How Ready Is Your Supply Chain to Adapt to New Geopolitical Realities and Regulations?

You can’t bet on the stability of your supply chain anymore, can you?

Chances of a wider Iran-Israel conflict are increasing even as Israel’s war on Gaza continues. Shippers still prefer the longer route via the Cape of Good Hope over the shorter Suez Canal to avoid Houthi rebel attacks in the Red Sea.

Amid all this come incidents and disasters that further rock the confidence of companies dependent on sole sourcing destinations and specific ports.

It’s hard to model a scenario where a wayward ship brings down a bridge and shuts down the Baltimore port for a year or estimate the damages and delays a 7.2 magnitude earthquake can cause to semiconductor fab plants in Taiwan or imagine a record-breaking rainstorm wreaking havoc on the United Arab Emirates.

Supply chains will face disruptions -- it’s not a prediction anymore. What’s unpredictable is the type of disruption it will be and how long it will last.

Then there is another type of uncertainty that threatens supply chains — policy changes and new regulations. These don’t strike suddenly but unless you are already somewhat bracing for it, the readjustments can be daunting. Like the U.S. Securities and Exchange Commission (SEC) ruling on climate risk disclosures, or the U.S. Environmental Protection Agency’s (EPA) new norms on electric vehicles that’s set to impact the entire automotive procurement process.    

It’s best to have systems and process and scenarios in place for a supply chain crisis — whether it’s caused by unforeseen incidents or a sudden change in regulations.

That’s precisely what we explored in our blogs from GEP’s subject matter experts, who’ve offered the following insights and recommendations.

Mike Jette, vice-president of consulting at GEP who leads the TMT vertical, had an interesting point to make about how chips manufacturers in Taiwan had already built resilience against earthquakes by shutting down production. Chipmakers like TSMC have made sure that the earthquake does not become a supply chain issue, Jette said in a blog. “TSMC was prepared for such incidents and the response to the tremors was a like a fire drill.”

However, he pointed out the increased uneasiness of U.S. technology companies over dependence on Taiwan for chips. “The images of the earthquake, such as buildings leaning over sideways, are powerful. They will provide credence for companies and politicians pressing for further government supports like the CHIPS and Science Act in the U.S.”

On how to mitigate the impact of the Baltimore port closure on transportation, our expert recommendation for companies is: Diversify risk.

All organizations should mitigate risk and expand to multiple ports. It should be at least two to three ports depending on where the company’s operations are and where its consumer demand is. Mitigate risks by spreading them.

Reacting to the U.S. EPA allowing plug-in hybrids to play a more significant role in the transition to electric vehicles, Vengat Narayanasamy, vice-president of consulting at GEP, said the new rules give procurement a unique opportunity to shape the future of mobility, and shared some key procurement strategies.

• Adapting to the growing role of plug-in hybrids alongside EVs, procurement priorities must be adjusted to source and procure a more diverse range of vehicles.
• Diversifying the supplier base to encompass manufacturers and suppliers specializing in both EVs and plug-in hybrids will be essential.
• Building a resilient and sustainable supply chain capable of supporting the increased demand for electric and hybrid vehicles will require close collaboration between procurement and suppliers.

With publicly traded companies in the U.S. now mandated to disclose key climate-related risks in their filings at the SEC, what step should companies take?

This GEP blog has some recommendations for companies yet to start the ESG reporting process. “Develop robust decarbonization strategies, identify and manage supplier ESG risks, and set ESG targets and track progress over time,” it said.

How?

By correlating ESG data with spending patterns, integrating third-party ESG data for a 360-degree view of supplier relationships and enabling smooth project workflows with status updates and cross-functional transparency.

The result: More transparency in external compliance objectives and emissions reports that align with leading ESG reporting frameworks and certifications. 

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