Global supply chains are currently not sustainable, as we painfully learn these days!

by Adrian Braun

April 2020

Each crisis demands us in the end to learn at least something from it in order to be prepared that the same unfortunate outcomes will not happen again. The global supply chain disruptions in the light of the corona crisis show that there is lot of learning potential for diverse actors when it comes to international logistics and transportation. Of course the issue is complex as there is not the golden recipe what could be done better next time. The diversity of the global economy with its many sectors, many cultures and many markets with very different political agendas is enormous. Eliminating diversity of economic systems and business sectors is not realistic and not desirable, too. In the past decades we understood that more diverse markets appear to be stronger and more resilient, particularly in times of crises. Therefore, other solutions must be found.

It becomes essential in this respect that actors involved do a bit less talking about sustainability and doing more implementation of practices that correspond with sustainable development. For the global supply chains it means for example that still too many manufacturers rely on too few partners when it comes to the procurement of the supplies, for example raw materials or pre-fabricated parts of the end-products. Due to an expansively developed shipping sector supply chains operate globally these days and consumer products (or parts of them) travel many thousands of kilometres before being finally arriving at the end-user. Textiles, entertainment technologies, working tools, toys, food and much more have its product roots often far away from the consumer markets. In some cases this is unavoidable, but in many cases this has just prevailed because it is the apparent lowest-cost solution. However, the corona crisis lead to closed borders and temporary broken supply chains and now we have only costs and no income. How to prevent such a dilemma? One solution is to increase the share of local and regional supplies from domestic markets when applicable. This is often not the cheapest way of doing operations but in the long run more sustainable. Political actors can support enormously in providing framework conditions to strengthen regional supply chains with subsidies, particularly in early stages of the business. This has nothing to do with trade wars and import-sanctions that had been discussed, as these ideas are evidently also not sustainable. The right balance of global, regional and local supply chains must be found, by including more parameters than just weighing labour costs against transportation costs.

A good advice is to implement or develop further sustainable supply chain management (SSCM) and scrutinize the own operations along the entire supply chain considering environmental, social and governance (ESG) metrics. International frameworks and standards as the Global Reporting Initiative (GRI) guidelines and its performance indicators could be utilized in this regard. This may reveal many rooms for improvement to be more resilient in times of crises and also during the regular operations.

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