Korean Companies’ Risk of Global Supply-Chain Disruptions

Eight in ten companies are exposed to supply-chain risk

In a situation where at least eight in ten Korean exporting companies are currently exposed to the risks of global supply chain disruptions, a recently published report highlighted the importance of the government’s role in introducing more robust policies to support affected companies. It also stressed the need for companies to devise strategies to build up resilience to deal with supply chain disruptions.
The Korea International Trade Association (KITA) recently released a report titled “The global supply-chain crisis and Korean companies’ response,” which includes a survey result compiled by collecting relevant information from 1,094 Korean exporting companies.

According to the survey, 85.5% of respondents are experiencing problems stemming from supply chain disruptions. Among those experiencing problems, 35.6% pinpointed logistical disruptions, including shipping delays, and skyrocketing shipping costs as the biggest type of risk — followed by rising raw material prices (27.8%), and disruptions triggered by lockdown measures in certain regions (16.9%).
Supply chain disruptions have been a chronic issue with the prolonged Covid pandemic and the war between Russia and Ukraine. The report revealed that companies are devising ways to minimize the knock-on effects of supply chain disruptions. A total of 35.9% of respondents said they are securing alternative supply sources of key items, while 17.8% of respondents said they are building up safety stocks.
However, it was revealed that as many as a quarter of companies are inadequately prepared to respond to the ongoing disruptions, with 12.4% of respondents saying they do not have any strategies in place, and 15.3% saying that they are temporarily suspending or winding down production.
As 39.4% of affected companies identified addressing logistical challenges as the most urgently needed support required from the government, this clearly indicated that what is critically needed is securing freight space on container ships in order to resolve delays in logistics, and the provision of shipping cost subsidies. Aside from addressing logistical challenges, 20.8% of affected companies stressed the need to introduce a supply-chain early warning system, which will allow them to pre-emptively manage and respond to such risks.
Ga-hyeon Park, the Head Researcher at KITA, recently noted, “The ongoing supply chain risk is not only a complicated issue involving a wide array of issues, including the international situation, resource nationalism and climate change, but also became an issue exerting a greater influence on industries.”
The researcher also advised, “The government should focus on resolving logistical problems to overcome the risks accompanied by supply chain disruptions and support companies to build up resilience to deal with disruptions, along with its effort to strengthen year-round monitoring on potential abnormalities, which will help companies to pre-emptively respond to surfacing risks.”

 
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