By Diplomatic Council member Jane Enny van Lambalgen*

Companies and consumers will have to prepare for shortages in the supply of goods in 2024. There are more black swans on the move around the world than ever before. A "black swan" refers to unforeseeable events such as a pandemic, whereby many events that seem unimaginable at first glance are "announced" long in advance. This includes, for example, a tightening of the security situation around the world with an impact on supply chains.

Conflict over Taiwan is foreseeable

The attack by the Houthi rebels in the Red Sea may still come as a surprise, but the dispute between China and the USA over Taiwan has long been foreseeable - an example of a smouldering conflict that will lead to massive supply bottlenecks if it breaks out. In addition, the fighting over the Gaza Strip will have an impact on many supply chains worldwide in 2024. High-tech components made in Israel can be found in numerous technical products. If the developers there are deployed on the front line, many new developments will be delayed. Furthermore, it cannot be ruled out that the Houthi rebels could find imitators on other important sea routes.

The increase in extreme weather events such as floods, droughts and forest fires due to climate change is also foreseeable. The resulting damage to infrastructure and production facilities could literally lead to production stoppages and supply bottlenecks overnight.

Honest risk management is the order of the day

Businesses are therefore advised to take an honest risk management approach that takes into account geopolitical tensions, natural disasters and cyber attacks on their own company and supply chain. This includes: at least two suppliers for each component, preferably spread over two different continents, and flexibility in the software in order to be able to adapt it quickly in the event of necessary semiconductor changes.

The diversification of supply chains is the order of the day" Companies that try to return to their old model of supposedly stable supply chains after the end of corona are maneuvering themselves into a dead end.

Readjusting the balance of just-in-time

When it comes to just-in-time production, it is urgently recommended to readjust the balance between on-time delivery and safety stock. In case of doubt, it is better to strengthen delivery reliability at the expense of costs than to be unable to deliver at all.

This also applies to securing critical raw materials, which are often mined in politically unstable regions. Here is an example: Anyone who is dependent on certain raw materials from Africa must monitor the geopolitical situation with a focus on China and Russia. The political significance of the BRICS countries should not be underestimated in other regions either. It should be noted that entire industries are dependent on critical raw materials, including electronics, the automotive industry, the energy sector and medical technology.

* Jane Enny van Lambalgen is Founding Partner and Managing Director of Planet Industrial Excellence and a member of United Interim, the leading community for interim managers in German-speaking countries, and the Diplomatic Council, a global think tank with consultative status at the United Nations (UN). She works for companies as an interim manager for strategy, operational excellence, turnaround, supply chain management and digital transformation. As a temporary manager, she holds positions as CEO, Managing Director, COO, Delegate of the Board of Directors, Supervisory Board and Advisory Board in medium-sized companies. Her work focuses on international operations assignments with a focus on production, supply chain and logistics.