As economies worldwide emerge this spring from a pandemic-pounded year, a new report is highlighting five risks to track for businesses looking to help their supply chain operations recover in 2021, according to Everstream Analytics.
The report features lessons from 2020 that can help leaders navigate this uncertain business environment, according to the “Annual Risk Report 2021” produced by Everstream, which is the newly rebranded title for the combined supply chain risk management firms Resilience 360 and Riskpulse.
The first trend is a movement toward shorter, more localized supply chains, since the pandemic has reignited long-running debates about near-shoring and re-shoring initiatives, the report said. During the crisis, over-reliance on a single country’s manufacturing facilities and supplier networks—most notably China—exacerbated the impact of regional disruptions on global companies. In reaction, many firms are thinking about moving their production of critical components to reduce the size and concentration of supply chain risks.
The second trend is a rise in bankruptcies and insolvencies among smaller and more specialized suppliers. While governments worldwide eased financial reporting requirements for business hit hard by pandemic impacts, they could soon return to standard regulations if vaccines help to bring the virus under control during 2021. The result would be an increase in insolvencies during the first half of 2021, focused in North America, Central and Eastern Europe, Latin America, and Western Europe, Everstream said.
Number three on the trend list is a continued rise in cyber attacks on production sites and logistics operators. Everstream says it saw a 216% increase in reported cyber attacks in 2020, including threats like data breaches, ransomware, and operational vulnerabilities. That matched predictions, but the targets and means of the attacks have evolved in response to the geopolitical and economic circumstances of 2020, the firm said. The pandemic brought the vulnerabilities of global supply chains into renewed focus, with a focus on susceptible targets such as shipping operators and the healthcare industry.
At number four, Everstream says persistent air cargo constraints will continue to cause ripple effects throughout supply chains. Capacity in some trade lanes fell by more than 50% during the initial phase of lockdowns in the first half of the year as grounded passenger aircraft removed “belly cargo” capacity from the market. While a rise in dedicated freighter aircraft flying without passengers has made up some of the difference, the capacity decline has led to demand greatly exceeding supply and driven air cargo rates to record highs.
And the fifth trend will be an increasing use of multimodal solutions, according to Everstream. Due to tight air cargo capacity and ongoing container shortages in ocean and rail logistics, organizations are unable to rely on current trade lanes to keep their just-in-time (JIT) supply chains stocked. In response, they have started to explore alternative shipping options, in particular on the major trade routes connecting destinations between Asia, Europe, and North America. That decision is driven less by cost concerns, and more by the need for reliable services, as can be witnessed by statistics like the number of trains connecting China and Europe increasing by more than 40% compared to 2019, Everstream said.