Cyprus and the global supply chain troubles

The global supply chain is grinding to a halt, under the pressure of soaring consumer demand for goods and insufficient technology at ports and for shipping. – this offers an opportunity for Cyprus as the global logistics industry restructures.

In June 2021, it was estimated that there was a record total of more than 300 freighters awaiting to enter overcrowded ports. In addition, the time container ships are spending waiting for port berths has more than doubled since 2019, according to insurer Allianz.

The result is that an extensive restructuring of the global logistics industry is underway.

The EY Attractiveness Survey for Cyprus 2020 indicated considerable investor interest in the logistics and supply chain sector in Cyprus in this context.

But business here has been slow to respond, according to Christos Christoudias, managing director at Christoudias Logistics.

“One thing has become clear, following the travel restrictions imposed to curtail the spread of the coronavirus, is that the world can no longer depend on the two major logistics hubs of China and the US. Near-shore centres are required: Small hubs that can service the greater neighbouring area.

The big question is whether Cyprus can play such a role?”

Christoudias points out that Cyprus has never taken advantage of its geographical location to advance the logistics sector.

“This is especially true for managing the costs related to shipping and air-transferring cargo, which inevitably hold Cyprus back from developing into a logistics hub.”

The cost of building warehouses in Cyprus large enough to manage nearshoring for logistics is another factor. A warehouse of this size must be at least 500,000 square metres in size. Finding and developing such a space here is not easy, industry experts say.

Cyprus is, of course, not the only country seeking to adjust to a major reconfiguration of supply chains, with a new mix of reshoring, nearshoring and offshoring.

According to a recent McKinsey Global Institute report, supply chains will face disruptions lasting a month or longer, every four years. McKinsey estimates that this could involve 16 to 26 percent of exports, worth $2.9 trillion to $4.6 trillion could be in play—whether that involves reverting to domestic production, nearshoring, or new rounds of offshoring to new locations.

In a McKinsey survey of supply chain executives conducted in May 2020, an overwhelming 93 per cent reported that they plan to take steps to make their supply chains more resilient, including building in redundancy across suppliers, nearshoring, reducing the number of unique parts, and regionalizing their supply chains.

Nearshoring, and the regionalisation of supply chains offer substantial opportunities to Cyprus, thanks not only to its location, but also because of its adaptable and well-educated workforce.

“When an organisation breaks down a complex supply chain into smaller regional locations, they are able to streamline processes with ease. In addition, they achieve the following benefits: Create visibility across supply chains; increase the velocity and agility of supply chains; improve response rates to market changes; deliver consumer expectations and demand,” writes Logistics Insider.

Over the next few years, suppliers and manufacturers will form new relationships to create smart, regional supply chains, to manage the risks that arose during the pandemic and its aftermath.

With the right investment in talent and infrastructure, Cyprus can fit neatly into these new value chains and the potential for job creation and technology demand is clearly one that merits government and industry attention.