Supply Chain Roundup - Week 29/30 - 2023

Jul 30, 2023

5 min read

Updated: May 19, 2024

The Age of Interconnected Economies

A groundbreaking agreement has been finalized between the European Commission and Chile, aiming to forge sustainable supply chains for critical raw materials. These materials are pivotal for various industries including digital, aerospace, defense, and notably in the push towards global decarbonization, exemplified by the electric vehicle sector. This partnership emerged from the recent EU-CELAC summit held in Brussels, highlighting the urgent need to establish resilient value chains as the demand for these indispensable materials is projected to surge.

Europe's heavy reliance on imports for these resources underscores its vulnerability to supply chain disruptions and market volatility. The agreement defines five strategic areas to boost durable value chains, including the integration of sustainable raw materials chains, joint research and innovation efforts, adherence to environmental, social, and governance (ESG) standards, the development of necessary infrastructure, and the enhancement of capacities and educational programs.

This initiative is part of the EU's broader strategy to secure sustainable critical raw materials, extending partnerships to countries like Canada, Ukraine, Kazakhstan, Namibia, and Argentina. Amidst growing skepticism towards globalization and an uptick in economic nationalism, the necessity for supply chain sovereignty is becoming more pronounced, challenging businesses to maintain operational agility and competitive edge. The U.S.'s Inflation Reduction Act ($400 billion in green subsidies from which EU companies will be excluded), with its substantial green subsidies, poses additional challenges for EU companies, prompting the need for innovative supply chain models.

One emerging solution is the Constellation of Value (CoV), a network of select suppliers, manufacturing and service partners, logistics service providers, designed to optimize supply chain effectiveness and security. Unlike traditional linear supply chains, CoVs employ advanced digital technologies to enhance connectivity and resilience among network members. The shifting landscape demands that companies adapt to these changes, which are aimed to redefine global markets and economic structures for years to come.

A case in point is the Prysmian Group, which has integrated ESG criteria into its supply chain strategy, focusing on sustainable practices and ethical sourcing. The group has taken action to support suppliers that use recycled materials and strives to reduce CO2 emissions by improving the efficiency of distribution networks and logistics partners. Prysmian only uses raw materials that have received technical approval and have been sourced from qualified suppliers. The group conducts product/process audits to ensure the quality and performance of the materials. Prysmian is advancing the concept of Constellation of Value in their supply chain by continuously monitoring its procurement base to ensure ethical conduct and ESG compliance in business processes, thus lowering its risk.

Similarly, DHL Supply Chain's recent investment in Latin America underscores the region's growing significance in global supply chain management, driven by economic growth, sourcing shifts, and robust airfreight activity. DHL Supply Chain announced plans to invest €500m in the region by the end of 2028, focusing on new technologies, digitization, ESG initiatives, and facility expansion.

Green Horizons in Pharmaceuticals

The pharmaceutical industry is increasingly prioritizing sustainability, recognizing its potential to significantly reduce the environmental footprint of supply chains. Despite lagging behind other sectors in sustainability advancements, the industry faces the challenge of high energy and water usage, along with extensive R&D and manufacturing operations that contribute to substantial pollution levels.

With carbon emissions significantly exceeding those of the automotive sector, the industry must navigate the lack of environmental standards in current regulatory guidelines. Carbon emissions are currently 55% higher than the automotive industry (even though it is 28% smaller in size). Upstream from raw materials, manufacturing finished products is also very carbon intensive. Food and Drug Administration (FDA) and European Medicines Agency have not yet included environmental standards in the good manufacturing practice (GMP) guidelines.

Opportunities abound for enhancing sustainability across various operational domains, from strategic planning and logistics to manufacturing and packaging. The industry is aimed for transformative progress through technological investments and green initiatives. Increased regulatory pressure on ESG objectives will necessitate collective efforts towards a sustainable future.

Avery Dennison, a multinational manufacturer and distributor of labels, tags, RFID tech, and specialty medical products, highlights in an article published this week the potential to minimize supply chain waste and enhance regulatory compliance, including ESG considerations. RFID is considered one of the best solutions to reduce supply chain waste. While the use of blockchain for supply chain tracking is currently being used by 6.3% of respondents, is set to rise to 95% in three years, says the report. For supply chain operators, it offers end-to-end visibility, reduces supply chain disruptions and helps manage inventory, recalls and temperature monitoring.

Concurrently, Hayat Biotech's insights into the pharmaceutical supply chain's challenges and solutions emphasize the importance of strategic collaborations and digital advancements for overcoming obstacles and ensuring supply chain resilience. The establishment of Pharma.Aero's global community further illustrates the industry's commitment to collaborative efforts in enhancing supply chain sustainability and efficiency in the pharmaceutical industry.

Cyber Resilience in the Digital Era

In an era where cyber threats loom large over global businesses and their supply chains, safeguarding sensitive information is crucial. The role of third-party partners in the security ecosystem is critical, necessitating a proactive approach to mitigate risks. The repercussions of data breaches extend beyond data loss, potentially eroding customer trust and tarnishing brand reputation. Gartner's findings underscore the consumer backlash against brands compromised by cyber incidents (68% of consumers say they would refuse to purchase from a brand that has experienced a data breach).

It’s estimated that, by 2031, a ransomware attack will occur every 2 seconds. With ransomware attacks predicted to escalate, the emphasis on predictive risk profiling and advanced security strategies is more critical than ever. Predictive risk profiling delves into vast seas of data to produce a comprehensive risk assessment. The data is held within a Data Exchange and is part of a third-party cyber risk management (TPCRM) platform. Employing AI, ML, and analytics, businesses are enhancing their security postures through comprehensive risk assessments and adopting a defense-in-depth strategy that includes layered defenses and a zero-trust model.

A robust Third-Party Cyber Risk Management (TPCRM) system, incorporating vulnerability assessments and real-time threat intelligence, is essential for evaluating and mitigating risks posed by suppliers. The ability to predict has become a reality, with some of the security platforms able to predict with an astounding accuracy rate of nearly 85%.

Recent data from Resilinc highlights the prevalence of supply chain disruptions, underscoring the need for vigilant cybersecurity measures across various sectors to safeguard against a myriad of threats, including cyber-attacks. Resilinc shows a total of 8,197 supply chain disruptions in the first half of 2023. The most affected sectors were healthcare, high-tech, automotive, aerospace, and food & beverage.