Lack of trust and transparency as a result of ideological and military conflicts are undermining the international supply chains, according to the CIPS Risk Index for the first quarter of 2017.
The index which is put together by Dun & Bradstreet, highlighted the fact that prolonged conflict is creating supply chain no-go areas, cutting off local businesses and consumers from global markets and potentially causing a scarcity of goods.
The index picked out the conflict between Ukraine and separatist rebels in the east of the country, saying it continued to hinder both physical and digital supply chains this quarter.
“Businesses have been busy re-routing supply chains away from the conflict area, while sanctions have discouraged businesses from dealing with Russia. This process has accelerated as a result of persistently low commodity prices which have seen the value of the region’s exports fall.
“Civil wars in Iraq, Libya, Syria and Yemen are also disrupting traditional land-based supply chains across the Middle East, curtailing the flow of goods from Jordan and Lebanon through Syria and Iraq, and in North Africa between Egypt, Tunisia and Algeria.”
The index also pointed out that the first quarter of 2017 had seen an escalation in the ideological conflict between globalisation and economic nationalism, with the British Prime Minister, Theresa May’s, visit to the White House in January 2017 symbolic of the shift in emphasis from multilateral to bilateral trade deals.
“Despite President Donald Trump’s decision not to pull out of the North American Free Trade Agreement in April 2017, the future trading relationship between Canada, Mexico and the USA remains uncertain. As a result, North America’s contribution to global supply chain risk rose from 8.1 per cent in Q4 2016 to 8.6 per cent in Q1 2017.”
However, it said France and Germany looked likely to maintain their pro-Europe outlook.
CIPS economist John Glen said: “Supply chain infrastructure can only function normally and efficiently when there is trust and collaboration between all nationalities and sections of society. Whether through military confrontation in the Middle East or political schism in Britain, supply chain infrastructure is one of the first casualties of conflict and the results can be devastating.”