Supply Chain Disruptions May Cause Shift in International Trade

The dynamics of international trade may shift in response to the supply chain disruptions currently affecting world commerce, European Central Bank President Christine Lagarde said Saturday (Oct. 16), per a Bloomberg report.

“There are signs that the global economy could increasingly be a source of shocks for Europe rather than a stabilizer against volatility,” Lagarde said in a speech at the International Monetary Fund (IMF), the report stated.

Some global manufacturers already are holding higher inventories than they did before the pandemic due to concerns about disruptions, Lagarde said, per the report.

This would be a departure from the just-in-time inventory management that has been common in global trade for decades and which Lagarde said is vulnerable to shocks, according to the report. The euro area’s economy is especially vulnerable to bottlenecks because of its globalized nature, she added.

“Faced with historically long delivery times, global manufacturers’ stockpiling of inputs continues to run higher than before the pandemic,” Lagarde said, per the report.

The supply chain has been facing numerous strains as of late. Data from digital freight platform Transporeon showed that the cost of shipping went up as much as 10 euros per kilometer in January. The costs were a result of Brexit, the delta variant of COVID-19 and closed borders.

Read more: Roambee, Transporeon Partner on Real-Time Supply Chain Visibility

In the U.S., too, supply chains remain plagued by shortages of labor, commodities and transportation. In response, suppliers and retailers are trying new ways to move goods on cargo liners, trains and competitors’ trucks.

See more: Industries Try Allocations, Alternate Vendors and New Forms of Transportation to Work Around Supply Chain Problems

The grocery industry, for one, is taking additional measures. Some suppliers are shifting their limited production capacity to top-selling items; imposing allocations, or purchase caps; telling grocers to cancel promotions and issuing general warnings about limited availability.

The supply chain problems are in many cases related to the pandemic, with factories shutting down, ports experiencing delays and many parts of the supply chain facing shortages of workers.