Tag Archives: supply chain risk

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Supply Chain Disruption Hits 76% of Businesses a Year

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Almost a quarter of businesses reported annual cumulative losses of at least $1.05 million (CAD $1.4 million) due to supply chain disruptions, and 76% of businesses reported at least one instance of supply chain disruption annually, according to a survey conducted by the Business Continuity Institute and Zurich. The top causes of supply chain failure among businesses surveyed were ones that will likely get even more frequent in the coming years: unplanned IT outages, cyberattacks, and adverse weather.

As the supply chain continues to grow ever longer, adding more potentially disruptive risks along the way, businesses are learning some painful lessons about the financial and reputational damages that can result from failures to ensure supply chain resilience.

Check out the infographic below for some Zurich’s top insights on supply chain visibility, including the biggest sources of damage and key steps to mitigate losses:

zurich supply chains infographic

The World’s Most Resilient Cities

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Toronto most resilient city

How do you invest, source and expand responsibly?

Picking the right place to do so may make or break your efforts. At least, that’s the theory of London-based property company Grosvenor. With that in mind, the company analyzed 160 data sets to assess the vulnerability and adaptive capacity of the world’s “50 most important cities” to determine which are the most resilient, with resilience defined as “the ability of cities to continue to function as centers of production, human habitation, and cultural development despite the challenges posed by climate change, population growth, declining resource supply, and other paradigm shifts.”

Grosvenor first measured vulnerability by looking at climate threats, environmental degradation (including pollution and overconsumption due to sprawl), resources, infrastructure and community cohesion. For the next half of the equation, according to the Guardian, “Adaptive capacity, or a city’s ability to prevent and mitigate serious threats, was a combination of governance (high value here on democracy, freedom of speech, community participation, transparency, accountability and long-term leadership vision), strong institutions, learning capacity (including good technical universities), disaster planner and finally funding (from budget to credit and access to global funding).”

Of particular note, eight of the weakest 20 cities are in BRIC countries, and some of the cities where population and industry growth are waiting to boom may pose the greatest risks.

Five Questions with a Food Fraud Expert

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Food Fraud

BALTIMORE—After his Food Safety Summit session on food fraud and economically motivated adulteration, I caught up with Doug Moyer, a pharmaceutical fraud expert and adjunct with Michigan State University’s Food Fraud Initiative. Here are a few of his insights into top challenges for the supply chain, and the biggest risks to be wary of as a consumer.

What are the riskiest foods for fraud?

The most fraudulent are the perennials: olive oil, honey, juices and species swapping in fish. Most people underestimate the amount of olive oil adulteration, but the amount of what is labeled “extra virgin olive oil” that Americans buy is more than Italy could ever produce. I buy certified California olive oil because I’ve sat down with that group and I know that their industry is really concerned about standards and have established a rigorous certification process. I am also really concerned about species swapping in the seafood industry. I love sushi, but I have a lot of concerns eating it, and they are not always about health. I don’t like feeling duped, and a lot of companies now have to contend with that reputation issue after so many studies have found that the odds can be incredibly low that you are eating the fish that you think you ordered—as little as 30% in some sushi restaurants in Los Angeles, for example.

Adulteration has been getting a lot more attention recently, from consumers and regulators. How old of a phenomenon is food fraud?

Food fraud actually dates back to the antiquities. In the industry, we refer to it as a 2,000-year-old problem. There are actually ancient jugs used for oil or wine that feature art that is misleading about the origin or quality of what came inside.

Why are we seeing more food fraud in the U.S. now?

In the United States, we have the real luxury of solid supply chains and active food safety protectors in the form of regulators and advocates. But, as the supply chain lengthens, strangers and anonymous players get introduced, and that’s where the system is most endangered.

What is the worst case of food fraud you’ve ever seen?

Melamine in Chinese infant formula is definitely one of the worst, and especially sinister. In the ‘80s, there was also a truly horrible case with olive oil in Spain. Many people hear about olive oil adulteration now and say, “What’s the harm, if it’s just another oil?” In that case, though, it was adulterated with industrial grade oil. Over 1,000 people died, and some are still infirm and in hospitals today.

What are the biggest culprits in pharmaceutical fraud?

Male enhancement, by far, is the top victim. Patients may be too embarrassed to see a doctor about their symptoms, so they log online and order from a rogue pharmacy—which may not even be a pharmacy at all. But if they were too embarrassed to get the medication to begin with, they will probably be too embarrassed to report the issues, too. Anti-malarials are also a big culprit abroad. In countries with a lot of demand for medications that fight malaria, many counterfeiters see the opportunity to fill that need before legitimate providers can. Poor populations gravitate toward these cheaper products, and access to doctors may be limited by a long, expensive trip—when you are already sick, or cannot afford the trip, it’s easier to go to a street vendor who rips off a sheet of what he says will help. It’s a particularly heinous crime because counterfeiters will trick customers with a little bit of aspirin in the pills that lower fevers and help with the body ache. That kind of deliberate attempt to keep people from getting better, to me, is more heinous than food fraud.

Are Drone Cargo Ships the Next Step in Supply Chain Automation?

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Rolls Royce Drone Ships

Ahoy, robots!

The $375 billion shipping industry, which carries 90% of world trade, is next in line for drones to take over—at least, that’s what Rolls-Royce Holdings is betting on. The London-based engine manufacturer’s Blue Ocean development team has already set up a virtual-reality prototype in its Norwegian office that simulates 360-degree views from a vessel’s bridge.

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The company hopes these advanced camera systems will eventually allow captains in control centers on land to direct crewless ships. The E.U. is funding a $4.8 million study on the technology, and researchers are preparing a prototype for simulated sea trials next year.

“A growing number of vessels are already equipped with cameras that can see at night and through fog and snow—better than the human eye, and more ships are fitted with systems to transmit large volumes of data,” said one Rolls-Royce spokesperson. “Given that the technology is in place, is now the time to move some operations ashore? Is it better to have a crew of 20 sailing in a gale in the North Sea, or say five people in a control room on shore?”

Crew costs of $3,299 a day account for about 44% of total operating expenses for a large container ship, industry accountant and consultant Moore Stephens LLP told Bloomberg News. By loading more cargo and replacing the bridge and other systems that support the crew, such as electricity, air conditioning, water and sewage, ships can cut costs and boost revenue, claims Oskar Levander, Rolls-Royce’s vice president of innovation in marine engineering and technology. The ships would be 5% lighter before loading cargo and would burn 12% to 15% less fuel, he reported.

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Unmanned ships would require captains to operate them remotely and people to repair and unload them in port, but the lack of crew at sea could change the landscape of piracy. Without people to take hostage, the risks would greatly reduce—as would the need for for kidnap and ransom insurance premiums. The material being transported, however, could be even more vulnerable without a human line of defense.

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Further, the remote operating system opens the door to digital hijacking from hackers or cybercriminals.

Currently, human error—most notably tied to fatigue—causes most maritime accidents, according to Allianz. But, as the 600,000-member International Transport Workers’ Federation is quick to point out, humans are also the first line of defense in a field plagued by unpredictable conditions. “The human element is one of the first lines of defense in the event of machinery failure and the kind of unexpected and sudden changes of conditions in which the world’s seas specialize,” Dave Heindel, chairman of the ITF’s seafarers’ section, told Bloomberg Businessweek.

Drone cargo ships would represent the latest part of a rapidly automating supply chain. As Wired pointed out, as customers’ desire for ever-more-instant gratification mounts and companies like Amazon find ways to drastically cut shipping costs with technology, consumer pressure may make this too tempting a development to pass up.