Global supply chain disruptions influence trade by disrupting the major processes involved, such as production, transportation, and distribution. The main reasons behind these disruptions are the COVID-19 pandemic, the shortage of containers, a container ship blocking the Suez Canal, frequent logistic management inefficiencies, and the geopolitical tensions of the Russia-Ukraine war. Apart from this, during the pandemic, there was a declaration of lockdown, and trade was prohibited. These situations have worsened the country’s economic and social situation. This resulted in increased expense, decreased capacity, and ultimately decreased efficiency. 

In this blog, we will discuss the causes of global supply chain disruptions, their effects on the shipping industry, and how we can initiate action to mitigate their effects on the global economy. 

What are global supply chain disruptions?

Global supply chain disruptions are mainly events that cause disruptions or hindrances in the manufacturing, sale, and distribution of goods. This is a significant challenge for global trade and demonstrates how all the supply chain stages are interconnected. With the arrival of the COVID-19 pandemic, this problem has significantly increased and affected the shipping industry. As we know, shipping and maritime logistics are the most crucial art of trading. Without them, goods cannot be transported from one place to another. The supply chain involves trade as an indispensable part, where shipping falls under the secondary sector. 

The Federal Reserve Bank of New York developed the Global Supply Chain Index (GSCI) of New York as an indicator that merges international manufacturing data with transportation indicators. 

What causes global supply chain disruptions?

Several reasons, internal or external, lead to global supply chain disruptions. Let’s discuss the factors that have led to this disruption and affected the economy negatively: 

1. Pandemic: In recent years, COVID-19 has become a worldwide pandemic that has weakened the global supply chain. The effect of the pandemic or public health hazards devastates supply chains, the people involved, and associated sectors and industries. Similarly, it has affected the shipping industry, as all the port routes were sealed to prevent transmission through other countries. These shipping containers are quarantined first when the lockdown opens, increasing the shipment time. 
2. Market fluctuation: The recession and market inflation also affect the supply chain. In addition, shipping and container prices change when the market fluctuates. The whole supply chain will be affected if your supplier’s price changes. You can change your supplier at that time. 
3. Logistical issues: Globalization has undoubtedly increased trade, ultimately increasing shipping. Any logistic failure due to a sudden event during the journey can affect the supply chain and dismantle the economy. 
4. Shortage of raw materials: Any industry’s shortage of raw materials can dismantle and disrupt the whole supply chain. Automobile and technical industry shortages are affected mainly by global trade disruptions.
5. Cyber attacks: Digital crimes are widespread nowadays. Someone can easily hack your company’s data if quality antiviruses do not protect it. This can destroy your company’s reputation or economically harm your business. So, you must be careful when installing these digital methods on your shipping. 
6. Natural disasters: Natural disasters affect global supply chain disruptions by blocking trade routes or preventing one country from manufacturing goods or sourcing them to its assignees. In 2011, an earthquake in Japan triggered a tsunami that affected the power plant in Fukushima, Daiichi. 
7. Geopolitical tensions: Geopolitical tensions negatively affect supply chain management. Due to these tensions, trade relations changed, and trade routes and taxes were affected in India and China. The recent Russia-Ukraine war has affected the trade and shipping of many companies. 

How do supply chain disruptions impact shipping?

Global supply chain disruptions have affected the shipping industry in many ways. There are some indirect and direct ways through which you can have an idea of how these disruptions have affected the shipping industry; let’s have a look at the impacts: 

1. Port congestion and delays: The disrupted global supply chain caused by the above-mentioned factors led to port congestion. For example, after the earthquake, when ports opened, many businesses needed their goods transported, which caused a crowd at the container ports. Consequently, there were delays in shipping. 
2. Changes in shipping routes: In the previous point, we discussed that the ports become crowded due to global supply chain disruptions. Because of the congested ports, businesses change their routes; they prefer choosing longer routes over congested ports. 
3. Decreased capacity: Supply chain disruptions also lead to decreased capacity of shipping companies, as their manufacturing and distribution processes are dismantled due to natural disasters or market fluctuations. This decreases ocean freight capacity and increases costs. 
4. Enhanced risks: Supply chain management risks have increased due to increased inefficiencies in operations. The risk of cargo damage, theft, loss, and additional costs in the form of liabilities are some of the complementary effects of supply chain damage in the shipping industry. 
5. High costs: The supply chain constitutes global trade. Shipping is a crucial part of the trade, and disruptions in the supply chain will hinder market supply and demand, ultimately affecting global market conditions. Therefore, an increase in the price of fuel, labor, or detention or demurrage fees, if charged, is the consequence of supply chain disruption. 
6. Shortage of inventory: Shipping allows you to move goods from one place to another. Global supply chain disruptions can lead to an inventory shortage at the required place. Various factors, such as lockdowns, blocked trade routes, natural disasters, or other logistic delays, can cause this. 

How can you mitigate the impact of a supply chain crisis? 

There are different ways to mitigate the impact of the global supply chain crisis. Let’s explore those strategies in brief: 

Comprehensive risk management plan: You can minimize the impact of global supply chain disruption by following the simple rules of prevention, preparedness, response, and recovery. A business company must prepare a contingency plan for global supply chain disruptions. A supply chain risk management plan might focus more on external risks, such as potential geopolitical conflict, major weather events, or labor shortages.

Enhanced relationship with the supplier: Manufacturing is the initial stage of the supply chain; if manufacturers communicate properly with suppliers, they can better manage the situation. You can promptly discuss conflicts with the other members involved if they arise. 

Scattered suppliers: Some companies rely on only one supplier for all supplies, which increases the impact of disruptions in the supply chain. So, you must diversify your suppliers to have options for buying the components. 

Use technological solutions: Technological solutions will enhance the supply chain and minimize the effect of disruptions. For example, supply chain digitalization will increase efficiency, decrease manual errors, and create faster responses. Tracing the journey using automated vehicles and enhanced communication networks will simplify the supply chain process. 

Use analytics and monitor tools: Employing supply chain analytics and monitoring tools in the supply chain will mitigate the impact of global supply chain disruptions as you will be well aware of the real-time analytics and situation of the shipment that will help your response quickly and predict any potential threats. 

Keep a stock of backup inventory: No one can predict the exact time and how the supply chain will be. So, it is better to have a backup of inventories to minimize the effect of disruption on your business. 

Execute flexible supply chain management: Many businesses planned production months ago, but they should also prepare for any disruption in the future. An efficient, flexible supply chain that adapts to the conditions prepares them for future disruption. 

Analyze critical components: You must be aware of the performance of every supply chain component, be it the manufacturer, supplier, distributor, or carrier, to evaluate where the problem is and how to resolve it. It is one of the best solutions for supply chain disruption. 

Future outlook of global supply chain disruption

The impact of supply chain disruptions on businesses and companies is visible. Let’s have a look at the future overview of supply chain management and its impact: 

1. Cybersecurity: As the use of technology is increasing in every field, including the shipping industry, it will become a compulsion to inculcate a cybersecurity plan in your system to avoid any unauthorized access to your confidential data. Cybercrime is increasing rapidly in these countries, so you need to prepare for the effects. 
2. Sustainability: Environmental concern is the central issue faced by the shipping industry, as it leads to frequent disasters and legal compliance by other countries. So, it is evident that supply chain sustainability will be the principal concern of experts in the future. 
3. Geopolitical tensions: Geopolitical tensions have been affecting the global supply chain recently and will continue to do so, as we can see from the tensions arising in the Middle East. These tensions change the whole pattern of trade by affecting trade route relations and transportation networks. 
4. Supplier involvement: The business is trying to involve suppliers directly in the supply chain to minimize the impact of global supply chain disruptions. Suppliers are the foundation of the supply chain, and if the foundation is strong, it will strengthen the whole process. 
5. Educating the supply chain workers: Training the workers involved in the supply chain process is necessary. They must be at least aware of how to respond to the fundamental supply chain obstacles.

Global supply chain disruptions are a problem for global trade. They impact the shipping industry by decreasing efficiency and increasing costs. You can minimize the impacts by following specific strategies, such as preparing a backup inventory and involving suppliers in synchronizing the processes. So, as a member of the shipping industry, you need to be aware of the supply chain’s current condition and prepare your business to deal with those disruptions. 

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