In 2021, disruptions to the supply chain were estimated to have cost the global economy $1.9 trillion. So, how can this be minimised?
Researchers at Complexity Science Hub in Vienna (CSH), INET Oxford and the University of Cambridge, have set out to answer this question and recommended using the wide availability of data and new analysis methods to eventually map the global network of 13 billion supply connections.
Doing so could lead to benefits such as:
- improving supply security;
- ensuring all trading partners, their suppliers, and their suppliers' suppliers operate in an environmentally friendly manner and in compliance with human rights;
- improving monitoring of what is likely to be a fluid supply chain as economies move towards adoption of more green technologies; and
- reducing tax evasion through a standardised system that collates data about individual business-to-business transactions.
Dr François Lafond, Deputy Director of the INET Oxford's Complexity Economics Programme, said:
‘This is an exciting time for research. With the right setup for data development, we will soon be able to calibrate models of the global economy at much finer scale, paving the way for real-time monitoring, more accurate predictions, and ultimately better policies.’
The research team, led by the Complexity Science Hub (CSH) in Vienna, report (in a paper published in Science) that it would be necessary to link trade data from different countries to create an accurate global map of supply relations. However, a lot more work needs to be done.
For example, the EU records trade in goods between its member states at company level. The researchers say that if member states also included services and linked them with VAT data, this could lead to a comprehensive cross-border company-level network accounting for almost 20% of the global GDP. The European Commission laid the legal foundation for such a framework by proposing ‘VAT in the Digital Age.’
‘Unfortunately, this is far from being realised,’ said Professor Stefan Thurner, an author of the paper and President of CSH.
‘So far, we do not have a single situation where the supply chain networks of any two countries have been joined and merged. This would be an essential next step.’
To create a truly international picture of supply interconnections, hundreds of datasets must be joined, analytical tools developed, and an institutional framework created together with secure infrastructure for storing and processing enormous amounts of sensitive data.
Professor Doyne Farmer, Director of the Complexity Economics Programme, said:
‘Supply chains are vital to everything we do, yet we know very little about them. Having better maps of supply chains and a better understanding of how they are disrupted and how to recover would make our economy much stabler.’
The researchers now aim to establish a foundation to help accurately map supply connections worldwide.