Assessing supply disruption impacts along the supply chain within life cycle sustainability assessment - a novel approach applied to the Swiss economy
- The Swiss service-oriented economy is as many other Western economies almost exclusively dependent on the supply of materials and products from abroad and related supply chains often involve several actors around the world. The supply chains for technologies used in the Swiss mobility, energy provision and storage as well as ICT sectors, three key sectors with a high economic and strategic importance for the Swiss economy, are particularly complex. Due to their complexity, these supply chains may be affected by supply disruption events occurring anywhere around the world. Just recently, significant disruptions in the supply chains of these three sectors have for example been caused by the COVID-19 pandemic, the Brexit and the China-United States trade war.
To build more resilient supply chains, it is key to anticipate and manage supply risks and to implement technologies associated with comparably low supply risks. A common way to identify such supply risks is the evaluation of supplyThe Swiss service-oriented economy is as many other Western economies almost exclusively dependent on the supply of materials and products from abroad and related supply chains often involve several actors around the world. The supply chains for technologies used in the Swiss mobility, energy provision and storage as well as ICT sectors, three key sectors with a high economic and strategic importance for the Swiss economy, are particularly complex. Due to their complexity, these supply chains may be affected by supply disruption events occurring anywhere around the world. Just recently, significant disruptions in the supply chains of these three sectors have for example been caused by the COVID-19 pandemic, the Brexit and the China-United States trade war.
To build more resilient supply chains, it is key to anticipate and manage supply risks and to implement technologies associated with comparably low supply risks. A common way to identify such supply risks is the evaluation of supply disruption impacts with criticality assessment approaches. Some of these approaches have been integrated into the Life Cycle Sustainability Assessment (LCSA) framework to, amongst other benefits, allow for assessing the socio-economic impacts of supply disruptions and environmental, economic and social impacts with the same approach and thus for avoiding burden-shifting between these two types of impacts. Key limitations of the existing approaches assessing criticality within LCSA are however that they do not allow for evaluating supply disruption impacts along the entire supply chain as well as for addressing different time horizons. This dissertation thus aims to address this research gap with the development of the SPOTTER approach.
The objective of the SPOTTER approach is to provide a quantitative assessment of supply disruption impacts along the full supply chain in the short-term (i.e. the next 5 years) and medium-term (i.e. in 5 to 15 years) that allows for identifying the most relevant supply risks within global supply chains and over different time horizons. To this end, it analyzes supply disruption hotspots (i.e. relatively highest impacts along the supply chain) and determines overall supply disruption impacts (i.e. the total impact for the supply chain) over the two time horizons. The hotspots and overall impacts caused by global and country-specific supply disruption events are thereby assessed and aggregated into the two categories cost variability and limited availability. Considered events comprise six short-term events geopolitical instability, child labor restrictions, trade barriers, depletion of economic resources, price volatility and limited recyclability as well as four medium-term events demand growth, co-product dependency, primary raw material reliance and depletion of ultimate resources. Scores of the overall impacts and hotspots are calculated by multiplying amounts of inventory flows (i.e. material/product flows between different country-specific supply chain processes) with respective characterization factors (CFs) that define supply disruption impacts on the product system. These CFs are case-specific and are defined based on supply disruption probability and vulnerability indicators. This dissertation has provided an overview and has explained the rationale of the SPOTTER approach by illustrating the selection and use of the indicators defining the CFs and by presenting how the scores of overall impacts and hotspots are calculated. Given the challenges regarding data availability for assessments along the supply chain, a procedure for the practical application of the SPOTTER approach has additionally been presented. This procedure, here called the 'SPOTTER implementation procedure' involves guidelines for scope definition, inventory analysis, screening of inventory flow relevance and impact assessment.
After the method development, the application of the SPOTTER approach has been demonstrated in a first case study, where the hotspots of supply disruptions in the short-term have been analyzed along the cobalt and aluminium supply chains of electric vehicles (EVs) used in Switzerland by following the 'SPOTTER implementation procedure'. Based on this case study, data sources suitable for an assessment with the SPOTTER approach have been identified as well as the quantification of the inventory flows along the supply chain, the calculation of impact scores and the interpretation of results from the hotspot analysis have been explained. The location of the identified hotspots have been presented on global maps and the magnitude of the hotspots in relation to the overall impacts have been illustrated with pie charts and stacked bar charts. The hotspots with the relatively highest magnitudes suggest, on the one hand, potential disruptions of cobalt ore supply from the Congo to Australia and Canada, EV supply from the USA to Switzerland, EV wiring supply from Mexico to the USA and Al wire supply from Bahrain to Morocco. On the other hand, these hotspots indicate potential supply disruptions in the global markets of traction batteries and EV components used in the USA, cobalt powder and battery components used in China and South Korea, cobalt ore used in Australia and EVs used in Switzerland. Furthermore, the results of the hotspot analysis have been compared with the results of existing studies. This comparison has shown that some results such as the indication of an unstable cobalt supply are in line with the outcomes of existing studies but also that our study provides new country-specific information about relevant supply risks along the full supply chain.
To determine bottlenecks in the supply chains of infrastructure and fuels used in the Swiss mobility, energy and ICT sectors and to identify technologies associated with comparably low supply risks used in these three sectors, a second case study has been performed. In this case study, supply disruption hotspots have been analyzed and the impacts of different technologies have been compared. Considering the tremendous efforts regarding data acquisition and computation for such an assessment on a sectoral level, a screening procedure that allows for identifying the most influential inventory flows for an assessment with the SPOTTER approach has been introduced. This procedure is executed as an integral part of the goal and scope definition and inventory analysis within the SPOTTER approach. It has then been demonstrated how to apply the screening procedure in combination with the 'SPOTTER implementation procedure' for the hotspot analysis and impact comparisons performed in this case study. Results of the hotspot analysis regarding the supply of infrastructure have been presented for each sector individually and for the combination of the three sectors. These results suggest that supply disruptions may occur especially along supply chains of solar panels, nuclear power plant equipment, lithium-ion batteries and electronic devices, which describe key technologies for the Swiss economy. In particular, relatively high impacts have been identified related to the supply of cobalt, natural graphite, gallium, hafnium, battery cells, mobile phones, laptops and flat-screen monitors from African or Asian countries as well as related to the supply of solar panels, hafnium powder and natural graphite from the global market. The results of the hotspot analysis regarding the fuel supply, which have been presented for the combination of all three sectors, indicate high risks for the supply of natural gas, coal, uranium and petroleum oil from Russia, Niger and Nigeria as well as potential supply disruptions in the global market of coal, uranium and fuel wood. The results of the impact comparisons suggest that the utilization of some key technologies used within the different sectors is associated with a relatively lower supply risk. For example, lower overall impacts have been assessed for the implementation of wind turbines compared to solar panels and the supply of German laptops compared to Chinese laptops. With regard to the mobility sector, the comparison between battery electric cars and conventional cars indicates that the utilization of battery electric cars has higher risks for the supply of infrastructure but lower risks for the supply of fuels. Additionally, the results of the performed hotspot analysis and impact comparisons have been compared with the results of existing studies. This comparison has shown that our study provides besides some already presented results in the literature such as the hotspots of cobalt or the comparably higher impacts for the infrastructure used in battery electric vehicles also new and more comprehensive information about relevant supply risks within global supply chains for different sectors of an economy.
The information on supply risks provided with the two case studies has finally been considered for suggesting suitable risk mitigation measures targeted toward policy-makers in Switzerland as well as Swiss companies and retailers. It has thus been demonstrated that our case studies with the SPOTTER approach provide so-far missing information that is relevant for the identification of pertinent risk mitigation measures.…
