Eight out of ten exporting companies are exposed to the risks of global supply chain disruptions

- KITA conducted a survey on the knock-on effects of supply chain disruptions posed to exporting companies and identified addressing logistical challenges and stabilizing raw material prices are top priorities.

- The necessity to strengthen year-round monitoring system was raised, which will allow responding to potential supply chain abnormalities in a pre-emptive manner.

In a situation of at least eight out of ten Korean exporting companies being exposed to the risks of global supply chain disruptions, a recently published report highlighted the importance of the government’s role of introducing much robust policies to support affected companies and the necessity of companies to devise strategies to build up resilience to deal with supply chain disruptions.

KITA Institute for International Trade (Head: Sanghyeon Cho) released a report titled “The global supply chain crisis and Korean companies’ response” on May 3rd, 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, 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 found out that companies are devising ways to minimize the knock-on effects of supply chain disruptions. 35.9% of respondents said they are securing alternative supply sources of key items and 17.8% of respondents said they are a building up safety stock. However, it was revealed that a quarter of companies are not properly prepared to respond to the ongoing disruptions, with 12.4% of respondents saying they are not equipped with any strategies and 15.3% saying that they are temporarily suspending or rolling down production.

As 39.4% of affected companies picked addressing logistical challenges as the most urgently needed support from the government, this clearly indicated a) securing freight space on container ships in order to resolving delays in logistics and b) providing shipping cost subsidy are critically needed. 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 manage and respond to risks in a pre-emptive manner.

Ga-hyeon Park, the Head Researcher at KITA, said, “The ongoing supply chain risk is not only a complicated issue involving a wide array of issues, including, international situation, resource nationalism and climate change, but also became an issue of having 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.”