Hot off the press! Resilinc has published its 2022 Half Year report.
Named “Gridlock” in reference to all the supply chain gridlock from the first half of the year – driven mostly by China’s zero-COVID policies and the Russia-Ukraine war – the report includes supply chain disruption data, a review of the major supply chain events of the first two quarters of this year, and a forecast of what Resilinc expects for the remainder of the year and beyond.
For a taste of what’s included in the report, we’re highlighting some key year-on-year trends covered. Take a read and then be sure to download our 2022 Half Year Report – Gridlock for the full overview.
The pandemic isn’t over—especially not in China
In February, OEMs with China-dependent supply chains had reasons to hope that changed policies would mean a surge in Omicron cases would cause only moderate disruptions. But by March, China’s industrial production declined with quarantines and lockdowns. EventWatchAI data shows a corresponding 56% year-on-year increase in H1 for Human Health Alerts and a 40% rise in Port Disruption alerts.
By May, China’s exports were surging, and supply chains have continued to recover. Yet, with fall weather approaching, zero-tolerance COVID containment policies may cause additional major disruptions from the world’s largest exporter.
Geopolitical and cyber risks grew
Geopolitical event alerts issued by EventWatchAI grew by 521% in the first six months of 2022—mostly due to the Russia-Ukraine war. While prices for food and energy commodities have begun easing, the war and Western sanctions against Russia and Belarus have triggered extraordinary disruptions to oil and gas, nitrogen fertilizer, grains, and vital industrial gases such as neon.
Resilinc’s risk analysts also attribute the rise in EventWatchAI Cyber alerts—which increased by 90% from H1 2021—to the war. Russia’s cyberattacks on Ukraine intensified before the invasion, and while less effective than initially feared, these attacks undermined health care, food, and relief supplies distribution. Russian hackers also stepped up attacks on U.S. entities.
Strikes and protests increased
Labor disruptions reported by EventWatchAI increased 57% over the first half of 2021, and Resilinc analysts expect layoffs to amplify the labor actions and protests over inflation, food and fuel shortages that are already occurring. Labor actions of most significant concern are often in logistics and transport; and across the globe, truck drivers, port and maritime workers, airline and airport staff, railway workers and others are pushing for higher wages and protection against job losses from automation.
Factory fires: the most common disruption
Factory Fire alerts were again the most common type of alert sent by EventWatchAI, increasing by 131% over H1 2021. As Resilinc has reported earlier, shortages of skilled labor have forced factory managers to operate with fewer staff and give less attention to fire safety. At the same time, many factories have quickly ramped up production of new items or changed sizes and configurations to meet shifting demand—changes that have led to gaps in safety protocols.
Business restructuring: long-tail risks growing
H1 2022 saw three alert categories—M&As, Business Sales and Leadership Transitions—grow significantly. While M&A activity has declined due to recession fears and high interest rates, the first months of 2022 saw investors taking advantage of available cash to acquire smaller firms; large firms consolidating to fortify against vulnerabilities revealed by the pandemic; and some mega-deals in the tech sector, including AMD’s acquisition of Xilinx and Microsoft’s purchase of speech-Nuance Communications.
The supply chain implications of such business restructuring usually don’t manifest for months, but they can have major impacts as acquiring companies shed non-core lines or sell business units. A best practice is to monitor any post-M&A changes closely to assess how suppliers on all tiers could be affected. This can be most effectively done in a supply chain risk management system that continuously monitors and evaluates all possible impacts on suppliers.
EventWatch continually upgraded
Resilinc continues to expand our Supply Chain Intelligence Network and upgrade EventWatchAI. In H1 2022, we vastly expanded the news and information sources monitored, adding publicly accessible websites and news providers worldwide and tens of millions of social media and other informal sources.
Using AI and natural language processing, EventWatchAI constantly monitors these sources for potential events and risks that could disrupt supply chains. Then, Resilinc risk analysts review the resulting feeds to determine which events may impact supply chains, which merit an event alert and the severity level. In performing these reviews, the staff also train the AI system to improve its analysis capabilities—quintessential machine learning.