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'Make or Break' Year for Supply Chains

'Make or Break' Year for Supply Chains

Nov. 24, 2021
Supply chain risks for next year include crime, climate and convergence.

The supply chain challenge is far from over and next year companies will have to face several issues.  "Because of this unprecedented moment, the supply chain is about to have a make-or-break year and needs to be right at the top of the C-suite agenda,” said Susan Taylor Martin, CEO, of BSI, in a statement. 

In a recent report, Supply Chain Risk Insights, by BSI, a number of threats will emerge including:

Crime

The report notes that the past year saw a “significant number of criminal organizations trying to infiltrate the logistics supply chain, masquerading as legitimate companies working in warehousing, transportation and distribution.” The group also noted the issue of fake carriers in an increasing number of countries.

As global prices increased due to congestion and delays surrounding ground transportation this forced some companies to shift to air. The report notes that cartels targeted vulnerabilities in these new chains.,  In the U.S., parallel to the shift toward air freight was an increase in smugglers introducing illegal drugs into air cargo shipments; up from 20% in February to 33.3% in June.  The report says that “it seems Mexican drug cartels are using long-established networks to transport the goods from Mexico into the United States via the supply chain, utilizing truck, sea and air modalities along the US-Mexico border.”

To address this situation BSI advises companies to undertake proper due diligence when onboarding their suppliers. Furthermore,  an end-to-end risk assessment of a company's supply chain will mitigate the risks inherent to partnering with separate companies from around the world.

Climate

Companies are seeking to both protect their supply chains from the effects of climate change and ensure they play their role in a greener future. For example, BSI noted that this year, at least 18 companies-spanning several industries were identified as sourcing products from companies contributing to deforestation in the Amazon. “This type of association has the potential to bring significant reputational damage to an organization and could ultimately result in a drop in revenue,” the report said.

Climate change is also increasing the frequency of natural disasters. For example, Hurricane Ida in August in the U.S. and Typhoon Chanthu in September in China have cumulatively caused various delays of shipment volume arriving infrequently at Californian facilities. This has put renewed stress on the ports of Los Angeles and Long Beach, which account for about one-third of all U.S. imports.

To mitigate these issues organizations need to reassess and look beyond traditional supply chain partners, methods and technologies.

Convergence

Another threat to supply chains is the inability of companies to understand how policies such as business continuity, sustainability, corporate social responsibility and security are interrelated. Business continuity threats can lead to security threats and vice versa.

The global shortage of semiconductors exemplifies this convergence. Taiwan holds roughly 90% of the world's manufacturing capacity to produce semiconductor chips, an overreliance that contributed to the global shortage of this component. In addition, factors such as droughts and COVID outbreaks in Taiwan between April and July impacted operational capacity, compounding the global shortage. This shortage also created security concerns; for example, a group of criminals attacked a truck driver's assistant as he was transporting a high-value cargo of semiconductor chips in Hong Kong in June, stealing $650,000 worth of goods.

Another high-profile convergence – between cyber security and physical security in this case – made international headlines in April this year. In the US, hackers gained entry into the Colonial Pipeline through a virtual private network account, which was intended for employees to remotely access the company's computer network. The hack took down one of the largest fuel pipelines in the country and led to gas shortages across the East Coast – all because of a single compromised password.

Convergence can be addressed by companies doubling down on collaboration, ensuring that all parts of an organization and their partners understand the integrated threats to a supply chain and that teams work together to address them.

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