Global Supply Chains Are Dangerously Easy to Snap

Global Supply Chains Are Dangerously Easy to Snap:

… Global supply chains are, in fact, a national security issue, and one that has been neglected by planners for too long.

… When everything works, the supply chains allow distributors and retailers to keep minimal stocks, a model known as just-in-time. In the U.K., for example, many retailers only stock 24 hours’ worth of fresh produce. The system works so well that between 2010 and 2015, 52 percent of U.K.-based suppliers reduced their stock levels, while just 22 percent increased their stock. That, too, helps keep consumer prices low by saving on warehousing costs. At Tesco, Britain’s largest retailer, an orange, whether it’s from Argentina, Chile, Cyprus, Egypt, Israel, Morocco, Peru, South Africa, Spain, Swaziland, Turkey, or Uruguay, sets the consumer back a mere 30 pence (39 cents).

But if someone damaged the supply chains, all of this falls apart fast.

… Cyberattacks—whether perpetrated by a government or proxies—could wreak havoc in companies’ logistics systems, which organize the travel route of every product. Or, an adversary could sabotage harbor operations. For that matter, workers at harbors or distribution centers could simply go on strike. E-commerce is just as exposed as brick-and-mortar chains to supply chain disruptions.

Delivery disruptions are, of course, not a new concern. So limited were supplies during World War II that the British government was forced to maintain rationing after the war had ended. 

… But the real challenge may be nature. Britain’s sweltering summer heat, a byproduct of climate change, has already caused shortages of fans and air conditioners in a country unused to scorching weather. After Japan’s 2016 earthquakes, Toyota—one of the world’s largest automakers and a pioneer of just-in-time—had to suspend production at its Japanese factories because it couldn’t get the parts for its cars. In a 2015 report for the Hawaii Department of Transportation, Ian Robertson, an engineering professor at the University of Hawaii, recommends that in case of an earthquake or tsunami warning “every effort should be made to evacuate all ships and barges.” But Hawaiians rely on those very ships for their livelihoods. “Closure of any of the Hawaiian commercial ports for more than a week due to storm or tsunami inundation would severely affect the health and safety of island residents,” Robertson notes in the report.

Disruptions to global supply chains are, in fact, more devastating than a traditional military attack. “We assume that we’ll always have daily deliveries, and consumers have come to rely on it,” Marsden, the Cardiff University professor, noted. “But we only need to look at truck-driver strikes to understand the effects of disruptions to supply chains. The 2000 lorry-driver strike put the fear of God in the [U.K. Ministry of Defense].” Brazilians suffered a similar fate earlier this year, when a trucker strike caused food and fuel shortages. When President Michel Temer responded by sending in the Army, commanders discovered that they, too, were short on fuel. An adversary could bring a country to its knees without dispatching a single soldier.

… And exactly because an attack on global supply chains (not to mention natural disasters or animal or plant disease) is more likely than a military attack, this is not a paranoid scenario. On the contrary, we have been lucky that our fragile supply chains have not yet been hit. Navies, including Britain’s Royal Navy, protect global shipping traffic, but supply chains can be sabotaged by cyberattacks or attacks on harbors or distribution centers. By teaming up, governments and the private sector could better protect these lifelines.

… Governments and industry might also consider whether the global supply model is sustainable. No supply chain is completely secure, but localized production reduces vulnerabilities.

(Via Foreign Policy)

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