CONTENTS
- 1. Risk of petrochemical raw materials spreads to medical necessities
- - Government response to stabilize production of medical necessities
- 2. Government's supply chain response policy expanded to regulatory and administrative areas
- - Case study of expansion to other industries: Demand management and site-oriented supply and demand response
- 3. Key risks your business may face
- - Response strategies that companies should check
- 4. Supply chain risk, from ‘management target’ to ‘strategic area’
- - Corporate Legal Group Strategy
1. Risk of petrochemical raw materials spreads to medical necessities
This measure stems from the fact that rising prices and supply and demand instability of petrochemical-based raw materials such as naphtha are directly affecting the production of medical consumables.
Since most medical necessities are produced based on synthetic fibers and plastic materials, fluctuations in raw material prices are directly related to production costs and supply stability.
In particular, it is difficult to secure replacement materials for surgical gowns, surgical drapes, and medical waste bags, and supply disruptions can have a direct impact on medical site operations, raising the need for government policy intervention due to the current political instability in the Middle East.
AccordinglyThe government distributes naphtha volume for the relevant items first, and provides regulatory exemptions and simplification of procedures in the raw material import and production process.I decided to do it.
Government response to stabilize production of medical necessities
The government is concretizing its response by intervening in the entire production process.
first of all,Through consultation with the petrochemical industry, priority allocation quantities for raw materials used in the production of medical consumables are set separately and distribution standards are adjusted to avoid supply disruptions.I'm doing it.
This isMeasures to secure a stable supply line for the production of essential items independent of existing market pricesno see.
alsoAt the raw material import stage, we speed up supply and demand response through simplification of customs clearance procedures and administrative support, and at the production stage, we shorten the screening process required when changing items or packaging methods to avoid delays in actual production transition.I'm doing it.
In addition, by operating a supply and demand monitoring system based on medical institution demand through collaboration between relevant ministries and local governments, we are establishing a response structure to enable rapid supply redeployment in the event of a supply imbalance in a specific region or item.
As such, this measure is characterized by not only securing raw materials, but also designing an integrated supply chain management method covering all stages of import, production, and distribution.
2. Government's supply chain response policy expanded to regulatory and administrative areas
Recently, supply chain instability has emerged in conjunction with regulatory and administrative factors that affect the entire production process, such as import procedures, licensing, and product change approval.
In this trend, this responseSupply chain management is expanding to be combined with policy and regulatory areas.It shows.
Previously, the focus was on securing raw materials or stabilizing prices in the event of a supply chain problem, but this time, an approach is being taken to structurally alleviate supply disruptions by simultaneously adjusting regulatory areas such as licensing in the production process, import procedures, and product change approval.
In addition to supplying raw materials, the government is expanding its intervention in the following ways:
• Application of fast track screening for changes to pharmaceuticals and packaging materials
• Shortening of production period through change in packaging method
• Adjustment of supply and demand by region through cooperation between central ministries and local governments
In addition, similar supply and demand management measures are being implemented in other industries such as construction materials, paint, packaging materials, and agricultural films, so supply chain risks are spreading beyond specific industries.
Case study of expansion to other industries: Demand management and site-oriented supply and demand response
This supply chain response method isNot only in the medical and packaging fields, but also in other industries such as construction materials.It is applied similarly.
Food packaging material fieldConsidering the structure's high dependence on naphtha-based raw materials, the government is proactively checking inventory levels of raw materials and finished products and trends in production and supply.
In particular, to prevent the possibility that demand for price increases could lead to market distortion, we are responding by combining demand management and inventory monitoring.
Construction materials fieldSupply chain management is also being operated more actively.
The government constantly manages the supply and demand situation of key materials through nationwide on-site inspections and production plant monitoring, and when there is a supply shortage of some items, it responds by preventing construction interruption through process adjustment or priority supply.
In addition, we are quickly responding to supply and demand imbalances by region and process by establishing a system to receive and respond to on-site difficulties.
Recently, supply chain response has expanded to include demand management, on-site inspection, and administrative procedure coordination, and is spreading across various industries.
3. Key risks your business may face
If these policy responses are implemented in earnest, companies may face the following complex risks.
category | Highlights | corporate impact |
Raw material supply and demand risk | Petrochemical raw material price fluctuations and supply restrictions | Profitability deteriorates due to production disruptions and rising costs |
Regulatory/Policy Risk | Priority distribution policy for raw materials, application of special regulatory provisions | Changes in business operating environment and increased dependence on policies |
Contract and Dispute Risk | Changes in contract terms due to delayed delivery and increased costs | Transaction disputes occur and responsibility is unclear |
Supply chain trust risk | Supply delays and quality instability | Reduced trust with business partners and weakened long-term contractual relationships |
In particular, essential consumer goods industries such as medical, hygiene, and packaging materials are likely to be prioritized for policy intervention, requiring preemptive structural inspection of the overall supply chain structure and establishment of response strategies.
Response strategies that companies should check
In an environment like this, structural inspection and response system maintenance across the entire supply chain are necessary.
Analyze dependency on specific raw materials and suppliers and review ways to secure alternative supply chains
2. Reexamination of contract structure
Reorganization of contract conditions such as price adjustment clause, delivery flexibility, force majeure clause
3. Establishment of policy and regulatory response system
Establishment of a monitoring system for changes in the government's raw material distribution policy and regulations
4. Coordinate production and logistics strategies
Redesign operational strategies, including securing inventory, adjusting production schedules, and changing packaging methods
This response needs to be approached as a structural response strategy to prevent supply chain instability from leading to actual production disruption.
In particular, in situations where raw material price fluctuations or supply and demand instability occur repeatedly, it is important to establish a system that comprehensively inspects supply, contracts, and production rather than responding to individual issues.
Additionally, considering the expanding scope of government policy intervention, companies must establish an internal system that can monitor and respond not only to market conditions but also to changes in the regulatory and administrative environment.
This serves as a key element to ensure mid- to long-term supply stability and business sustainability.
4. Supply chain risk, from ‘management target’ to ‘strategic area’
This move shows that supply chain issues are being transformed into a strategic area that is tied to national policies, regulations and industry structures.
Rising oil prices and instability in the supply and demand of raw materials are not temporary variables but structural risks that can affect a company's cost structure, contractual relationships, and overall production strategy.
Therefore, there is a need for companies to establish a response strategy that considers both policy direction and regulatory environment and to transform supply chain risks into a proactive management-oriented system rather than a reactive response.
Corporate Legal Group Strategy
Daeryun Law Firm provides legal advice across corporate operations, including redesigning contract structures, responding to logistics and distribution contract disputes, and reviewing fair trade issues in relation to global supply chain risks.
In order to ensure a company's legal stability and business sustainability in a changing trade environment, systematic legal review is necessary from the early stage.
▶ Establishment of contract change and dispute response strategies related to delivery delays and cost increases
▶ Review of applicability of Force Majeure clause and arrangement of responsibility structure
▶ Business impact analysis due to changes in government raw material priority distribution policy and regulations
▶ Administrative response and supply chain risk management advice, including import regulations and customs clearance procedures
Daeryun, the 9th largest law firm in Korea, proposes customized response strategies for companies based on analysis of policy and legislative trends.
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