Global Supply Chain Disruptions : Competition Policy Implications
This note complements prior World Bank work analyzing the technical drivers of supply chain disruptions from 2021 onwards. The focus of this note is to shed light on the role of market structure and dynamics by: (a) analyzing how market dynamics an...
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2022
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| Online Access: | http://documents.worldbank.org/curated/en/099548205272263182/IDU0cd8b1e1a0e97604b5b09fdf08385d6d7cdb2 http://hdl.handle.net/10986/37507 |
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okr-10986-375072022-06-09T05:10:35Z Global Supply Chain Disruptions : Competition Policy Implications World Bank SUPPLY CHAIN DISRUPTION UNEXPECTED DEMAND SPIKE LOGISTICS DISRUPTION PORT-HINTERLAND CONNECTION RISING SHIPPING COST MITIGATION TRADE FINANCE OVERLAND TRADE FACILITATION ANTICOMPETITIVE BEHAVIOR GLOBAL LOGISTICS INDUSTRY COLLUSION COMPETITION POLICY TRANSPORT DISRUPTION STRUCTURAL CONSTRAINT This note complements prior World Bank work analyzing the technical drivers of supply chain disruptions from 2021 onwards. The focus of this note is to shed light on the role of market structure and dynamics by: (a) analyzing how market dynamics and industry structure may have contributed to the current situation; (b) outlining implications for value chains in developing countries; and (c) suggesting further policy and research priorities. On the demand side unexpected demand spikes in the United States have created disruptions due to the sheer volume of logistics throughput needed and the sudden, unexpected rebound in demand that is contributing to the “bullwhip effect.” On the supply side, capacity constraints with respect to port-hinterland connections have been the main bottleneck rather than maritime shipping per se. However, this note raises the concern that industry structure and alliance practices within the maritime shipping, shipbuilding, and container manufacturing sectors may be contributing to the extreme reaction of shipping prices. In the short term, policy makers in developing countries can help mitigate the effects of rising shipping costs and decreasing service levels by extending the timeframes of trade finance and removing barriers to overland trade. Although there is little that governments outside of China, Europe, and the United States can do to directly solve the process bottlenecks, market characteristics suggest that the global logistics industry may be susceptible to collusive outcomes, which exacerbate price spikes. Thus, governments could pay closer attention to potential anticompetitive behavior, especially in maritime shipping and hinterland logistics. In the medium to long term, policy makers, regulators, and researchers should more carefully consider efficiency–resilience tradeoffs in the global logistics industry. Key topics to explore include investigations into potential anticompetitive behavior by shipping lines and increased scrutiny over mergers and alliance practices among logistics service providers and the supplying manufacturing industries. Public-private and private initiatives to facilitate data sharing may also help improve forecasting, which could help mitigate the effects of demand volatility. This note was predominantly prepared before the invasion of Ukraine by the Russian Federation, which started in February 2022. In the short term, the war is likely to exacerbate the congestion at European ports and disrupt Asia-Europe rail links, potentially leading to higher shipping prices. In the long term, it remains to be seen whether decreases in global demand due to the war will lower shipping demand and prices. Nevertheless, the long-term structural constraints to competition in the sector highlighted in this note remain the same overall. 2022-06-08T16:02:28Z 2022-06-08T16:02:28Z 2022 Report http://documents.worldbank.org/curated/en/099548205272263182/IDU0cd8b1e1a0e97604b5b09fdf08385d6d7cdb2 http://hdl.handle.net/10986/37507 English Equitable Growth, Finance & Institutions Notes; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank Washington, DC Report Publications & Research |
| repository_type |
Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
SUPPLY CHAIN DISRUPTION UNEXPECTED DEMAND SPIKE LOGISTICS DISRUPTION PORT-HINTERLAND CONNECTION RISING SHIPPING COST MITIGATION TRADE FINANCE OVERLAND TRADE FACILITATION ANTICOMPETITIVE BEHAVIOR GLOBAL LOGISTICS INDUSTRY COLLUSION COMPETITION POLICY TRANSPORT DISRUPTION STRUCTURAL CONSTRAINT |
| spellingShingle |
SUPPLY CHAIN DISRUPTION UNEXPECTED DEMAND SPIKE LOGISTICS DISRUPTION PORT-HINTERLAND CONNECTION RISING SHIPPING COST MITIGATION TRADE FINANCE OVERLAND TRADE FACILITATION ANTICOMPETITIVE BEHAVIOR GLOBAL LOGISTICS INDUSTRY COLLUSION COMPETITION POLICY TRANSPORT DISRUPTION STRUCTURAL CONSTRAINT World Bank Global Supply Chain Disruptions : Competition Policy Implications |
| relation |
Equitable Growth, Finance & Institutions Notes; |
| description |
This note complements prior World
Bank work analyzing the technical drivers of supply chain
disruptions from 2021 onwards. The focus of this note is to
shed light on the role of market structure and dynamics by:
(a) analyzing how market dynamics and industry structure may
have contributed to the current situation; (b) outlining
implications for value chains in developing countries; and
(c) suggesting further policy and research priorities. On
the demand side unexpected demand spikes in the United
States have created disruptions due to the sheer volume of
logistics throughput needed and the sudden, unexpected
rebound in demand that is contributing to the “bullwhip
effect.” On the supply side, capacity constraints with
respect to port-hinterland connections have been the main
bottleneck rather than maritime shipping per se. However,
this note raises the concern that industry structure and
alliance practices within the maritime shipping,
shipbuilding, and container manufacturing sectors may be
contributing to the extreme reaction of shipping prices. In
the short term, policy makers in developing countries can
help mitigate the effects of rising shipping costs and
decreasing service levels by extending the timeframes of
trade finance and removing barriers to overland trade.
Although there is little that governments outside of China,
Europe, and the United States can do to directly solve the
process bottlenecks, market characteristics suggest that the
global logistics industry may be susceptible to collusive
outcomes, which exacerbate price spikes. Thus, governments
could pay closer attention to potential anticompetitive
behavior, especially in maritime shipping and hinterland
logistics. In the medium to long term, policy makers,
regulators, and researchers should more carefully consider
efficiency–resilience tradeoffs in the global logistics
industry. Key topics to explore include investigations into
potential anticompetitive behavior by shipping lines and
increased scrutiny over mergers and alliance practices among
logistics service providers and the supplying manufacturing
industries. Public-private and private initiatives to
facilitate data sharing may also help improve forecasting,
which could help mitigate the effects of demand volatility.
This note was predominantly prepared before the invasion of
Ukraine by the Russian Federation, which started in February
2022. In the short term, the war is likely to exacerbate the
congestion at European ports and disrupt Asia-Europe rail
links, potentially leading to higher shipping prices. In the
long term, it remains to be seen whether decreases in global
demand due to the war will lower shipping demand and prices.
Nevertheless, the long-term structural constraints to
competition in the sector highlighted in this note remain
the same overall. |
| format |
Report |
| author |
World Bank |
| author_facet |
World Bank |
| author_sort |
World Bank |
| title |
Global Supply Chain Disruptions : Competition Policy Implications |
| title_short |
Global Supply Chain Disruptions : Competition Policy Implications |
| title_full |
Global Supply Chain Disruptions : Competition Policy Implications |
| title_fullStr |
Global Supply Chain Disruptions : Competition Policy Implications |
| title_full_unstemmed |
Global Supply Chain Disruptions : Competition Policy Implications |
| title_sort |
global supply chain disruptions : competition policy implications |
| publisher |
Washington, DC |
| publishDate |
2022 |
| url |
http://documents.worldbank.org/curated/en/099548205272263182/IDU0cd8b1e1a0e97604b5b09fdf08385d6d7cdb2 http://hdl.handle.net/10986/37507 |
| _version_ |
1764487363348660224 |