The impact of the US election result is the top concern for exporters when it comes to managing supply chains, according to Simon McKeever, chief executive of the Irish Exporters Association. He says that the potential fallout from the election is on the minds of exporters more than the conflicts in Ukraine and the Middle East.
“What’s more in the mind of people is the impact the result of the US election will have on global trade and Ireland’s position in global supply chains,” says McKeever. “If there is another tariff war there are questions as to where Ireland sits within that.
“A lot of companies may need to reconsider their USA strategy if there are all kinds of tariffs. Companies are thinking about that because it’s a big market. That’s the single biggest thing from an external point of view that people are talking to me about at the moment.”
While the election outcome may be front of mind for businesses the two major conflicts remain a hindrance when it comes to supply chain management.
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“A lot of companies were just getting over Covid and Brexit. Access to raw materials was already a challenge. Shipping times are extending due to reduced access to the Red Sea. That is adding 10 days of travel time. It adds extra costs and also impacts trading decisions over who pays for goods and when they are paid for,” says Ian Talbot, chief executive at Chambers Ireland.
“There’s also the risk of oil and gas price turmoil with the Middle East. Surprisingly enough it’s not currently having the impact that you might have expected. If things continue to escalate, energy issues could become more of a factor.”
These issues have been compounded by the increased impact of climate change, with major weather events disrupting supply chains significantly.
“These events disrupt both material sourcing and goods transport. For instance, significant flooding or heatwaves in Europe or North America can delay production while rising insurance costs add financial burdens. To manage these risks manufacturers are focusing on resilience, including sourcing locally or from areas less affected by climate events,” says Sharon Higgins, executive director of membership and services at Ibec.
“Supply chain interruptions from extreme weather have caused temporary shortages of materials, driving up costs. Businesses have faced higher expenses for emergency sourcing, rerouting shipments, and holding larger inventory buffers to mitigate risk. They are also working to reduce carbon emissions, contributing to a lesser environmental impact.”
Higgins says that the tension caused by the combination of climate and conflict issues has only increased concerns around Ireland’s trading partners taking a more protectionist approach.
“Ireland’s economy is underpinned by our strength in trade and our ability to attract investment. These strengths have been challenged by increasing levels of protectionism and global competition, including escalating trade disputes and the imposition of tariffs,” she says. “This creates uncertainty that directly impacts supply chain stability. In speaking with our members we know that weaker global trade and ongoing trade uncertainties remain significant concerns for the manufacturing sector.”
The logical approach to easing the pressure would be to spread the risk across a wider range of trading partners. The actions of Irish businesses, however, don’t back up that line of thinking.
“It’s really interesting. Brexit gave companies a good education on what was needed. Companies might have focused more on diversifying and not being dependent on the UK. Yet at the same time the trade statistics show that the UK is still the top trade partner in Ireland by a long way,” says Talbot.
“There is still a huge dependence on the UK and the US with our trade. There was a huge surge in terms of trade with China but when all is said and done we’re still using our traditional trade routes. We’re managing our exposure by doing business with friends and neighbours.”
Despite that somewhat conservative approach to managing supply chain risk, McKeever is confident that Irish businesses have an edge when it comes to preparing for future challenges.
“Irish companies are excellent at engaging with problems. As a country there is a Team Ireland approach. We look at how we can come together to deal with an issue. As a nation we’ve learned well from experience to come together whenever a hurdle comes up,” he says. “We have a flexible approach and an openness, a willingness, to do things in a different way. We’re an adaptable economy.”