be the warmest year on record. A hotter atmosphere is linked to a range of problematic effects and, as in 2018, wildfires, droughts, low water levels and melting ice are likely to have the most significant impacts on supply chains. Over the long term, climate change can be expected to drive increased risks of flooding and extreme weather patterns, the report says.

5: Tougher environmental regulations make polluters pay
In moves intended to tackle climate change, local air quality, and other forms of environmental pollution, authorities around the world are introducing new regulations and stepping up enforcement efforts. Some of the most significant effects of these policies are expected in China, where strict rules have been introduced to reduce emissions from the burning of coal, including enforced production shutdowns and plant closures. In 2019, anti-pollution measures may also be expanded to a broader range of industries across Asia.

And as other countries in South East Asia follow China’s lead in closing their doors to scrap imports, big waste producing countries in Europe and elsewhere will be forced to ramp up development of domestic recycling capacity.

6: Economic uncertainty and structural change put suppliers under threat
Supplier insolvencies are likely to rise as small producers continue to be casualties of the global trade war, uncertainty over Brexit, and stricter environmental regulations – putting insolvencies at the forefront of supply chain risk management in 2019.

7: Cargo caught up in industrial unrest
Industrial action such as strikes, overtime bans, or work-to-rule is a perennial risk in transport operations, and the risk of strikes is expected to increase in 2019, fuelled by a combination of local labour relations disputes and a growing sense of dissatisfaction among workers at wider economic and social change.

8: Hazardous transport: container ship fires
Insufficient fire-fighting capabilities and a trend towards larger container ships put pressure on maritime-dependent supply chains. There is a major container cargo fire at sea roughly every 60 days, according to insurance company Allianz Global Corporate & Specialty, with the largest this year occurring on the Hapag-Lloyd owned vessel Yantian Express while transiting the Atlantic Ocean from Sri Lanka to Halifax in Canada. Industry experts say that it could take weeks before the ship will be unloaded and damages can be assessed.

9: Battles at the border to increase wait times
Companies dependent on US-Mexico and EU-UK lanes are set to see increased costs and border crossing wait times as countries focus on physical border security. While border closures at ports of entry will remain extremely rare, Resilience360 anticipates an increase in the frequency of these high-impact events in 2019.

10: Drones strike a blow to aviation safety
Close-proximity drone aviation safety incidents are also likely to become more frequent in 2019, presenting a greater risk to aviation logistics operations. However, while civilian drone aviation safety incidents remain concentrated in the Manchester-Milan corridor in Europe and across the United States, countries such as Bangladesh, Egypt and Kenya have mitigated this risk through strict regulations or outright bans.