Page 92 - North American Clean Energy January/February 2020 Issue

energy efficiency
Building Resilient International Supply Chains
What clean energy companies need to know
By 2030, the United Nations1 predicts that the worldwide population will reach 8.6 billion—one billion more people than today. This growth is anticipated to continue into 2100.
Sustaining a growing global population requires access to healthy food, clean air, fresh water, and other natural resources. To meet this need, clean energy companies are investing heavily in new research
and development initiatives to power our future. To achieve this, companies must start sourcing parts
and components from a wider network of suppliers— ultimately expanding their supply chains to include international markets. In fact, a recent survey of global clean tech executives2 found that global expansion, and management or growth of supply chains, rank among their top five priorities over the long term.
As supply chains become more interconnected, however, companies are exposed to new risks. While
of companies set to source in the region will more than double over the next three years, to 33 percent. China is also a top destination, ranking as the third most preferred market for sourcing - today and
in the future. This shift will add new supply chain complexity, and new risks to be managed.
Risks around the world
Supply chains are critical to a company’s success, and are inherently sophisticated no matter where they are located.
As more supply chains expand internationally, businesses and suppliers become more independent, which makes any single disruption potentially
a component (or several components) for their product, they yield a certain amount of control and oversight. Additionally, emerging markets may have different cultural standards when it comes to quality, which potentially puts a product at risk if this difference is not proactively discussed.
Another significant global supply
chain concern is intellectual property
(IP) protection - ranked by clean tech executives as the third overall risk to their supply chains. As supply chains become more globalized, it’s vital to understand the different laws each country has regarding
by Maria Guercio and Martin Kunz
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JANUARY•FEBRUARY2020 /// www.nacleanenergy.com
relatively predictable, they can lead to business disruption, and even failure to meet global needs.
For clean energy companies looking to grow their supply chains abroad, either for the first time or to expand into new countries, here are a few things to keep in mind.
Where in the world are supply chains going?
Clean energy companies primarily source supplies from the U.S. and Europe. Yet, despite these
two regions providing economic stability and comparatively simple business processes, they will decline in dominance.
Southeast Asia is one area of the world that is emerging as an attractive option; the percentage
significant. For example, within a supply chain network, each supplier has its own suppliers—and those suppliers likely source from other companies. Should any one supplier within this chain suffer
a production delay or quality issue, it can have a cascading effect, ultimately affecting the end company’s reputation and revenue.
These threats don’t just exist in the abstract. At least half of the clean tech executives surveyed suffered
a supply chain disruption in the past three years. Among the greatest challenges are quality assurance and production problems, ranked first on the list by clean energy executives. Production problems also posed a serious risk (they came in second).
The reason clean tech executives are so concerned is that, when they depend on someone else to manufacture
IP protection and enforcement; these laws are typically less stringent than U.S. laws.
Finally, stability of the legal and political environment in the countries where international suppliers are located is a
top concern for clean energy companies. Deciding which supplier to work with can depend on a number of variables: Are
they located in a place where there is a stable political situation on-the-ground?
Is there a sound infrastructure in place to physically move supplies? How easily can component parts be exported? Even minor changes in a country’s legal or political environment can have an outsized impact on a supplier’s ability to operate.