Red light as global supply chain index hits high risk level for first time
13 Jun 2022
Global supply chain resilience has reached the ‘high risk’ threshold on the Achilles Index for the first time on record.
The Achilles Supply Chain Resilience Index (ASCRI) Q2 report covering the first quarter of 2022 scored worldwide performance at 39.8 points.
This brings it below the 40 point level which denotes high risk and confirms the predictions made by the company reported in Process Engineering in March. And, warns Achilles, the index is likely to drop still further over the next quarter.
“With the prolonged conflict in Ukraine and extremely tight restrictions on movement in China at present, the prospect of further disruption and even higher costs seem almost inevitable,” said Achilles chief product officer Katie Tamblin.
She added that manufacturers in many sectors would need to increase their inventories of products, in spite of having made previous continencies.
“It would be wise for manufacturers to consider acting now to mitigate even greater risks months down the line. By bringing planned orders forward as much as possible, that extra stock cycle and the extra planning time it brings, could prove to be an invaluable way to find alternative sources of supply,” warned Tamblin.
A key factor is the conflict in Ukraine that has resulted in that country’s industrial sector being severely disrupted, while sanctions against Russia for its invasion of its neighbour have impacted traxe with Europe. Meanwhile the powerful Chinese economy has been stalled by the effects of previous renewed lockdown introductions.
This has been compounded by the fact that the UK economy’s efforts at recovery, post-lockdown, have been countered by 40-year-record inflation rates.
Added Tamblin: “Where possible, bringing the next order forward can help manufacturers to potentially afford themselves one extra stock cycle and the time to find alternatives if supply is lost.
“While many will be concerned about the cost of an extra stock cycle in the short term, the cost premium is still expected to be less than that caused by large-scale stockouts.”
ASCRI calculates supply chain risk by examining economic, environment, labour practices, regulatory, resilience, and safety/security factors for countries and suppliers based in these but also taking into account macroeconomic issues.