Detecting and Analysing Supply Chain Disruption

There is mounting evidence of supply chains distress across different industrial ecosystems affecting the production capacity of firms and indirectly creating price pressures. At the same time, the need of policy makers to monitor and understand the underlying factors is also more pressing. This paper, therefore, proposes a methodology to detect and analyse supply chains disruptions. In a first step, it applies a new indicator based on business surveys to estimate at sectoral level the relative importance of supply constraints versus demand expansion in determining price pressures. This information is summarised in the form of an “alert system” that can be updated on a regular basis. In a second step, relying on two case studies on wood and magnesium, where price distress and shortages have been observed, an econometric model is built. This investigates the relation between the import price variation and several dependency indicators, as well as long-term demand variations in order to understand the likely determinants of price pressures associated with shortages. The results suggest that higher reliance on foreign imports combined with higher concentration in supply chains are the two key factors explaining price pressures at product level. In addition, we find that products where there is a strong structural demand increase are more likely to experience price pressures. These findings can shed light on the determinants of ongoing supply chains disrutpions and specific price pressures, thereby helping policy makers design appropriate responses.