Supply Chain Superintelligence: September 2024

Welcome back! In this issue, we’re focusing on two topics with a huge impact on global supply chains. Read on to learn more about:

• The near miss of the now-cancelled Indian port strike and the far-reaching impact that similar labour disputes could have on supply chains worldwide.?
• The evolving landscape of sustainability compliance, including how businesses are preparing to meet the requirements of the European Deforestation Regulation (EUDR).

Indian Port Closures

Why We Might Not Be So Lucky Next Time

By Marco Felsberger

The last-ditch cancellation of a strike at 12 of India's major maritime ports averted significant disruptions to global trade. Rather than face the disruption planned for August 28, India’s shipping ministry has instead agreed wage rises for some 20,000 workers.

This near miss is a warning for industries worldwide that depend on shipments from these ports: from textiles and machinery to chemicals. The strike’s cancellation does not mean that the danger is over – in fact, it highlights the need for visibility into supply chains.

Here’s our analysis of the potential disruption that would be caused by a strike similar to the recently-cancelled one in India.

Overview

A one-day strike would result in minimal delays. However, if disruption extended to seven days, a global supply chain crisis could unfold. Critical ports like Rotterdam, Shanghai, and Singapore would face severe congestion, impacting industries with just-in-time delivery systems such as fashion, automotive, and electronics.

Key Ports at Risk of Congestion

To prepare for the impact of the strike, understanding which ports are at risk of congestion is key to planning accordingly and mitigating disruption.

1. Singapore. Would see the highest absolute increase in daily capacity at risk. The port’s role in rerouting goods from India makes it particularly vulnerable, potentially disrupting trade flows across Southeast Asia.
2. Ningbo (China). Will likely face a substantial increase in traffic caused by rerouted shipments of goods headed to East Asia. This port is critical for machinery, electronics, and raw materials, meaning delays could disrupt key manufacturing hubs.
3. Rotterdam (The Netherlands). Europe’s key entry point for Indian goods would experience a surge in traffic. This increase could stretch its capacity, causing delays across industries such as textiles, chemicals, and machinery.
4. Hong Kong. Could see operational stress due to rerouted goods, particularly electronics and machinery. This would add pressure to an overburdened supply chain in the region.
5. Qingdao (China). Would likewise experience increased congestion from rerouted shipments. Delays would impact normal trade flows in agriculture and mineral products.

Smaller Ports with High Relative Capacity Risk

1. Khalifa Bin Salman (Bahrain). Could become a bottleneck as traffic increases.
2. Point Murat (Australia). May struggle with the surge in traffic, leading to potential disruptions in regional trade.
3. Kasim Terminal (Indonesia). Likely to experience operational difficulties, causing delays and inefficiencies.

Impact on European and U.S. Markets In the event of a strike, European ports like Rotterdam, Hamburg, and Antwerp would face congestion from rerouted traffic. The UK and Germany are especially vulnerable, given their reliance on textile/chemical imports from India. Key U.S. ports like Los Angeles and New York could experience delays, causing shortages in machinery, electronics, and consumer goods.

A Global Ripple Effect China and Africa may also feel the strain. Ningbo and Shenzhen will see an influx of redirected goods, while African countries dependent on Indian exports of minerals and chemicals could face long-term supply issues.

Industry-Specific Vulnerabilities

• Textiles & Footwear: Significant impact on fashion retailers across Europe.
• Stone & Glass: Crucial for construction and manufacturing, with a notable impact on the Swiss market.
• Chemicals & Allied Industries: Essential for pharmaceuticals, agriculture, and industrial processes.
• Machinery & Electrical Equipment: Potential disruptions in manufacturing and technology sectors.

Lessons for Supply Chain Resilience

This event serves as a reminder that businesses must remain proactive and prepared for potential disruptions. Key steps include:

1. Diversification of Sourcing: Reduce reliance on single-source suppliers.
2. Buffer Inventory: Maintain safety stocks for critical components.
3. Enhanced Visibility: Implement real-time tracking systems for better supply chain transparency.
4. Scenario Planning: Conduct regular risk assessments and develop contingency plans.
5. Supplier Collaboration: Strengthen relationships with key suppliers to improve flexibility during disruptions.

Key Considerations for Supply Chain Managers

• The impact of disruptions grows non-linearly with the duration of the event.
• Resilience and adaptability vary by industry, influencing recovery times.
• Geographic diversification can mitigate the effects of localised disruptions.
• The interconnected nature of global trade means that even small, local disruptions can cause widespread ripple effects.
• Recovery often takes longer than the initial disruption, especially with prolonged events.

Conclusion

The averted Indian port strike of 2024 is a stark reminder of how vulnerable global supply chains remain. While the crisis was resolved, the vulnerabilities exposed demand action. Companies should seize this opportunity to reassess and strengthen their supply chain strategies.

At Prewave, our experts have analysed potential impacts, and while this event was avoided, the insights gained are invaluable. We continue to monitor global trade risks, ready to provide crucial insights and support for navigating an increasingly complex landscape.

The Global Reach of the EUDR

Compliance Is Now a Worldwide Priority

By Harald Nitschinger

The European Deforestation Regulation (EUDR) isn’t just reshaping European businesses—it’s transforming the global landscape. The need to ensure that commodities like cocoa, palm oil, soy, and timber are “deforestation-free” has sparked discussions far beyond Europe’s borders, but one thing seems certain. From December 30, 2024, EU-based companies, as well as their global suppliers, must comply.

The EUDR’s influence is undeniable. The requirement for complete due diligence means that companies aren’t just encouraged to use their resources and technological capabilities for sustainability – they’re demanded to. For many of these firms – inside and outside the EU – it’s not a question of if compliance is necessary, but how it can be achieved.

Why Non-EU Companies Should Care

For EU companies, the consequences for non compliance are severe—turnover-based fines, import bans, and reputational harm. However, non-EU companies will also need to comply in order to avoid exclusion from the single market.

Likewise, the EUDR is just the beginning of a global regulation wave. Other nations, such as the UK with its Forest Risk Commodity Regulation (UKFRC), are following suit, making the upcoming regulations impossible to ignore.

AI-Driven Solutions for Complex Compliance Challenges

At Prewave, we’re committed to helping businesses worldwide navigate this new era of compliance—not only for the EUDR but for future legislation as well.

Prewave’s AI-powered supply chain management technology offers a ready-made solution to EUDR compliance. By automating supplier risk management and conducting risk assessments automatically, businesses can stay on the right side of the rules. Our partnership with Satelligence ensures fast, accurate compliance, significantly reducing false positives that can block producers from the EU market.

Is your business prepared for the December 30 deadline? Talk to an expert about Prewave’s end-to-end EUDR compliance solution.

We hope you enjoyed this edition of the Supply Chain Superintelligence newsletter! For more updates, follow us on LinkedIn or visit us at prewave.com.

About Prewave

Our mission has always been clear: to make the world's supply chains more transparent, resilient, and sustainable. Since our inception in 2017, Prewave has become synonymous with supply chain risk management excellence. Today, we are the world's leading end-to-end supply chain risk management platform, ensuring transparency, visibility, and compliance—all in a single platform.