'SCAN' (Supply Chain Alert Notification) Monitoring System

Abstract

This note proposes an indicator-based mechanism in order to monitor the evolution of supply chains in the European Union (EU) and identify potential distress. Current events, such as COVID-19 or the Russian aggression against Ukraine, have highlighted the need for a better risk assessment of supply chains, particularly in strategic areas, with the ultimate goal of detecting disruptions as early as possible to avoid potential adverse effects on the economy and society. The proposed monitoring system is entitled “SCAN” (Supply Chain Alert Notification) and its main goal is to identify significant inflationary pressures and/or shortages, resulting from imbalances between demand and supply. This data-driven system could alert policymakers on possible supply chain disruptions, which can occur for specific products and sectors. The SCAN is first applied at the product level, where supply chain disruptions start to materialise. In order to be able to have targeted conclusions, we illustrate how this mechanism performs by focusing on a set of important commodities in two strategic settings – i.e. production of solar panels, commodities affected by the Russian invasion. The SCAN is then applied for the universe of sectors to capture signals of distress with more important aggregate consequences.

Keywords: Supply Chain Disruptions, Critical Raw Materials, Trade Flows, International Trade, National Security