Unstable supply chains: economic challenge and ecological opportunity

Whether unsafe shipping routes or natural disasters – many factors are currently causing unstable supply chains. But it is precisely these problems in the supply chain that could become catalysts for innovative solutions that combine economic efficiency and sustainability

unstable supply chains

Author: House of Eden

Around 12 percent of world trade passes through the Red Sea. This is connected to the Mediterranean via the Suez Canal. The passage is the shortest sea route between Asia and Europe. But this route is currently barely passable for merchant ships. Since the Yemeni Houthi militia announced in November 2023 that it would prevent ships of any nationality from passing through the Red Sea in solidarity with Hamas, numerous freighters have already been attacked - and there is no end in sight.

Large shipping companies such as the Danish Maersk or the German Hapag-Lloyd are therefore currently taking a cautious approach. They are rerouting their ships via the much longer route around the Cape of Good Hope at the tip of South Africa. The consequences: 10.000 additional nautical miles per shipload, up to 10 days or more longer delivery times and extra costs of up to six figures per day. The price of cheap goods from Asia is therefore increasing and with it the awareness among many companies that the current practice cannot continue. The unstable supply chains could thus become a driver for a long overdue rethink - towards more Transparency and sustainability along the supply chain.

How can unstable supply chains be sustainably strengthened?

In our globalized world, supply chains are often complex and extensive. They extend across continents and countries, and include numerous intermediaries and suppliers. This complexity entails risks. The insecurity on the world's oceans mentioned at the beginning is just one of the possible challenges. Supply chain disruptions due to natural disasters or political unrest, as well as strikes by workers in the producing countries, are also part of this.

More and more companies are realising that new practices are necessary to minimise these risks along the supply chain and to be successful in the long term. According to a recent Sustainability study by Miebach Consulting  Ultimately, for most companies, the motivation for sustainability is tied to the idea of ​​efficiency and cost reduction. Economic pressure could thus become a catalyst for ecological change. After all, many of the solutions on the table for the problem of unstable supply chains also contribute to the issue of sustainability.

Companies benefit economically from the following approaches. But they also offer environmental and social benefits:

  1. Local procurement: The Regionalization of supply chains can reduce dependence on global suppliers and thus the risk of delivery delays or failures. Local procurement reduces transport costs and at the same time lowers CO2 emissions.
  2. resource conservation: Through Recycling and reuse of materials can reduce dependence on scarce raw materials. This not only prevents supply uncertainties, but also reduces the exploitation of natural resources in the global south and the associated burdens on the regional population.
  3. transparency: A transparent supply chain makes it possible to identify and respond to potential risks at an early stage. digital technologies can help ensure the traceability of products along the entire supply chain. This makes it possible to monitor not only timely delivery but also actual compliance with environmental and social standards.
  4. Diversification of suppliers: The diversification of suppliers reduces dependencies and minimizes the risk of supply bottlenecks. On the other hand, it also helps smaller manufacturers with high labor and wage standards to survive in a market that has so far been dominated by large producers and dumping suppliers.

Conflicts between economic and ecological goals

If stability and sustainability can go hand in hand along the supply chain, why are sustainable approaches not yet standard? There are various explanations for this. For example, switching to sustainable practices can initially be associated with higher costs. Investments in environmentally friendly technologies and materials are often more expensive than conventional alternatives. This makes them particularly difficult for small and medium-sized companies to manage. The switch to more sustainable and resilient supply chains does not happen overnight. First, the old supply chain network must be unraveled, new suppliers found and production processes adapted. Complete traceability and transparency along the supply chain is also a logistical and technical challenge.

Using innovations to combat unstable supply chains and promote sustainability

The future of supply chains will be strongly influenced by technological innovations and digitalization. Technologies such as the Internet of Things (IoT), artificial intelligence and Blockchain enable greater transparency and efficiency of supply chains. IoT sensors can provide real-time data that helps companies monitor the status of their deliveries and identify potential bottlenecks at an early stage. AI can analyze patterns in existing supply chains and make suggestions for more efficient and sustainable design. Blockchain technology offers a secure and transparent method for tracking products. This also gives consumers better opportunities to identify truly sustainable products. In the future, a combination of technology, human expertise and sustainable action will be important to create more resilient, efficient and environmentally friendly supply chains.

Conclusion: Sustainable companies navigate troubled waters better

Unstable supply chains are forcing companies to rethink their current business practices. They need to find sustainable solutions to ensure economic success and become resilient to geopolitical tensions, natural disasters and other unexpected events. By aligning their supply chains with sustainable factors such as the Minimizing the use of resources By reducing transport routes, companies can not only minimize risks but also protect the environment. This not only means they are doing something good for the planet, but also provides another selling point for their products. Sustainable action is thus proving to be a key strategy for meeting the demands of an increasingly complex and uncertain global economy. Sustainability in the supply chain is therefore not just a nice-to-have, but will be a necessity for economic success in the future!

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