Changes Magazine

The butterfly effect

changes #2/24

American meteorologist Edward Lorenz brought chaos theory into the public consciousness with his notion that a butterfly flapping its wings in Brazil can set off a tornado in Texas. That same concept applies equally to supply chains, where even seemingly insignificant glitches can have major repercussions.

Modern supply chains are optimized for efficiency. That means any disruption, however small, can quickly trigger an unpredictable chain of events. One such disruption occurred in the summer of 2022, when the war in Ukraine made natural gas so hard to come by and expensive in Europe that many fertilizer producers were forced to reduce or even shut down production at their ammonia plants using natural gas as a feedstock. Scheduled maintenance shutdowns of ammonia plants in the USA only exacerbated the situation. This butterfly wing flap in agribusiness precipitated a chain of events that ultimately took the fizz out of the beverage industry – literally and figuratively. Until the crisis, most industrial food-grade CO 2 used for bottling and carbonating soft drinks had been a by-product of ammonia manufacture. The resulting shortages drove numerous breweries, soft drink producers and mineral water bottlers to scale back their production. FROM INTEGRATED PRODUCTION TO GLOBAL SUPPLY CHAINS In the chemical industry, this type of interconnectedness – where the by-products of one process are used for other processes – is known as integrated production. Chemical giants like Dow and BASF have turned this kind of integrated supply chain into an art form that significantly enhances their production sites’ resource efficiency, and hence economic viability. But there is a downside: a broken link in the chain can have unforeseen consequences for other processes, both at the plant in question and far beyond – as we have seen in the beverage industry example. What’s more, a supplier who cannot guarantee supply risks losing revenue and market share, with the added sting that many customers may never return. And yet, reliability of supply is just one among a growing number of challenges that companies must navigate in managing their supply chains. Indeed, while supply chain globalization has in recent years created new market opportunities and possibilities for cooperation, it has also driven an increase in complexity and vulnerability. Supply chains across all industries – whether chemical, life sciences, automotive or machinery manufacturing – have been under pressure in recent times. Uncertainty and risks continue to grow. This upending of many things taken for granted by the big industrial players of the world came to a head during the pandemic years. As if the 2020 and 2021 closures of China’s ports to halt the spread of the virus weren’t enough, the Ever Given container ship ran aground in the Suez Canal, and most recently another one – the Dali – collided with a bridge in Baltimore. Suddenly, supply routes once considered reliable were anything but.

Text: Armin Scheuermann Illustration: Totto Renna

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