Home News BSI’s Global Supply Chain Intelligence report reveals 2015’s foremost supply chain risks

BSI’s Global Supply Chain Intelligence report reveals 2015’s foremost supply chain risks

by Brian Sims

There were $22.6 billion worth of losses due to cargo theft last year, with a $33 billion impact realised by 2015’s top five natural disasters. In tandem, an increased number of terrorism incidents contributed towards major disruptions for international shipping in Europe and the Middle East.

BSI’s 2015 Global Supply Chain Intelligence Report notes a number of cross-border issues that threatened supply chains across the world. These included an influx of migrants in Europe that “harmed supply chain integrity” within the continent, economic downturns in Argentina, Brazil and China and issues of political transparency that drove social unrest in both Africa and Central America.

Extreme weather events, including many attributed to the ‘El Nino’ phenomenon, caused supply chain disruptions and threatened business continuity in multiple regions. There were also several industries plagued by the poor enforcement of labour regulations, allowing for significant rates of child or forced labour in Argentina and India (among other nations).

As stated, in 2015 nearly $23 billion was lost due to cargo theft worldwide from a variety of supply chain threats, predominantly driven by security concerns. South Africa witnessed a 30% increase in cargo truck hijackings over the last year, with thieves using high levels of violence and switching from targeting only high value goods to also target lower value items.

Daring vehicle shipment thefts have become increasingly commonplace in China, with a recent series of in-transit vehicle thefts occurring along the busy G45 highway. More sophisticated attacks were observed in India throughout 2015, where criminal gangs masterminded new techniques to steal goods without breaking customs seals in order to avoid detection – a major risk for companies participating in international supply chain security programmes.

Disruptions in trade

In Europe, disruptions in trade caused by the ISIS terrorist group clearly highlighted the link between terrorism and the supply chain. Border controls in France following the November attacks in Paris are estimated to have cost the Belgian shipping industry $3.5 million.

Terrorist-linked smuggling rings were also identified to be colluding between Spain and the Middle East, the groups illegally transporting shipments of stolen electronics, drugs, weapons and other contraband.

Elsewhere, the Jordanian trucking industry has suffered $754 million in lost revenue since conflict began in the Middle East back in 2011.

In addition to theft, business continuity-related threats such as extreme weather events and political and social unrest led to significant losses for individual companies and national economies last year. 2015’s top five natural disasters realised a collective $33 billion of damage to businesses.

In 2016, the BSI has identified that emerging health crises, such as the Zika virus, could also pose a significant threat to the global supply chain and may lead to work stoppages and protests similar to the supply chain disruptions seen in conjunction with the Ebola epidemic.

Labour unrest and factory strikes have also caused considerable financial damage across the world. Factory strikes in China increased by 58.3% from the previous year due to pay disputes as factory owners struggled to pay workers as a result of the slowing economy, in turn leading to protests. The withholding of wages was cited as a major cause in 75% of protests and generated losses of up to $27 million in the footwear industry alone.

Labour unrest is likely to continue in China in 2016, regardless of whether or not the economic situation improves.

Requirement for visibility

Numerous cases of child and forced labour were exposed in 2015, highlighting the need for visibility into corporate supply chains to mitigate the risk of Human Rights abuses. Nearly 80% of Argentina’s textile industry was found to be sourcing from unregulated facilities, where forced child labour and poor working conditions are common.

The BSI also noted an increase in the risk of child labour use in India due to the existence of loopholes in labour reforms approved in 2015.

In response to these and other recent concerns, European countries and the United States last year moved to pass laws mandating reporting on corporate social responsibility issues in corporate supply chains.

Jim Yarbrough, global intelligence programmes manager at the BSI, commented: “Companies are facing an increasingly wide range of challenges to their supply chain, from Human Rights issues through to acts of violent theft and natural disasters. Such complexity creates extreme levels of risk for organisations directly affecting the bottom line, and perhaps more seriously hidden threats to the supply chain which, if ignored, could do serious harm to a company’s hard-earned reputation.”

Biggest threats to the global supply chain in 2016

(1) Global cargo theft cost is estimated to grow by a further $1 billion in 2016 with increased concerns in China, Germany, India, Mexico, South Africa and the United States

(2) Continued tensions in the South China Sea are predicted to lead to further protests and disruptions

(3) Ongoing conflict in Syria will continue to impact supply chains (a) The migrant crisis will continue to lead to port disruptions (b) European Union/Schengen border controls are predicted to have a far-reaching impact

(4) ISIS is predicted to remain a significant threat when it comes to supply chain disruptions

(5) Labour unrest in China is likely to persist as the slowdown in the Chinese economy continues and more jobs move to neighbouring countries

(6) Weather disruptions

(7) Global health crises (eg Zika and Ebola)

The BSI report is based on data from BSI’s Supply Chain Risk Exposure Evaluation Network (SCREEN), which provides continuous evaluation across 22 proprietary risk factors and 204 countries.

The BSI’s 2015 SCREEN data and analysis reveals a clear picture of the changing global threat landscape and how this varies by country, continent and industry sector.

*To download a copy of the BSI’s 2015 Global Supply Chain Intelligence Report click here

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