Insight into supply chains

Raw materials and products are brought from origin to end-user through supply chains. The complexity of, and dependencies within, these chains make them prone to disruption. A good understanding of these chains is essential in analysing risks to the Dutch economy and industry.

What is a supply chain?

A supply chain is the path a product takes: raw materials are extracted, then processed into products, used by consumers, and finally disposed of. The example of a battery is a useful model to understand the basics.

Supply chain of a battery

  1. Raw material extraction – A battery starts with the extraction of raw materials such as lithium, cobalt, and nickel. Lithium is extracted in countries such as Australia.
  2. Manufacturing – The extracted raw materials are taken to factories, where they are processed into components such as battery cells.
  3. Assembly – These cells are assembled into a complete battery in a factory.
  4. Transport – Batteries are transported to shops or companies, where they are sold or installed in products such as phones and electric cars.
  5. Consumption – The battery is used by consumers in various devices.
  6. Recovery – At the end of a battery's life, it is collected for recycling. Valuable materials such as lithium, cobalt, and nickel are recovered during the recycling process.

Global networks

Modern supply chains are global networks made up of thousands of interconnected parties, such as suppliers, manufacturers, distributors, and recyclers. Take an electric car battery, for example: the raw materials are partly extracted in Australia, processed and assembled in Asia, installed in a car in Europe, and sold worldwide.

A supply chain is a network of relationships and dependencies between key parties. Multiple suppliers can supply the same components, factories often rely on raw materials from different continents, and finished products are shipped worldwide. Mapping these networks enables public and private organisations to work more efficiently, predict problems, and respond to changes.

What makes a supply chain vulnerable?

A supply chain is vulnerable if it contains a 'bottleneck'. This means that a small number of countries or businesses are responsible for much of the production of raw materials, processed materials, and components. The fewer alternatives, the greater the risk. This risk increases when production is in the hands of countries with which the Netherlands has weaker trade relations, or when there are no easy alternative solutions.

Supply chains are constantly affected by logistics delays, political tensions, and natural disasters. These are situations that can disrupt even the most robust systems. Critical raw materials are essential for products such as electronics, batteries, and renewable energy solutions. The Netherlands has very little stock of these raw materials and depends on other countries for materials and components. This makes our industry vulnerable to supply chain disruptions.

What does the NMO do?

Insight into supply chains is crucial to protect the Dutch economy and industry. A better understanding of how these chains work and the risks they face enables businesses and governments to take smart measures, such as strengthening trade relationships, protecting key links, and diversifying suppliers. The NMO focuses on mapping vulnerabilities, dependencies, and potential bottlenecks within strategic supply chains. The NMO provides insight into these supply chains and geographical dependencies, seeking collaboration with international partners such as the Joint Research Centre, national statistical institutes (such as Eurostat and Statistics Netherlands), and other national observatories. The NMO also uses leading databases to better understand the supply chains and the vulnerable strategic dependencies within them. Understanding these chains allows the NMO to better anticipate the global market and respond effectively to potential risks.