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A Holistic Approach to Strengthening the Semiconductor Supply Chain

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A Holistic Approach to Strengthening the Semiconductor Supply Chain

The COVID-19 pandemic brought the consequences of offshoring semiconductors into sharp relief for American consumers and businesses. When the pandemic struck—snarling global supply chains and spiking demand for consumer electronics—American businesses and consumers were left without the inputs and supplies they had come to rely upon. This supply chain will remain at risk: Its core nodes remain in locations with high geopolitical uncertainty—none more important than Taiwan, whose semiconductor industry Beijing jealously eyes.

Such supply chain vulnerabilities alongside the recognition that semiconductors represent a strategic resource have inspired a push in Washington to rebuild American chip manufacturing. In June 2021, the U.S. Senate, in a rare act of bipartisan consensus, passed the U.S. Innovation and Competition Act (USICA), which would spend $52 billion to bolster the American semiconductor industry. In February of this year, the House of Representatives passed similar legislation—the America COMPETES Act—along mostly party lines. House and Senate negotiators now must reconcile these bills. President Joe Biden argued in his State of the Union address that passing some version of this legislation was essential “to compete for the jobs of the future” and to “level the playing field with China.”

But reshoring the semiconductor supply chain is unlikely to resolve the supply-chain shocks caused by the pandemic: construction of the most important nodes, namely fabrication of the chips themselves, would require not only tremendous up-front costs, but possibly a steady stream of government assistance in perpetuity. As lawmakers on Capitol Hill iron out how best to position the United States to maintain access to a key technology, it’s worth considering what a more holistic strategy to address semiconductor availability might look like.

Here, we propose a two-pronged approach. First, the United States should focus on deepening its high-tech collaboration with supply-chain partners such as South Korea, Taiwan, or even Europe. The U.S. should also amend immigration rules to permit more skilled workers to enter the country, augmenting the talent pool during a period of labor shortages and increasing the competitiveness of U.S.-based industry. We recommend this combination of policies rather than the costlier and riskier proposition of reshoring the industry from the ground up. The United States may not return to its 40% semiconductor manufacturing market share from the 1990s, but these policies would nonetheless help boost domestic production from 10-12% of the global market and increase supply-chain resilience while minimizing potential efficiency losses from over-reliance on local manufacturing.

Semiconductors and supply chains

The rampant offshoring of chip manufacturing from the U.S. to places such as South Korea, Taiwan, and China made good economic sense for companies in pre-pandemic times. East Asia has cultivated a comparative advantage in semiconductor production by virtue of access to cheap inputs and labor. Turning back the tide, conversely, appears to be considerably more costly. Full-scale self-sufficiency by region, according to a Boston Consulting Group report, would require “$1 trillion in incremental upfront investment, resulting in a 35% to 65% overall increase in semiconductor prices and ultimately higher costs of electronic devices for end users.”

Perhaps more importantly, restoring American chip manufacturing capabilities requires much more than the erection of domestic factories. The production of semiconductor chips involves an intricate set of steps from design to front-end fabrication to back-end assembly, testing, and packaging. Such steps are carried out by different firms and countries that have developed comparative advantages in divergent pieces of the supply chain, such that no country has complete end-to-end control of chip manufacturing. Indeed, as Brookings nonresident senior fellow Chris Thomas notes, this hyper-specialization and complexity “makes semiconductors a winner-take-all industry” such that “the top one or two players in any given niche […] earn all the economic profits in that niche due to scale, learning efficiencies, and high switching costs to customers.”

U.S. companies are among the most important designers of microchips in the world, but the supply chain that supports their physical manufacturing is located thousands of miles away in East Asia. Seven of the top 10 (by revenue) fabless semiconductor design firms—those that design and market the hardware but outsource the manufacturing of silicon wafers to a foundry—are American companies, according to a Congressional Research Service report. But the fabrication facilities (foundries) that make the chips designed by firms like Nvidia and AMD are controlled by Taiwanese and South Korean companies. Other parts of the chain are also equally difficult to reproduce: The most important equipment suppliers are a Dutch and a Japanese firm—ASML and Tokyo Electronics. Back-end production, which is labor-intensive, is concentrated in Malaysia, Vietnam, and the Philippines. For large-scale reshoring initiatives, there’s simply a lot to reshore.

The specialization of the semiconductor supply chain means that efforts to reshore the industry will require more than just the construction of foundries in the United States. These factories will be unable to meet their production and cost targets without reliable access to inputs. Decades of competition among East Asian technology hubs have honed regional supply chains to cheaply and reliably deliver components and materials for semiconductor manufacturing. In the short term, access to critical supplies is likely to remain strained. Russia and Ukraine both provide key inputs for semiconductor manufacturing, such as nickel, palladium, and neon—and the Russian invasion of Ukraine is likely to throw yet another wrench in the global supply chain for chips. The semiconductor industry has sought to increase production, but according to U.S. government data, significant gaps between supply and demand remain. While congressional initiatives to restructure semiconductor supply chains may be aimed at longer-term resilience, the current state of the industry illustrates the complex logistical challenges facing any reshoring initiatives.

Addressing the broader nature of the supply-chain challenge is among the issues facing congressional negotiators trying to reconcile House and Senate bills aimed at boosting U.S. semiconductor manufacturing. The Senate version—the USICA—takes a relatively narrow view of the industries eligible for support, limiting it to microchip manufacturers. The House version—the America COMPETES Act—applies a wider lens and also provides funding for companies supplying equipment and materials used in manufacturing chips. However, the House bill also cuts about $200 billion for regional technology hubs promised in the Senate bill. Invariably, these bills are based on the assumption that the money will be remunerative and assuredly beneficial in propping up domestic industry.

A new era of industrial policy?

As the Senate and House negotiate to work out a compromise between the two pieces of legislation, there is reason to be skeptical about the wisdom of a policy that would reshore the semiconductor manufacturing base. Semiconductor manufacturing facilities will take several years to build. Intel broke ground on two chip factories in Arizona last September, a $20 billion expansion, but the foundry will not be fully operational until 2024. Even once fabrication plants are constructed, it is unclear whether they will be profitable without government assistance. While semiconductor supply chains remain strained, fewer COVID-19-related disruptions and the industry’s efforts to expand capacity may ease shortages in the medium term. The legislation, then, may be a long-term solution to a short-term problem.

The new facilities may bolster the manufacturing base, but companies are facing both blue- and white-collar labor shortages that are likely to be difficult to resolve because of unfavorable demographic, educational, and economic trends in the economy. The Intel plant’s promise of 7,000 construction jobs and another 3,000 permanent jobs therefore faces potential labor challenges. They may be resolved with higher wages, but this raises a different issue: Estimates suggest that the silicon wafers that TSMC is making in Arizona will be more expensive than those made in Taiwan, costs that will be passed along to consumers at a time when consumers are already paying more as a result of high inflation.

Government intervention to prop up the U.S. semiconductor industry and improve its competitiveness would be reminiscent of 20th century efforts to create “national champions” by offering subsidies to firms in domestically popular industries. Politicians have long campaigned successfully on reviving strategic industries, like steel and coal, in which the United States is comparatively disadvantaged, despite the fact that there is no consensus that industrial policy is efficacious. As Daniel Yergin and Joseph Stanislaw document in their book Commanding Heights, the adoption of industrial policies to support domestic industries tends to require a perpetual stream of government assistance to maintain a comparative advantage. A better way to improve the availability of semiconductors and improve the resiliency of the chip supply chain would be to embrace foreign expertise and talent rather than expensive unilateralism.

A third way: partnerships and talent promotion

Even if the United States can reshore some of its domestic manufacturing capacity, the gains will come at considerable cost. Supply-chain resilience should not rely on costly, long-term policies. The United States should be mindful that reshoring risks increasing costs for consumers and consider that countries such as Taiwan and South Korea have developed expertise and efficiency in semiconductor manufacturing and happen to be close American security partners. Foreign direct investment (FDI) in these countries, for example, might allow for a more assured supply of chips. Promoting the expansion of a cheaper foundry abroad, thus, might be far more economical than constructing an expensive one at home.

Furthermore, the United States should welcome foreign firms building manufacturing capacity in the United States, like TSMC’s $12 billion investment in Arizona and Samsung’s $17 billion investment in Texas. Despite these firms not being American, the investments in the manufacturing base are decidedly American, as are the supply-chain advantages brought by insulation from the geopolitical dynamics in Asia.

The United States has long excelled because of its human capital. Yet just as new plants are being built that will require high-tech labor, the United States faces engineering and manufacturing talent shortages. The semiconductor industry can promote STEM skills in universities, but the impacts of those investments will be felt in the medium- to long-term. The government can promote immigration policies that raise the ceiling for high-skilled labor to increase the competitiveness of the U.S.-based semiconductor industry.

In other words, the United States can try to have it both ways—hedging against geopolitical risk in Asia by welcoming investments in American manufacturing and promoting inward migration while also bolstering relations with allies and leading chip producers like South Korea and Taiwan. Doing so mitigates potential security risks without large sacrifices in economic efficiency. Indeed, the logic of comparative advantage that led semiconductor manufacturing to be offshored in the first place still applies today. Promoting “national champions” in an effort to reshore the entire supply chain would only drive up consumer costs at a time when inflation has become a political, economic, and ultimately a national-security liability.

traffic cargospot

Air Freight Rates May Be Spiking Now but a Fall in Rates Looks Possible

The airline sector is recovering. As Willie Walsh, the former CEO of British Airways and now Director General of IATA said on Thursday, “the recovery in air travel is gathering steam as governments in many parts of the world lift travel restrictions.

States that persist in attempting to lock-out the disease, rather than managing it, as we do with other diseases, risk missing out on the enormous economic and societal benefits that a restoration of international connectivity will bring,” Willie Walsh is, of course, referring to China, which continues the most savage response to COVID-19 outbreaks. This is placing a break on the bounce-back of air traffic at the global level.

The rest of the world is doing its best to compensate. Total air traffic measured in revenue passenger kilometers increased 115% year-on-year in February 2022, although this is still 45.5% less than the volumes seen in February 2019. In particular international traffic is recovering violently, with a 256.8% increase year-on-year, although this is 59.6% lower than 2019, showing how severe the crash in international air traffic has been.

In terms of demand, air cargo is a very different market. Over the past two years the market for cargo has often been extraordinarily strong in the face of a near absence of belly freight. Demand is still respectable, with global traffic measured in cargo ton-kilometers up 2.9% year-on-year for February, with a slight bias to domestic operations, possibly due to e-commerce traffic in markets such as the US. However, IATA also reports that actual ton-kilometers, that is the volume of cargo carrying capacity available, increased 12.5% year-on-year in February, whilst load-factors fell 4.9%.

Cargo capacity is still 5.6% below February 2019, but demand is not increasing as fast as it was in December 2021. If these trends are sustained the implications are that the balance between air cargo capacity supply and air cargo demand will tip towards lower prices.

The disruptions in China and Hong Kong are taking their toll, as is the avoidance of Russian airspace by many airlines, with air freight rates reportedly spiking on China-Europe routes in recent days.

However, as Willie Walsh commented “Demand for air cargo continued to expand despite growing challenges in the trading environment. That is not likely to be the case in March as the economic consequences of the war in Ukraine take hold. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty will take their toll on air cargo’s performance”.

ROI 3PL distribution chargers made4net “largely making compromises between the way a warehouse wants to work and the way the system allows the warehouse to work,” logistics gather business

How to Get Around the Limitations of Your Warehouse Management System

The effects of the covid-19 pandemic have demonstrated some glaring vulnerabilities in global logistics. Many executives outside the operational realm had simply assumed that existing technology would be good enough to facilitate rational decision-making that could take into account what’s happening at every point along the supply chain, including in a crisis.

In reality, most operational decision-makers have little visibility outside their own domains. Even that can be somewhat lacking. As with many areas of business over the last decade, a certain level of technical capability exists theoretically, but does not exist in practice.

The supply chains of the near-future will demand the seamless transfer of information between customers, shippers, carriers, and each node in between.

But for now, most warehouse managers must make do with incomplete data and inflexible software, “largely making compromises between the way a warehouse wants to work and the way the system allows the warehouse to work,” as researchers from the Rotterdam School of Management in Europe warned in 2002. “In certain environments, such compromises might seriously degrade warehouse performance.” ¹

Two decades later, the situation has not changed much.

A modern WMS is an impressive feat of computer science, bringing together multiple types of user interface with some heavy processing – in the best packages even predictive analytics – behind the scenes. But it’s also the case that the richer a suite of software, the harder it is to change.

In Warehouse & Distribution Science, professors from the Georgia Institute of Technology observed that:

“The working life of a warehouse management system is generally greater than that of the computer language in which it was written. Consequently, most WMS’s in current use are an accretion of many different computer languages… This can make them hard to maintain or customize.” ²

Ed Frazelle, The founder of Georgia Tech’s logistics institute, goes even further and says that warehouses today are expected to do more than ever but have “less warehouse management system capability,” than before, arguing that this is “a by-product of Y2K investments in enterprise resource planning systems.” ³

For some companies, this probably feels like being stuck between a rock and a hard place. Make do with a system that’s less fit-for-purpose with each passing day, or take a risk on another significant technology investment that might end up having an even shorter life cycle?

The answer lies in fundamentally rethinking how operational software ought to be procured and installed.

In the 90s, the all-in-one package model of line-of-business applications made sense for the buyer as well as the vendor. Today it only makes sense for the vendor.

New programming paradigms and business models in the software space, enabled in part by smaller chips and faster, more prolific internet connections, have transformed the incentive structures that fuel innovation. The result is that value, both on the simple level of functionality and usability, and on the more strategic level of investment lifecycles and extendability, is today more readily found when purchasing smaller applications that do one thing and do it well.

One of the gamechangers that allowed companies like Amazon and Alibaba to be so explosively successful is the progress that Application Programming Interfaces (APIs) have made, which allow multiple pieces of software to communicate with each other even if they’ve been developed in isolation.

Today it’s quite straightforward to plumb together multiple pieces of specialized software, each of which performs a specific function to an excellent standard, resulting in a systems architecture that provides precisely the features the organization requires, behind interfaces that are tailored to each user’s needs.

Furthermore, vendors of such software are sometimes willing to include a lot of assistance in configuring these systems, or even to develop custom features or integrations at affordable rates. It’s no exaggeration to say that the business model of this type of vendor hinges more on customer success than that of previous generations of technology companies, which tend to aim for customer captivity.

The Dutch researchers in 2002 suggested that rather than be trapped by a warehouse management system that rapidly depreciates in value while forcing the warehouse to operate on the software’s terms, it “seems better to implement a tailor-made WMS.” 

Of course, they knew at the time that this was easier said than done for most organizations. In 2002, such a project would be prohibitively expensive and full of risks compared to a plentiful marketplace of ‘good enough’ off-the-shelf options.

But today, a tailor-made WMS doesn’t have to be something built from the ground-up. Rather, it can be assembled from a basic, mid-market or high-performing niche WMS as a base, customized and configured with the help of the vendor and extended with specialized functionality from third parties.

And this is precisely how the most tech-savvy organizations seek competitive advantage.

In cases where moving away from a legacy WMS is not possible, its shortcomings can still be addressed by smart integrations, earning the warehouse breathing room in the medium-term.

To offer a concrete example, receiving operations account for about 17% of total warehouse costs on average, as reported in Introduction to Logistics Systems Planning and Control. Furthermore, these processes are “difficult to automate and often turn out to be labour-intensive.” 

Meanwhile, Frazelle paints us a picture of how a world-class warehouse receives material:

“The personnel and equipment required to unload each inbound warehouse load should be optimally prescheduled to eliminate the possibilities of delays and/or dock congestion.”

Such resource coordination is something at which leading-edge warehouse management systems excel. There’s just one problem. How can any of this be optimized if the contents and time of arrival of shipments can’t be predicted?

“balancing the use of receiving resources — dock doors, personnel, staging space, and material-handling equipment — requires the ability to schedule carriers and to shift time-consuming receipts to off-peak hours…” 

In other words, the efficiency of a warehouse’s receiving operations is limited by the quality of its communications with external carriers.

It’s true that many of the more expensive WMS’s include some form of dock scheduling. But not one of them has tackled the problem with much care or depth. Indeed, the warehouse management systems that focus specifically on what happens inside the warehouse tend to perform best.

A solution like DataDocks tackles load scheduling directly, taking into account the relationship component intrinsic to bringing about behavior change from customers, carriers or suppliers.

Dock scheduling is a way to free up resources and establish better control over warehouse operations in general. It serves as the crucial missing link in information transfer between systems, connecting transportation with warehousing and bringing logistics management closer to end-to-end visibility.

For warehouse managers, it represents a natural first step in overcoming the limitations of warehouse management systems.

integrate logistics automation freight

Supply Chain Pressures from COVID Lockdowns in China, Russia- Ukraine War and Rising Oil Prices

Implications of the Russia-Ukraine war 

“Logistics companies are wary of trade lanes, trade partners and shipments to and from Russia. Market volatility has caused uncertainties in the market which has caused massive delays and reduced capacities.”

“COVID induced lockdowns in China and the Russia-Ukraine war has torn apart the expectations of recovery of the supply chain, which has been grappling to keep up to the pressures of implications resulting from these and many more disruptions.”

“The War has impacted Europe greatly. First, Containers are stuck in the terminals waiting for transhipments to Russia and the result is a huge pileup there. The second significant impact is on the China- Europe rail. The northern corridor is still open, but volumes are massively reduced due to uncertainty in the market. That has pushed cargo towards sea freight and even in some cases towards air freight. Low-value cargo has largely suffered because high-value cargo has been pushed to the ocean transport.”

“On a more global scale, the rise in oil prices has been a major repercussion as a result of the war. More logistic players are unclear about the restrictions of doing business with many companies because there are second order and third order sanctions that are also required to be considered while doing business. Companies are hesitant to make decisions, selection of new partners is significantly impaired.

China lockdowns  

There is market commentary about expectations of significant decrease in freight rates. I don’t think that will happen necessarily in the short term, but in the mid-term to long term, this will lead to increase in rates.

“It’s almost like in a traffic jam. Some people now stepped on the brakes really heavily and the problem is that this will lead to a significant sort of bulk up in demand for freight services which will essentially be unleashed once the factories reopen. And when the demand is back, the carriers will again not have enough equipment on the ground because not enough equipment went into China during the Port lockdowns and not enough vessels are available so that will push up prices once again.

So this will continue pushing the volatility in the market and the congestion situation on the Transpacific will also not significantly improve because it’s almost like a start-stop situation. It will just come back worse than it was because the way you remove the traffic jam is not by stopping something violently and then hitting the accelerator again. It’s sort of making sure that the traffic flows at a certain speed.”

The impact of COVID lockdowns on key markets will have wider reaching impacts leading to equipment scarcity in China, hike up of rates and worsening of the traffic jam on transpacific.

The problem will continue to remain after that because there are also labour union disputes in the US waiting in the month of May which historically always leads to slow down at the west coast ports.

Into the Future?  

“We will need more resilient supply chains and that means less concentration on high volume routes. While China-US will still be significantly massive, more smaller trade networks will increase to other countries in Southeast Asia, countries potentially in Africa and South America, who will pick up some of this uncertainty and some of the volume that now gets diverted from the big supply nation. This will be a very gradual process. And again, it doesn’t mean that freight demand from China will decrease now, but I think it might not grow as much anymore.”

Emergence of small trade networks 

The implications of emergence of smaller trade networks. One is you don’t really need these huge vessels on smaller trade networks. There will be an increase in demand for smaller vessels. Secondly, the model of just a few stops in China, then crossing the Pacific, then a few stops in the US, and then going back will, I think, decrease in importance.

And there will be an uptick in more complex networks with more stops and longer turnaround times, further increasing the turnaround times of containers because they just spent more time on the water or an increase in trans shipments. So, for example, more stops in Southeast Asia, then all of this goes into, let’s say, Singapore or Hong Kong in a major hub and then re-export to across, for example, the Pacific. That again, not only increases sort of intraregional traffic, but it also increases the importance of these transit hubs, which will need to build up further capacity to cope with the demand.

And then lastly, I think it will increase the importance of smaller players in the market, and that can be smaller feeder operators and can be smaller who basically pick up this intra-regional traffic or even the transpacific traffic. But that doesn’t start from the big hubs, depending on, I guess, the network model of the carrier.

Pre-pandemic times, supply chain was all about efficient prices and just in time delivery model to make more profits.

Rising Oil prices 

The rising oil prices are bound to have a limited impact on containerized trade in the short run. But generally high oil prices hit hard when the freight rates are very low. Currently, when the freight rates are astronomically high for the past two years (for instance, $10,000 for a 40 ft high cube from China to the US) the impact of a fuel prices hike will not have a large impact on the short term. What remains to be seen in future is how the war pans out in the future and how the supply chain builds resilience in the end.

To say business that this year’s MODEX event was widely, if not wildly, anticipated is more than reasonable, given the months it’s been since many


To say that this year’s MODEX event was widely, if not wildly, anticipated is reasonable, given the months it’s been since many attendees have seen this many faces, masked or unmasked, in a single day. While a few were masked, most presenters and audiences were not. The many exhibitors were upbeat as they shared the latest inventions and processes that are and will be impacting the supply chain. The twitterverse was alive with pictures of tweeters with their “long-lost” friends.

The prime questions at the conference dealt with whether the changes in consumer and supply chain behavior are permanent and, if so, to what extent. The first item was almost universally answered affirmatively, but no consensus existed for the second. Yes, e-commerce is on the rise. Will the same pace of growth exist? Probably not. 

SSI Schaefer’s Saif Sabti, VP Business Development and Strategy, and John Barre, executive sales manager, reported that e-commerce had seen 39% YOY increases but they predicted that growth will slow to something more like 18%-23%. Some 82% of Boomers say they will go back to brick-and-mortar stores, but, even if that happens, it’s not clear if retailers should prepare for changed expectations regarding inventory, payment, and delivery. Millennials and Gen Xers confirm their use of e-commerce will continue. 

If changes in behavior were the underlying issues addressed in 2022, the answer to problems arising from these changes could be summed up in one word:  automation. Automation was presented as ultimately less expensive than human labor, faster than humans—important as the orders increase, and better for the workers who are present. Ergonomics are better if the number of steps workers take and the weight they must transport are reduced. 

Considering MODEX 2020’s panel on COVID, which grossly underestimated its effects, it seems prudent to include here the session that was NOT about a new machine, application, or process. Under Attack:  What Ukraine Means for Global Supply Chains could not have been timelier. Beyond the humanitarian concerns involving the American Logistics Aid Network, its executive director, Kathy Fulton, led this session on business and economic implications. Panelists were Alan Amling, Distinguished Fellow at UT Supply Chain Institute, University of Tennessee at Knoxville, and CEO of Thrive and Advance, LLC, and David Shillingford, cChief sStrategy oOfficer, Everstream Analytics

Amling and Shillingford pointed out that supply chains connect many businesses to Ukraine and Russia. That connection, however, may not be obvious, even to the businesses themselves. Shillingford told us that 90% of the world’s sunflower oil comes from Russia. Why should this matter to us? Because Lays and Ruffles primarily use sunflower oil. Groceries and snack machine vendors are unlikely to have considered this as they assessed the risk the Ukraine situation poses to their businesses. In the case of war and embargoes, items may become more expensive or, worse case, unobtainable. Sunflower oil will be more expensive, and Lays may shift to olive oil or some other alternative. In contrast to the rare earth minerals, recently provided by both Russia and Ukraine, oil is a small problem. Those minerals may be unobtainable, and some have no known substitutes.

The panelists continued discussing risk. They said that businesses know their Tier One suppliers, but few know all their Tier Two supplies, or the Tier One’s of their Tier Twos. This time the disruption in the chain is geopolitical; two years ago, it was medical. COVID-19 infections and/or various governments’ responses to actual infections and to reduce spread have rippled through the supply chain. Weather, earthquakes, and climate degradation are also risks. Back in 2006 in Harvard Business Review, Elizabeth Economy and Kenneth Lieberthal wrote that China lost $31 billion in industrial output due to a lack of water clean enough to run the factories. Amling proposed that companies create scenarios that focus not on the cause but on how their business could respond to disruptions to inputs and outputs.

Compared to war, e-commerce and its implications seem almost simple to manage. Certainly MODEX 2022 displayed solutions to the challenges of too few workers for work that has become more complicated, but must be more accurate, and rising costs for materials, labor, and transportation. Both the educational sessions and the booth conversations pushed the same message. Firms anywhere along the supply chain need to clarify their strategy so they can find and be better partners to the firms with whom they choose to connect.


The conflict is tightening global liquidity, especially for developing countries, as investors flock to assets perceived as less risky.

Ukraine War Risks Further Cuts to Finance Development

The financial fallout from the war in Ukraine could widen the already huge gap in financing needed to achieve sustainable development goals (SDGs) and lead to cascading credit downgrades and debt defaults in developing countries, UNCTAD said.

The gap in financing needed to achieve SDGs, such as ending poverty and halting climate change, now sits at $17.9 trillion for the 2020-2025 period, new UNCTAD estimates show. This puts the current annual gap at $3.6 trillion – more than $1 trillion wider than before the COVID-19 pandemic – without even factoring in the effects of the Ukraine conflict.

“We risk going from having a gap to achieve the SDGs to having an abyss,” UNCTAD Secretary-General Rebeca Grynspan said on 21 March as she opened a meeting on financing for development convened by the organization.

Calling for emergency measures and efforts to support sustainable growth, she said climate change and other non-stop crises are hitting developing countries hardest and making it harder for them to achieve the SDGs.

“Shock after shock, their debt burdens rise, their poor become more numerous, their fiscal space shrinks and their sustainable development goals fall increasingly out of reach,” Ms. Grynspan said.

Tightening global liquidity

The $17.9 trillion figure is likely an underestimate, Ms. Grynspan said, because the calculations were done before the start of the war in Ukraine in late February.

The conflict is tightening global liquidity, especially for developing countries, as investors flock to assets perceived as less risky. The cost of credit has already increased since the start of the conflict, with bond yields rising an average of 36 basis points.

The war’s impact on government spending around the globe will put further pressure on aid budgets, which were already low.

“External financial resources for development continue to decrease, which has been especially detrimental to low-income and middle-income countries,” said Abdulla Shahid, president of the 76th session of the UN General Assembly.

In 2020, official development assistance from advanced economies was on average just 0.32% of their gross national income – less than half of the 0.7% commitment.

Cascading effects on debt

Capital flight and less development assistance would create acute stress for many developing countries already struggling with high debt levels. Cascading credit downgrades and debt defaults could be on the horizon.

More than half of African countries were already downgraded by at least one credit rating agency in 2020, said Vera Songwe, executive secretary of the UN Economic Commission for Africa.

“The Ukraine crisis will likely lead to more downgrades as possible contagion spreads across emerging markets,” Ms. Songwe said.

In 2020, debt-to-GDP ratios in developing countries rose to 69% from 57%. For these nations, about 16% of export earnings are spent on debt payments. The share reaches 34% in small island developing states.

The debt burden undermines their abilities to provide essential services. In 62 developing countries, for example, the share of government spending on debt service was higher than health spending in 2020.

Emergency financial measures needed

To keep the gap from becoming an abyss, Ms. Grynspan called for emergency financial measures to help developing countries cope with the impacts of the war in Ukraine – including soaring prices of food, fuel and fertilizer.

According to an UNCTAD assessment, more than 5% of the poorest countries’ import baskets is made up of products that are likely to face a price hike due to the war. The share is below 1% for richer countries.

Such emergency measures would be similar to those provided by the global financial system when the COVID-19 crisis started.

One suggestion was to reconvene the Group of 20 major economies’ debt service suspension initiative (DSSI), which froze debt repayments for low-income countries until December 2021.

“But we also need to restart the DSSI in way that doesn’t just keep kicking the can down the road,” Ms. Grynspan said. “A permanent and comprehensive debt restructuring mechanism is needed.”

Strengthen productive capacities

In addition to emergency measures to reduce costs, Ms. Grynspan called for collective efforts to promote sustainable growth in developing countries.

The efforts should be underpinned by a sustained and structural push to help the countries strengthen productive capacities so they can make more goods and services and add more value to them.

Ms. Grynspan also called for more long-term strategic investments involving the private sector and local, regional and multilateral development banks.

“We urgently need to capitalize our development banks, something that didn’t happen with the pandemic,” she said.

economic mapping Global supply strains that started to ease in early 2022 are worsening again as headwinds strengthen from the war in Ukraine and China’s economy

Global Supply Lines Brace for Economic Storm to Widen

Global supply strains that started to ease in early 2022 are worsening again as headwinds strengthen from the war in Ukraine and China’s COVID lockdowns, threatening slower growth and faster inflation across the global economy.

After the pandemic hit Asia-U.S. trade routes the hardest over the past two years, the latest turmoil is being acutely felt in Germany, which is heavily reliant on Russian energy and suppliers across Eastern Europe. Business expectations in the region’s biggest economy during March posted the steepest one-month drop on record, factories across the continent face diesel and parts shortages, and delays moving cargo through key North Sea gateways such as Bremerhaven are lengthening.

“We thought Russia was just a resources story that was going to push energy prices up — that it would make supply chains more expensive but it wouldn’t disrupt them,” said Vincent Stamer, a trade economist with Germany’s Kiel Institute for the World Economy. “It appears a little more threatening than we initially anticipated.”

On top of the wartime setbacks, omicron outbreaks are widening China’s use of strict lockdowns in major trade hubs, the latest in Shanghai. A.P. Moller-Maersk A/S, the world’s No. 2 container carrier, said March 28 that some depots serving local ports have closed indefinitely, and trucking to and from terminals will be “severely impacted.”

Chinese exports were already tailing off from an October peak — a trend that might continue for the next few months if Beijing maintains the hard line on fighting the virus, Stamer said. That’ll add shipping delays, sourcing problems and costs for businesses from the U.S. to Europe.

According to supply constraint indexes developed by Bloomberg Economics, pressures in the U.S. and Europe intensified in February after several months of improvement. Anecdotal evidence through March suggests the strains won’t abate.

Stamer cited the example of electric wire assemblies made in Ukraine for German automakers. “These cable trees are actually custom-made for individual cars” and aren’t easily or cheaply sourced from other countries, he said. Another rare input that’s suddenly even more scarce is neon gas used in semiconductor production. Ukraine produces 50% of the world’s purified neon, Stamer said. Russia’s output of raw materials extends even deeper into the global economy.

More than 2,100 U.S. firms and 1,200 in Europe have at least one direct supplier in Russia, and the total reaches 300,000 when indirect suppliers are included, according to Arlington, Va.-based Interos, a supply chain risk management company.

“Multiple industries are reliant on the same raw materials and a large percentage of them are coming out of Russia,” Interos CEO Jennifer Bisceglie said. “You’re seeing a massive cascading effect on an already limping system of the global supply chain.”

The economic and political stakes are far more consequential than the developed world’s biggest worry in 2021 — the concern that slammed global logistics would spoil Christmas for retailers and consumers.

Fears are now rising about food shortages. The cost of living is rising in rich and poor regions alike. Soaring energy prices are spawning street protests from Albania to the U.K.

Costly, longer-term shifts are accelerating, too: Goldman Sachs economists say the new geopolitical risks are forcing companies to reinforce their operations against global disruptions through reshoring, diversification and overstocking inventories.

“At the moment, the storm clouds on the horizon look quite menacing,” Citigroup Global Chief Economist Nathan Sheets said in a research note March 25, explaining why “a major adverse supply shock” from the Russia-Ukraine conflict led the bank to cut its outlook for world GDP growth this year and increase its inflation projections. “Bottom line, an already complicated picture has become even more complex.”

Trade is already feeling the sting of sanctions on Moscow and blocked transport routes. According to FourKites Inc., a supply chain visibility platform, Russian imports across all modes of freight transportation dropped 62% over the first month of the conflict, while shipments into Ukraine plunged 97%.

Though Russia accounts for 5% of the world’s seaborne trade and Ukraine just 1%, a heightened risk of a global economic slowdown has emerged.

Economists at Barclays on March 28 said the world is entering a new era of higher volatility for growth and inflation. Allianz Research on March 25 warned of a greater risk of a “double whammy” in world trade — lower volumes and higher prices — in 2022. Clarksons Research, a shipping analytics firm in London, last week trimmed its projections for global trade this year and next, saying its port congestion indexes are rising again and the latest shocks are “amplifying an already disrupted maritime transport system.”

According to data compiled by Bloomberg, the German ports of Hamburg and Bremerhaven saw new highs in ship congestion this month, while Rotterdam, the continent’s busiest gateway for container traffic, saw its vessel backup at the start of the month reach an 11-month high.

The snarls make any return to normal unlikely this year unless demand unexpectedly craters. Ocean shipping, the workhorse for some 80% of global trade, was stretched so thin that the spot rate to send a 40-foot container of goods to the U.S. from Asia averaged more than $10,000 in the second half of last year — about seven times higher than the pre-pandemic level. Those rates have come down in recent weeks, but experts say the reprieve probably reflects a seasonal lull before transport demand and costs pick up again.

“It’s going to get worse as we move through the second half of this year and into peak season,” Mark Manduca, the chief investment officer of GXO Logistics, told Bloomberg Television on March 25. “You don’t initially feel the pinch in the first few weeks of a supply chain shortage — people have inventories.”

Even greater than the risks Russia’s war in Ukraine pose to global supply fluidity are the COVID-19 cases and targeted lockdowns in China, according to economists Ana Boata and Françoise Huang at Euler Hermes, a unit of Allianz Group. They see a risk that container freight prices approach or even exceed their previous peaks, before returning to current levels by year end.

“Overall, even if not returning to the peaks of 2021, the cost and congestion levels of global supply chains are likely to remain high for most of 2022,” Boata and Huang wrote in an email. “The normalization may start more visibly only from 2023.”

Trying to anticipate how two years of supply constraints affect consumer prices has already challenged central bankers, with Federal Reserve Chair Jerome Powell saying at a press conference earlier this month that Russia’s isolation from the world economy is “going to mean more tangled supply chains, so that could actually push out the relief we were expecting.”

Some of that relief was reflected in the New York Fed’s Global Supply Chain Pressure Index, a gauge launched in January that most recently showed some easing from peak strains late last year. While it’s too soon for the New York Fed to quantify any wartime effects, there are signs that the index’s recent improvement will be limited.

“There’s been a decrease in the pressure, but the level of the pressure is still very high. It’s an improvement but it doesn’t mean the problems are resolved,” New York Fed economist Gianluca Benigno said about the direction of the index in its latest update in early March. “Anecdotal evidence suggests there might be further pressure ahead.”

Recent delivery passage in the U.S. Senate of comprehensive legislation aimed at boosting domestic manufacturing of semiconductors is helping to Stemming from the COVID-19 pandemic, the logistical bottleneck continues to reverberate around the world as carriers, shippers and third

Supply Chain Disruptions Likely to Continue in Near Future

Economists and industry experts widely believe supply chain disruptions will continue to greatly impact the transportation industry for the first half of the year, and possibly into 2023. Stemming from the COVID-19 pandemic, the logistical bottleneck continues to reverberate around the world as carriers, shippers and third-party logistics providers attempt to deal with the impact on their operations.

Although AP Moller-Maersk reported record revenue and profits earlier this month, the shipping line said it expected supply chain problems to persist into the second quarter.

“We spent tremendous efforts in mitigating bottlenecks by expanding capacity across ocean [freight], improving productivity in terminals and growing our global logistics footprint,” said CEO Soren Skou. “We will continue these efforts as we see the current market situation persist into Q2.”

Despite the supply chain woes, high consumer demand continues to fuel record sales growth and profits for several major retailers. Amazon reported a 22% increase in net sales in 2021. Late last year, Kroger and Walmart also reported strong sales as they prepared for the approaching holiday season.

In its Q3 2021 earnings call, Kroger President and CEO Rodney McMullen said the company chose to incur some significant costs to bolster its supply chain. For example, additional warehouses originally brought on to support its business through COVID were kept open through the holiday season.

Walmart also made efforts to mitigate transit and port delays, such as adding extra lead time to orders, chartering vessels for goods, rerouting deliveries to less congested ports and expanding overnight hours at key U.S. ports. Brett Biggs, chief financial officer and executive vice president of Walmart, stated during the company’s Q3 2021 earnings call that the retail chain is also working with suppliers to mitigate supply chain congestion.

“We are seeing inflationary cost pressures in some areas, and our merchants remain laser-focused on taking the necessary steps to mitigate supply chain congestion while working with suppliers and monitoring price gaps to manage margins appropriately,” he said.

Doug McMillon, president, CEO and director of Walmart Inc., said in this latest cycle, the pandemic caused shifts in how customers and members shopped and what they purchased. The long period of sustained demand for goods has stretched supply chains, resulting in out-of-stocks and inflation.

Source of Problems

Council of Supply Chain Professionals interim President and CEO Mark Baxa believes the origins of the supply chain disruptions occurred nearly 18 months before the COVID-19 pandemic hit. He cited the implementation by the Trump administration of increased tariffs on Chinese goods in September 2018 as a turning point.

In reaction to the tariffs, many suppliers moved their sourcing from China to nations such as Indonesia, the Philippines, Vietnam, and South Korea, Baxa added. Those suppliers soon found themselves mired in issues surrounding infrastructure challenges, trade compliance and the legal processes around declaring where their goods were now made.

“Vice presidents and EVPs of supply chain did not understand the magnitude of risk within their supply chains, at least to the extent that they thought they should, or that they thought they had,” Baxa said, adding that when the pandemic hit, it caused even bigger reverberations. “Not only was Wuhan suspect for the origin of COVID, but on top of that Wuhan was and is a major industrial location for the world, not just the automobile industry, but many other industries.”

Through the pandemic, many companies soon realized their earlier attempts at diversification of their tier-one suppliers had simply led them back to the same core manufacturers, he said. A prime example is the semiconductor industry, where manufacturers in Taiwan eventually became the suppliers for 85% of the world’s semiconductors.

The pandemic also drove a nail in the coffin for just-in-time production and inventory management, he added.

“If we have two people sharing, ‘how are you getting through this?’ and the words ‘just-in-time inventory’ came out, you probably got the wrong person, you’re talking to the wrong person,” Baxa said. “Because that’s a fallacy right now. It’s almost make-believe. Nothing is just-in-time. It might be ‘crisis-in-time.’ ”

These supply chain disruptions have also led to some fundamental changes in the relationships among suppliers and their carriers and 3PL providers, Baxa said. One of those changes comes in the form of their agreements, he added.

“In the dark of night, [shippers, carriers and 3PLs] are writing long-term agreements [three-, five- and even 10-year agreements], and they’re in business,” Baxa said. “They’re embedded in business together.”

Baxa referenced key performance indicators involving finances plus growth and risk factors that companies are sharing for a better business relationship.

“So cost isn’t the only play,” he said. “It’s high reliability and risk mitigation today and for the foreseeable future. And that carries a value.”

Technology Solutions

Anshu Prasad, CEO of Leaf Logistics, said while the next couple of quarters are going to be tough because of inventory build and shortages and capacity constraints, he believes the tide for fleets is shifting toward greater use of technology in its freight management. Leaf Logistics provides carriers, shippers and third-party logistic providers cloud-based applications for building routes and freight management.

Prasad said it can take as much as 20 interactions — such as calls and emails among the shipper, the receiver, third-party logistics provider, carrier and driver — to move a truck from point A to point B.

“We think that through better data and better service planning and orchestration, we can reduce the amount of work that’s required to move trucks around the country by 80-85%,” he said.

Prasad added that cloud-based solutions can reduce the amount of work needed to manage freight movements as well as lower driver turnover by finding less wasteful ways to manage trucking capacity.

Jim Guthrie, director of operations for Springfield, Mo.-based Prime Inc., said technology has certainly made some improvements in the trucking industry. But in order for technology to fully resolve supply chain issues, “you’ve got to have good information from everybody, every piece of the supply chain,” Guthrie said. “You’ve got to have really seamless communication [among the customer, the shipper, the carrier, the receiver, and in most cases a 3PL] and every piece of that chain is impacted by COVID. And every piece of that chain at this point is probably short-staffed.”

Prime Inc. ranks No. 18 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Guthrie said over the next five years, there will be substantial technological advancements in freight management. The carrier is working with Mastery Logistics System to implement a cloud-based transportation management system into its own operations to address soaring logistics complexity and improve driver engagement, he added.

Working With Suppliers

Another way shippers and carriers have successfully dealt with supply chain disruptions is by taking a more collaborative approach.

“The more attractive you can make yourself to carriers, then I think the better you’re going to do at gaining capacity and moving your product and so we’re heavily focused on that,” said John Janson, senior director of global logistics for apparel and accessories supplier SanMar Corp.

Janson said SanMar’s philosophy has been to develop deep relationships with its carriers. SanMar operates 10 national distribution centers in the United States and imports from more than 24 countries. From its distribution centers, SanMar distributes its products to customers and stores via small parcel or less-than-truckload shipments.

“We’re trying to do mostly drop-and-hook and to be a good steward of both our carriers and other drivers so that drivers would want to come to our facilities because they know they’d be treated with respect, and they wouldn’t be tied up trying to load or unload,” he added.

Jason Williams, senior account manager for Trinity Logistics, said there are still some shippers that aren’t doing certain things to ease tensions with carriers. The firm, which ranks No. 20 on Transport Topics list of top freight brokerage firms, provides brokerage services in dry van truckload, LTL, refrigerated, intermodal and flatbed/heavy-haul freight among others.

“And those are the ones that I think are paying the most money to move their freight right now, because they’re not doing the little things they should, like being a little more flexible when it comes to appointments,” he added.

Williams said rather than opening up all of their contracted lanes to a bidding process and losing experienced contracted carriers, some shippers are providing them an opportunity to submit new rates on a quarterly basis without having to go through a full bidding process. With the carriers’ ability to revise their rates quarterly, some shippers find that they are more likely to receive responses on their load boards without having to go to the spot market, he added.

In describing his own company’s business strategy in acquiring new business, Rob Kemp, president and CEO of DRT Transportation, said his company still participates in the spot market. Lebanon, Pa.-based DRT Transportation assigns its freight load capacity to a blend of dedicated and contract as well as spot markets, he added.

“We try to keep X percentage of our capacity freed up at all times for whatever growth opportunity there may be out there. So, as contracts are finishing, and we’re renegotiating a fair number in a renegotiation, we move the needle on revenue per load with that,” Kemp said. “And as contracts are expiring, the capacity involving those that weren’t the most friendly customers, we’ll throw that into our open pool. And that’s moving the revenue per truck needle substantially as well.”

As for shippers looking at the impact of the capacity crunch on their carriers, Kemp believes a third of them aren’t doing enough to reduce pain points such as detention times.

“I don’t know why that is, it seems inconceivable,” Kemp said. “But it’s been our experience that they’ll still delay you five hours loading and four hours unloading and wonder why no one wants to haul their freight.”

Kemp said the shippers who are working with his company are taking steps such as changing shipping hours or going from live load to drop-and-hook to improve their drivers’ experience. Kemp appreciates those efforts not only because they help control costs, but also they make a big difference in driver retention.

“If I’m bringing on a new account, we’re asking a lot of different questions on how it will impact our drivers that we’re going to stick in there than we ever did before,” Kemp added. “And I think that’s something the shipper community should pay attention to, if they’re going to be the ones getting their freight hauled at a reasonable amount.”

supply chain management

Expert Insight: Supply Chain Disruptions Through the Eyes of TITAN Professional Tools

“Supply chain troubles.” “From bad [2020] to worse [2021].” It was a “perfect storm for our supply chain crisis.” These are just a few of the headlines I’ve seen in recent weeks looking back on 2021. While I think we’re all eager to turn the page and start anew, I fear many of the challenges we experienced last year will continue into 2022 – and perhaps beyond. If there’s one thing we learned last year, it’s that our supply chain is more fragile than many of us imagined.

Case in point, a recent estimate from the American Trucking Associations (ATA) reported that the truck driver shortage has risen to 80,000 – an all-time high for the industry. According to the ATA study, the driver shortage could surpass 160,000 by the end of the decade, noting that the industry will need to recruit nearly one million new drivers to replace those retiring or leaving the business. Not only did the outbreak of COVID-19 in early 2020 exacerbate the issue, but it also revealed gaps in every link of the supply chain and then amplified the impact of those collective weaknesses.


A recent Wall Street Journal article perfectly summarized the challenge:

Trucks haul more than 70% of domestic cargo shipments. Yet many fleets say they can’t hire enough drivers to meeting booming consumer demand as the U.S. economy emerges from the pandemic. The freight backup has intensified longstanding strains in the industry over hours, pay, working conditions and retention. The surge of goods has created logjams at loading docks and port terminals, gobbling up scarce trucking capacity and making drivers’ jobs even harder. Factories and warehouses are also short of staff to load and receive goods. Meanwhile, the broader labor shortage has left openings for other blue-collar jobs that compete with trucking, including in local delivery operations, construction and manufacturing.

To better understand the operational and logistical issues retailers, importers, wholesalers and other distribution organizations are facing due to the state of today’s supply chain, I recently spoke Nick Tsitis, vice president at TITAN Professional Tools. His account is eye-opening, to say the least, and can hopefully help those facing similar challenges.

Q:  How did the Suez Canal accident create operational and logistical issues for businesses like TITAN Professional Tools?

A:  No one talks about this anymore. Before conversations of current supply chain issues, however, our forwarders often referenced the incident. I believe it significantly contributed to and accelerated our current supply chain problems, including shortages of equipment and limited space on vessels and at our ports. There’s been a huge stress on the ports, making it difficult to even get containers off the ships. And when you do get them off the ships, they sit in these piles disorderly piles they’re calling “pig piles” now. Whatever’s on top becomes available first.  And if you’re on the bottom of that pig pile, your merchandise is stuck.

So, not only is it taking time to get containers off ships, but it’s also taking time to get them from the ground onto chassis. Once containers finally do make it to our facility, and we get them unloaded, you would think with such a shortage of equipment there would be an urgency to return containers, but they cannot be returned to the port. We recently discovered 12 containers being stored in our business park from someone that is not a tenant here.  Apparently, they ran out space in their complex, and decided to park the equipment at ours.

Q: How have issues like this impacted your operating costs?

A: In so many ways.  It used to cost $1,500 to get a container from Asia to Seattle. Now we’re paying as high as $18,000. We are often charged demurrage for containers that are off vessels but not delivered to us within a week.  There are surcharges being implemented on both sides as well (Asia and USA). It’s a huge burden on us. It also affects our cash conversion cycle as goods invoiced to us are stuck in transit, and we can’t invoice until we receive and ship to our customers.

Q: How are you dealing with dock scheduling and similar issues caused by all this unpredictability?

A: Once we can get the container and get an appointment, it hasn’t been too big of a problem. On occasion, the truck drivers will have to wait sometimes six to eight hours to pick up a container. We used to pay under $100 to get a container from Seattle to Kent. Now it’s almost $700 to move it seven miles. Local drayage is up, and we’re often having to pay the drivers by the hour to wait in line to ensure we get our merchandise.

Q: Are you also facing labor shortages in the warehouse that compound these issues?

A: I know others have but we haven’t realized that because we’re a small business and have a lot of family here that have been with the company for a long time.  We are fortunate and may be y the exception when it comes to labor. But, yes, when you look down the road and see Amazon hiring at $23.50 an hour with a $3,000 signing bonus, it can be hard to compete with that.  it has in the past.

Q: How close do you think we are to seeing an end to these disruptions?

A: Well, everything’s related in one way or another – if not directly, then indirectly – to these supply chain problems. Our lead time with several factories is now as high as 18 months, where it used to take 45 to 90 days to manufacture product and 14 days transit is now taking as many as 60 or 90 days transit. There are some factories, that if we placed an order now, we won’t see it for almost two years. That’s an extreme. Most factories now are taking 6 to 8 months. As a result, we’re buying out a year, which is really scary. So, yes, it’s going to take a long time to recover. I don’t think it’s going to get back to normal for at least another year.

Q:  Based on your experiences, what advice would you share with other businesses facing similar challenges?

A:  We often use the word “partnership” between vendors and customers. We are making it thru these challenging times because of the true partnerships we have on both sides, with our vendors, and our customers. Everyone is understanding, being more flexible and forgiving, and more willing to accommodate than before. Pardon the pun, but everyone is “in the same boat” on this.  We need to work together to get through it.


Datawatch: Analytics Goes Viral – How Data is Used to Help Predict, Prevent and Curtail Outbreaks

In the latest blog in our Datawatch series, we look at the role analytics plays in keeping outbreaks at bay – from Cholera in the 1800s to COVID-19 today.

COVID-19 has changed the world dramatically in a short space of time, presenting new challenges for world leaders and medical experts alike. In fighting it, we’ve had to use all the tools at our disposal, and past experience tells us that advanced analytics is perhaps the most powerful weapon in our armory.

You’d be forgiven for thinking that analytics and data science are relatively new tools that today give us an advantage in our fight against viral outbreaks. In a sense you would be right, the tools and techniques used by data scientists have evolved significantly in recent years. But analytics has actually been used in this way for over a century, with one of the earliest examples taking place way back in 1854.

At that time, the residents of Victorian London were in the midst of a rampant cholera epidemic that had killed more than 600 people in a week. Little was known about these kinds of outbreaks back then, and many people assumed that cholera was an airborne disease. However, thanks to some rudimentary data analysis and modeling, Dr. John Snow was soon able to put this misunderstanding to bed.

Long before GIS maps were ever a thing, Dr. Snow began to gather data related to the cholera deaths and plot them, by hand, on a map of London. As a result of this early form of data visualization, Snow was able to trace the source of the outbreak to a water pump on Broad Street. The pump handle was replaced, and the outbreak was stopped in its tracks.

Amazingly, these same techniques are still used today – although visualization has improved somewhat. You can see how Dr. Snow’s work may look if it were carried out today, here.

Big data, analytics, and the fight against COVID-19

Although the theory behind this technique is still widely used today, we now have tools at our disposal that Dr. Snow could only have dreamt of back in 1854. Most notably, huge computational power that allows us to crunch massive amounts of data in record times.

This technology has played a huge part in our battle against the recent COVID-19 pandemic, helping medical experts and world leaders identify the right responses, develop the right solutions, and plot the best routes to recovery. Here are just three ways analytics has helped us to fight the pandemic.

Tracking the spread of the virus

Tracking the spread of COVID-19 has been essential in our battle to mitigate and overcome its impacts. It’s interesting to note that in this instance, analytics played a part in tracking COVID-19 before most of us even knew it existed.

In 2019, an AI system belonging to an outbreak risk startup called BlueDot detected some similarities between what the press was calling ‘a strain of pneumonia’ in Wuhan and the Sars outbreak of 2003.

Since this initial discovery, BlueDot has continued to track the spread of COVID and monitor its movements, using AI to analyze a wealth of unstructured data, including social media posts and news reports.

Social media can actually play a huge role in situations like this. By applying sentiment analysis to unstructured social data, it’s possible to track everything from the regions the virus has spread to, to the attitudes to proposed legislative responses and government guidance.

All of this data can then feed into action plans and help health officials respond more appropriately, accurately defining the best social distancing and quarantine measures, for instance.

Developing vaccines

As the pandemic trundled on into its second year, it became apparent that this wasn’t going to be something that just went away. And this meant that vaccination was our best chance of life returning to normality.

The problem though is that developing a vaccine typically takes years. Before Pfizer and AstraZenica, the mumps vaccine held the record for the fastest to be developed, and that took almost half a decade.

However, thanks to advances in analytics and AI, a COVID vaccine was approved and made available for emergency use within a year of the virus’ outbreak.

A large part of this was down to global cooperation, and the fact that virologists have encountered coronaviruses before. But data analysis and tools like AI and machine learning were also significant factors.

For example, AlphaFold, a tool in Google’s DeepMind platform, used AI algorithms to catalog the structure of potential proteins that could help the virus spread – a vital part of understanding how a virus works and how it can be contained.

AlphaFold is a state-of-the-art system that can predict the structure of proteins based on their genetic sequence. This system was used to investigate proteins associated with COVID, before the information was made openly available to scientists working on the vaccine.

With the same aim, AI and natural language processing have played a big part in applying analytics to the COVID-19 Open Research Dataset – a collection of almost 500,000 scholarly articles that are gathered from across the world and made openly available to the global research community.

Elsewhere, in a lab in Tennessee, the world’s second-fastest supercomputer has been crunching data in an attempt to understand how the virus behaves, analyzing 2.5 billion genetic combinations to ascertain how COVID attacks the human body.

Responding at the right time in the right way

COVID-19 has been perhaps the toughest test imaginable for healthcare institutions worldwide. With resources in short supply, difficult decisions have had to be made each day. For instance, what critical assets are needed in each location? And where and when will hospital beds be required as the virus moves through populations?

These problems can’t be answered by leafing through spreadsheets – there’s simply too much data, too many variables, and a picture that changes each day. However, using advanced analytics, healthcare officials have been able to make these key decisions based on vital, actionable and timely insights.

For example, epidemiological models have been useful in forecasting infection spread throughout regions, helping healthcare workers to predict the potential numbers of infected people that will require medical treatment – and what that level of treatment will look like.

Predictive simulation and scenario modeling have also been used to help forecast the required number of healthcare workers based on given scenarios, along with the strain outbreaks may place on healthcare services. This data has then fed directly into national lockdown plans.

One example of this in action can be seen at the Sheba Medical Centre in Israel, where data-driven forecasting is used to optimize the allocation of resources before outbreaks even strike. The center has used machine learning to crunch data related to confirmed cases, deaths, test results, contact tracing and the availability of medical resources, to ensure it’s prepared for what lies around the corner.

The center also led a national competition to develop the best technology for predicting the deterioration rate of COVID patients.

A step change for virology

The scale and speed of COVID-19’s spread have been unparalleled. But the scale of our response to it has been equally as impressive. Using the latest analytics techniques, healthcare workers have been able to prepare for unpredictable scenarios, governments have gained insights into the best actions for keeping people safe, and businesses have been able to take measured approaches to adapt to the world around them.

In the midst of this pandemic, it’s hard to find many if any positives, but the lessons learned during COVID-19 will have a huge effect on the way we tackle similar events in the future.

Whether it’s developing vaccines, ensuring the appropriate resources are in the right place at the right time, or fast-tracking our understanding of the situation to keep as many people safe as possible, analytics is able to provide the answers to the most complex questions these situations present. And it’s been doing so since the 1800s.


Nitin Aggarwal is the VP & Business Head of Analytics at The Smart Cube, a global provider of analytics and procurement intelligence solutions.