Highlight 7/2023 – The impact of international geopolitical, economical, and health crises on the global supply chain
Mohammed Al-Khaifi, 6 February 2023
Within the last two years alone, the global supply chain has experienced events like never seen before. Fragile even prior to the global pandemic, Covid-19 has resulted in huge growth in demand in times of limited supply.
Events such as the grounding of the Ever-Given containership in the Suez Canal, record breaking floods in Germany, the snow freeze in Texas, the Qatar blockade, and now, the Ukraine war have had massive effects when it comes to the global supply chain. Shortages, delays, and even higher costs of shipping have arisen as results of such events. According to Howard Kingston and Björn Hartong, supply chains face heightened risks from growing political and economic volatility. Citing Freightos, a logistics company, they observe that the US – China container shipping period was almost double at the start of the year 2022. In some cases, freight costs blew up to 400% higher. Ports in all parts of the globe including the United States, Asia, and Europe remain gridlocked while the supply in warehouse spaces are very minimal.
The remains of the Covid-19 pandemic along with the current war on Ukraine will likely leave a scar on the global supply chain for some time. The demand for energy and food is still increasing while their prices remain soaring. This leads to a growing unrest in societies and to a rise in the crime rates. Kingston and Hartong also consider a study done by Maplecroft, a global risk and strategic consulting firm, which found that more than half of the world has faced an increase in civil unrest since the start of the pandemic due to the rise in the cost of living. Furthermore, disruption in trade and the logistics sector may blow due to tensions in geopolitics.
Emerging markets, handicapped by the Covid-19 pandemic currently face a period of instability especially from high food and energy prices in addition to a debt crisis emerging. The World Bank has warned that this could put around 75 million people into extreme poverty. The shortage in food and energy have already triggered strikes in Sri Lanka, while mid-income countries such as Brazil and Egypt might get hit the hardest. The civil distress along with the economic distress, and political instability have led to cargo theft and damage. Protests and civil unrest have been the main causes of warehouse thefts.
The global supply chain logistics are heavily reliant on workers for product security, loading, and delivery services. Yet at current times, and due to being exposed to increased cost of living, these workers are in short supply in many developed and developing economies. Considering current events, it has been proven that the modern global supply chain only works efficiently in times of peace and free international trade. With that being said, many global organizations have started revising their business models and supply chains paying greater attention to resilience and reliability.
Mohammed Al-Khaifi, Highlight 7/2023 – The impact of international geopolitical, economical, and health crises on the global supply chain, 6 February 2023, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the authors and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.