This week’s supply chain risk news
Here’s what to know after Asia’s deadly cyclones
Three cyclones wracked Southeast Asia in late November, leading to widespread flooding. Sri Lanka, Indonesia, and Thailand were especially hard hit. More than a thousand people have died in those countries amid the floods and landslides.
The financial impacts are sizeable. Sri Lankan authorities estimate the damage to the highway network totals around $615 million US, or more than half a billion euros. Railways, fuel stations, and water supply systems are also affected. As is Sri Lanka’s agriculture sector, which employs about a third of the population. Sri Lanka is known for its cinnamon and coconut exports, and it’s the world’s third-largest tea exporter.
Agriculture is also a concern in Indonesia. Some 40 thousand hectares (almost 100 thousand acres) of rice have been deluged. Disruptions for coffee, a key export from the Indonesian island of Sumatra, are also likely.
In Thailand, the fallout may top $15 billion, or around thirteen billion euros. Hundreds of factories suffered damage, affecting industries from rubber to plastic to food to metal. Thailand is the world’s largest rubber producer, and production could be down around 90 thousand metric tons. More details are in our Risk Center.
Again, a lot can go wrong when people with tractors and trucks get angry
Protests by Mexican farmers continue, at times blockading highways and toll booths and stranding freight trucks, buses, and other vehicles. While some groups agreed to a halt in late November, others have carried on. The recent blockades have reportedly left Ciudad Juárez on the brink of food and fuel shortages.
Central to the disruptions, which date back to October, have been epic traffic jams. In Chihuahua, demonstrators have targeted international border bridges connecting Juárez with El Paso, Texas. In recent days, that effort escalated to full-on closures at all four major international crossings in Chihuahua, as we discuss in our Risk Center. Substantial delays resulted for commercial traffic in both directions, stranding tens of thousands of truckloads of shipments. Other recent protests have included convoys toward Mexico City.
For the protesters, a key sticking point has been legislation to restrict private transfers of water rights. That measure has now passed, but so far, farmers and truckers haven’t backed down. Reports suggest the delays have driven factory shutdowns and halted billions of dollars in exports.
The U.S. wants rare earths without Chinese strings attached. Japan knows the feeling
In 2010, a Chinese fishing trawler collided with two Japanese Coast Guard boats in disputed waters, and the Chinese captain was detained. In the ensuing diplomatic kerfuffle, China embargoed rare earth exports to Japan.
Rare earths, as folks in the car industry know, are critical for magnets in motors, among many other uses. The debacle spurred Japanese trade officials to rethink some policies. This led to a $250 million deal with an Australian mining company. Japan wanted to develop a rare earth supply chain separate from China. That’s something the Trump administration would find particularly handy lately, as the New York Times reports:
“President Trump has said he believes it will take the United States about a year to secure ample rare-earth supplies. But Japan is a case study in how hard it is to pull out of China’s grip — especially its extremely cost competitive rare-earth processing facilities. Experts say such an effort requires both sustained government support and international collaboration.”
Japan’s efforts eventually paid off, but it took dedication. Whether the U.S. will maintain the resolve to follow suit is an open question.
Acute logistics risk assessments: What to expect when you’re expecting the worst
Global supply chains allow companies to source materials and locate production wherever they find the best deals. At least, so long as weather conditions, geopolitics, and international transportation options cooperate. Sometimes, of course, those considerations don’t oblige, which is why businesses have to assess and account for logistics risks.
Importantly, acute logistics risk assessments aren’t one-time snapshots. They hinge on a steady flow of information, and with this, the understanding that not all risk data is of equal value. Historic data can be helpful, as can global data from a variety of trusted sources. However, we should note here that relying too heavily on just one source can lead to troublesome blind spots.
Specific concerns vary from one supply chain to the next. Nevertheless, a throughline in risk assessments tends to be the importance of timely information and context, whether the potential issue is political, regulatory, or part of the growing trend of extreme weather driven by climate change.
Continuously monitoring risk data, automatically analyzing it, and being ready to act decisively—these are all crucial for smooth operations. We have more insights on creating acute logistics risk assessments on our blog.
Other stories we’re reading and monitoring
The tug-of-war over Dutch chipmaker Nexperia—which has roiled supply chains in the automotive industry for months—represents just one front in a broader fight between Washington and Beijing over where critical components are produced, and by whom, as the New York Times reports.
With EU subsidies delayed amid an investigation into alleged fraud, Greek farmers have launched protests in recent weeks. Protestors have been blocking key transit corridors with thousands of tractors, and possibly targeting key ports. More background is in our Risk Center.
It’s hard to imagine a semi-truck without the smell of diesel. But in an effort to curb carbon emissions, DHL Supply Chain has been trying out an electric Tesla Semi. That truck is now part of its California fleet, and DHL expects to add more like it next year.
