Global supply chain resilience threatened by oil prices and terrorism
Threats to supply chain resilience are reflected in the 2016 FM Global Resilience Index, which provides a global ranking of countries’ business resilience to supply chain disruption. FM Global is one of the world’s largest commercial property insurers and ranks 130 countries and territories according to nine drivers that can affect the vulnerability of a business in those regions.
Declining oil prices are at the root of Norway’s drop to second place in the third annual release of the Index. The oil producer was replaced by Switzerland, which was ranked 2 last year. Oil-rich Kuwait (ranked 59 this year, down from 50 last year) experienced one of the biggest declines, since its gross domestic product (GDP) was hit hard by lower oil prices. Economic productivity suffered similarly in Colombia, which fell from 110 to 119.
Crude oil prices, however, cut both ways. Armenia (ranked 52) and Malawi (ranked 84) are two of the biggest risers in the Index this year, driven by an increased resilience to oil shock. Since their consumption of oil has fallen, the countries are less exposed to the dynamics of the oil market.
Political risk, one of the nine Index drivers, can be a severe constraint on business resilience. A significant and topical component of political risk is terrorism. Already in 2016, there have been deadly acts of terrorism in such countries as Pakistan (ranked 117), Belgium (ranked 17), Côte d’Ivoire (ranked 58), Nigeria (ranked 116) and Turkey (ranked 79). The threat of terrorism is real and unabated.
For the second consecutive year, Ukraine (ranked 125, down from 107) was among those countries with the biggest drop, reflecting the high degree of tension within the country as well as with Russia (ranked 75).
The so-called Brexit debate, over whether the United Kingdom (UK) (ranked 20) should leave the European Union (EU), could impact the country’s future ranking in the Resilience Index. For those wishing the UK to remain in the EU, a vote for the country to leave could represent a significant risk to the UK’s productivity and growth prospects. Should that result, the Index drivers affected by GDP (i.e., GDP per capita’ and ‘oil intensity’) could be adversely swayed.
“By giving executives easy access to authoritative information on factors that could disrupt their supply chains, the FM Global Resilience Index provides a simple way to analyse the potential for business risk and drive better decisions,” said Bret Ahnell, executive vice president at FM Global. “Resilient supply chains give businesses a distinct advantage by protecting their operational integrity, revenue stream, market share and shareholder value. A fragile supply chain, on the other hand, often harms the company involved, sometimes for the long term.”
The FM Global Resilience Index is the first and only data-driven tool and repository of its kind. It gives users ranks and scores on nine drivers affecting countries’ resilience to supply chain disruption, including GDP per capita, political risk, oil intensity, exposure to natural hazards, quality of natural hazard risk management and fire risk management, as well as control of corruption, quality of infrastructure and local suppliers. Scores for each driver are combined into three factors (economic, risk quality and supply chain), yielding a composite zero-to-100 score.
DHL Claim Multi-Sector Collaboration Key to Fighting COVID
Since January, global logistics leader DHL has distributed more than 200 million doses of the COVID vaccine to 120+ countries around the globe. While the US and UK recently rolled out immunisation plans to most citizens, countries with less developed infrastructure still desperately need more doses. In the United Arab Emirates (UAE), which currently has one of the highest per-capita immunisation rates, the government set up storage facilities to cover domestic and international demand. But storage, as we’ve learned, is little help if you can’t transport the goods.
This is where logistics leaders such as DHL make their impact. The company built over 50 new partnerships, bilateral and multilateral, to collaborate with pharmaceutical and private sector firms. With more than 350 DHL centres pressed into service, the group operated 9,000+ flights to ship the vaccine where it needed to go.
With new pandemic knowledge, DHL just released its “Revisiting Pandemic Resilience” white paper, which examined the role of logistics and supply chain companies in handling COVID-19. As Thomas Ellman, Head of Clinical Trials Logistics at DHL, said: “The past one year has highlighted the importance of logistics and supply chain management to manage the pandemic, ensure business continuity and protect public health. It has also shown us that together we are stronger”.
Multisector partnerships, DHL said, enabled rapid, effective vaccine distribution. While international scientists developed a vaccine in record time—five times faster than any other vaccine in history—manufacturers ramped up production and logistics teams rolled out distribution three times faster than expected. When commercial routes faced backups, logistics operators worked with military officers to transport vaccines via helicopters and boats.
In the UAE, the public-private HOPE Consortium distributed billions of COVID-19 doses to its civilians as well as other countries in need by partnering with commercial organisations such as DHL. For the first time, apropo for an unprecedented pandemic, logistics companies made strong connections with public health and government.
“While the race against the virus continues, leveraging the power of such collaborations and data analytics will be key”, said Katja Busch, Chief Commercial Officer DHL and Head of DHL Customer Solutions & Innovation. “We need to remain prepared for high patient and vaccine volumes, maintain logistics infrastructure and capacity, while planning for seasonal fluctuations by providing a stable and well-equipped platform for the years to come”.
How Do We Sustain Immunisation?
By the end of 2021, experts estimate that we need approximately 10 billion doses of vaccines—many of which will be shipped to areas of the world, such as India, South Africa, and Brazil, that lack significant infrastructure. This is perhaps the greatest divide between countries that have rolled out successful immunisation programmes and those that have not. As Busch noted, “the UAE’s significant investments in creating robust air, sea, and land infrastructure facilitated logistics and vaccine distribution, helping us keep supply chains resilient”.
Neither is the novel coronavirus a one-time affair. If predictions hold, COVID will be similar to seasonal colds or the flu: here to stay. When fall comes around each year, governments will need to vaccinate the world as quickly as possible to ensure long-term immunisation against the virus. This time, logistics companies must be better prepared.
Yet global immunisation, year after year, is no small order. To keep reinfection rates low and slow the spread of COVID, governments will likely need 7-9 billion annual doses of the vaccine to meet that mark. And if DHL’s white paper is any judge of success, multi-sector supply chain partnerships will set the gold standard.