BSI reports global supply chain disruption

14 March 2018 - Poor government and law enforcement resources, political instability and corruption threaten worldwide business operations                                                                              

Inadequate government resources, political instability, terrorist activity and corruption drove an overall increase in supply chain disruption over the last year. This is according to a new report out today from BSI.

The Global Supply Chain Intelligence Report identifies an overall increase in cargo theft, largely due to inadequate government resources and personnel shortages leaving shipments open to theft and stowaways. According to data recorded by BSI the top commodities stolen globally were:

1. Food and beverages
2. Consumer goods
3. Electronics
4. Alcohol and tobacco
5. Apparel and footwear

BSI continues to note the significant risk of cargo theft in the pharmaceutical industry, with sophisticated thieves targeting these valuable products for hijackings in countries throughout the world. BSI data reveals a high median loss value and higher top-end losses given the large accumulation of pharmaceuticals in warehouses and tractor-trailers. BSI estimates that $1.07 billion of pharmaceutical products were lost in 2017 due to cargo theft.

The report finds that while global supply chains face a diverse range of risks, the factors are common: inadequate government resources, political instability, terrorist activity and corruption.

Jim Yarbrough, Global Intelligence Program Manager at BSI said: “This year’s annual review paints a worrying picture of supply chain disruption across the globe, which can impact the resilience of an organization. Companies doing business across borders find themselves facing an increasingly wide range of challenges to their supply chain, from human rights issues to natural disasters and terrorist attacks.

“The number of cargo thefts is a serious concern for suppliers across the globe, as groups of organized criminals find new ways to disrupt cargo transit routes. While these issues directly affect a company’s bottom line they also pose a serious risk to a company’s hard-earned reputation.”

The report provides an overview of the top supply chain threats and trends by region to help organizations increase their visibility and understanding of potential exposures within the supply chain. A sample of the highlights by region are identified below:  

Europe, Middle East and Africa

In Europe, the Middle East and Africa, political developments had pronounced impacts on supply chains in 2017.

Cargo transiting Europe continued to face substantial risk of stowaway introduction due to the ongoing migrant crisis. In 2017, BSI reported on shifts in migrant communities at major port facilities, a growing use of rail freight by migrants traveling through the Brenner Pass, and the emergence of cargo truck parking lots in Belgium as areas of concern for both stowaway introductions and potential violence against cargo truck drivers. Likewise, port facilities in Western Europe continued to face the highest risk of stowaway introduction into ground and sea freight shipments.

BSI also found that high-profile incidents in Europe demonstrated the continued intention of militant groups to exploit supply chains to facilitate attacks, where delivery vehicles and unsecured cargo trucks were among the primary targets for terrorists seeking to mount attacks.

European ports found themselves victim to a major cyber-attack in 2017, where an attack on a port terminal operator caused prolonged delays to sea freight movement worldwide, and particularly at major ports in Europe. Ports on the continent also faced disruptions due to long-running conflicts between labor unions and port operators or national governments.

Asia

Governments in Asia continued to face capacity shortages and difficulties in enforcing industry regulations in 2017, exposing businesses to an array of security, business continuity, and corporate social responsibility risks.

In India, insufficient personnel and resources continued to drive high rates of cargo theft, as BSI’s analysis indicated new areas of concern for cargo theft across northern India. The state of Uttar Pradesh, was the site of the most cargo thefts in India recorded by BSI last year, accounting for nearly a quarter of all incidents. Endemic supply chain corruption also continued to drive the threat of cargo theft: at least 17 percent of all cargo thefts recorded in India in 2017 involved the direct participation of cargo truck drivers or other supply chain employees.

Poor monitoring of the sizable pharmaceutical industries in China and India contributed to an increasing flow of illicit synthetic drugs and chemical precursors in departing cargo shipments. Likewise, inadequate planning and enforcement of environmental regulations undermined the efforts of Chinese authorities to address hazardous levels of smog and air pollution.

Corruption also undermined efforts by governments worldwide to end the use of North Korean forced labour within their borders. Recent reports on the extent of North Korean forced labour in international supply chains found that the North Korean regime profits directly from the wages of at least 50,000 workers who labour in conditions similar to slavery across dozens of countries.

Americas

Robust and specialized law enforcement operations in both the United States and Canada contributed to lower rates of cargo theft in both countries in 2017. While BSI recorded a higher frequency of cargo theft incidents in the United States relative to other regions, 2017 data reflected a decline in cargo thefts from 2016 across states of concern including California, Texas, Florida, Illinois, New Jersey, and Georgia.

Contrastingly, insecurity and violence perpetrated by criminal organized groups, including drug cartels, led to a rise in cargo theft risk in Mexico. Official statistics indicate that the total number of thefts involving cargo trucks in 2017 surpassed both the number of thefts in 2016 and industry estimates for thefts in 2017, with significant increases in the states of Mexico, Puebla, and Tlaxcala. Thieves likely targeted these areas due to their proximity to Mexico City, a known hotspot for cargo thieves intercepting goods en route to and from central parts of the country to ports in Veracruz.

The continued expansion and diversification of organized criminal groups in Brazil poses significant risks to both international and domestic supply chains, while drug trafficking remained a major concern in Colombia despite a ceasefire with the FARC guerrilla group.

Finally, supply chain disruptions in Puerto Rico following Hurricanes Irma and Maria created both security and business continuity risks. Alongside the disruption caused directly by the hurricanes, BSI also noted heightened supply chain security concerns. For example, customs officials at the Port of Philadelphia seized 321 kilograms of cocaine hidden in a shipment of furniture from Puerto Rico in early January 2018. It is expected that drug trafficking organizations will continue to exploit the aftermaths of these disasters to smuggle drugs into the United States.

Yarborough continued: “Although the range of risks facing companies may seem overwhelming, making use of the tools available means that organizations can quickly and simply identify these risks in their supply chain network. Once areas of risk have been identified, companies will then be able to work with their suppliers and specialist auditors, ultimately reducing the chance that a business partner will create financial or reputation damage to a company.”

2018 forecast

BSI anticipates that government capacity concerns, high-level political developments, and corruption to remain major drivers of global supply chain security, business continuity, and corporate social responsibility risks in 2018.

The process of the UK leaving the European Union is likely to continue to attract interest from the supply chain community. Businesses with complex supply chains are becoming increasingly concerned with the practical issues of a new trading model between the United Kingdom and the European Union, with the greatest risk being the potential for delays and queues at UK/EU borders for customs checks and declarations.  

In Brazil, it is expected that the strengthening and expansion of Brazilian organized criminal groups will likely continue in 2018, with the government’s efforts to combat this trend ineffective to date.

Similarly, cargo theft in Brazil and Mexico is likely to continue to pose a significant risk, as cargo thieves develop increasingly sophisticated or violent techniques in response to each new security countermeasure.

To download a copy of BSI’s 2017 Global Supply Chain Intelligence Report, please click here.

- ENDS-

Notes to Editors:

For a full copy of the report, please contact presssoffice@bsigroup.com.

The data and analysis within this report is pulled directly from our global supply chain intelligence platform, SCREEN. SCREEN provides insight into global supply chain security, business continuity and corporate social responsibility threats and trends in real-time. SCREEN allows users to visualize risk on a global scale and easily identification high-risk locations and potential exposures. Our spotlight news feature and proprietary global risk maps help organizations stay up to date with emerging threats and better protect their supply chain, brand and reputation. For more information about our data and intelligence platform, please contact us directly supplychain@bsigroup.com.

About BSI

BSI is the business improvement company that enables organizations to turn standards of best practice into habits of excellence. For over a century BSI has championed what good looks like and driven best practice in organizations around the world. Working with over 86,000 clients across 193 countries, it is a truly international business with skills and experience across a number of sectors including automotive, aerospace, built environment, food, and healthcare. Through its expertise in Standards Development and Knowledge Solutions, Assurance and Professional Services, BSI improves business performance to help clients grow sustainably, manage risk and ultimately be more resilient.

To learn more, please visit: www.bsigroup.com

About BSI Supply Chain Services and Solutions
BSI Supply Chain Services and Solutions is the leading global provider of supply chain intelligence, auditing services, audit compliance and risk management software solutions, and advisory services. Our mission is to help corporations, governments and associations identify, manage and mitigate global supply chain risks and maintain world class governance risk and compliance programs.  Our holistic supply chain risk management suite is designed to predict and visualize risk, and develop robust risk mitigation and compliance management programs to protect your supply chain, brand and reputation. Our intelligence-infused supply chain solutions and global network empower our clients to understand global supply chain risk with unequaled precision.

To learn more, please visit www.bsigroup.com/supplychain