Crises everywhere? Strengthen the chain!

Written by: Sucheta Govil

With climate change and geopolitical uncertainties pressing, industries need to get down to the core of their business setup. Resilient and diverse supply chains can make all the difference in the world economy. Consequently, the topic is central at this year’s Handelsblatt Asia Business Insights conference 2022.

Got something on your mind? I believe we all do. Following the news, we stand agape as climate change has turned from knocking to banging at our doors, with heatwaves, droughts, and devastating floods around the globe. Geopolitical threats shatter our illusions of stability and global cooperation. Recession soars to unprecedented heights with exploding energy prices a threat to prosperity and jobs.

In light of this, concerns about supply chains may seem secondary. However, they are a key factor. Export nations such as Germany are particularly dependent on stable supply chains and secure foreign trade conditions. The current crises underline that industries must hurry to build a future-proof agenda to secure revenue, growth, and jobs. This will make business more resilient against disruptions and set it up more sustainably.

Today, cargo and trade networks extend around the globe. Supply-chain shocks can turn that strength into the world economy’s greatest weakness. Climate change and economic and geopolitical upheavals are contributing to the more frequent and wider-spreading occurrence of these supply-chain shocks. Consequently, raw materials are missing, production processes come to a standstill, and goods reach their destination with immense delays. According to a recent study by McKinsey, supply-chain disruptions could cause companies to lose almost 45% of their annual profits over a ten-year period. 

Transparency through digitalization from end to end

A key factor for setting up companies against supply-chain shocks are more diversified and sustainable end-to-end supply chains. This involves a smart balance of global and regional supply networks that reduce dependence on individual companies and allow for unforeseen failures to be compensated for more easily. Whether this succeeds will ultimately also be a question of digitization. At @Covestro, we are investing in digital infrastructure to connect the entire value chain in a seamless flow of data. Supply-chain analytics optimize planning, procurement, production, and distribution while improving transparency along the entire value chain.

A truly digital transformation of business can also play a crucial role in global energy-supply security. Supply chains must not only be more diversified but also highly digitized to ensure reliable transport of alternative energy sources, such as ammonium from green hydrogen around the globe. For example, using track & trace procedures, containers can be tracked worldwide within the supply chain in real time. It is not enough for a company to establish individual digital solutions, though – only when the solutions are networked and standardized can an industry with a broad-based logistics and supplier network cooperate effectively and guarantee reliable production. So, investments in crisis-proof, sustainable supply chains will determine worldwide economic stability and the success of the energy transition.

This not only pays off in resilience, but also in reputational gain and trust: resource-efficient and thus greener logistics is a major focus of customers' and end-consumers' expectations of corporate responsibility.

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