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Cargo theft remains top supply chain risk in 2016

Cargo theft remains top supply chain risk in 2016 article image

Supply chains across the world face a number of challenges and one of the biggest threats to the global supply chain is cargo theft.

Last year, according to BSI’s Supply Chain Risk Exposure Evaluation Network, damages caused by cargo theft amounted to $22.6 billion – and that figure is estimated to grow by a further $1 billion this year.

There are increased concerns particularly in China, Germany, India, Mexico, South Africa, and the US, BSI says in its latest report.

Other supply chain threats in 2016 include:

  • Continued tensions in South China Sea predicted to lead to further protests and disruptions
  • The on-going conflict in Syria
  • The global migrant crisis, which will continue to lead to port disruptions
  • Labor unrest in China, which is predicted to persist
  • The continued slowdown in the Chinese economy
  • ISIS – predicted to remain a significant threat to disrupt supply chains
  • European Union/Schengen border controls predicted to have far-reaching impact
  • Weather disruptions (e.g. La Nina phenomenon)
  • Global health crises (e.g. Zika and Ebola)

BSI says most cargo thefts in 2015 could be attributed to security issues.

South Africa has seen 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 targeting 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.

New techniques to steal goods

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 programs.

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 suffered $754 million in lost revenue since conflict began in the Middle East in 2011.

Other risk factors

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 caused a collective $33 billion of damage to businesses.

This year, BSI has identified emerging health crises, such as the Zika virus, that could pose a significant threat to the global supply chain this year.

This may lead to work stoppages and protests similar to the supply chain disruptions seen in conjunction with the Ebola epidemic.

Labor unrest and factory strikes have also caused considerable financial damage across the world.

Factory strikes in China increased by 58% from the previous year due to pay disputes, as factory owners struggled to pay workers due to a slowing economy, leading to protests.

Human rights abuses

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. Labor unrest is likely to continue in China in 2016, regardless of whether the economy improves.

Numerous cases of child and forced labor were exposed in 2015, highlighting the need for visibility into corporate supply chain 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 labor and poor working conditions are common.

BSI also noted an increase in the risk of child labor use in India due to the existence of loopholes in labor 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.

"Companies are facing an increasingly wide range of challenges to their supply chain, from human rights issues to acts of violent theft and natural disasters,” explained Jim Yarbrough, Global Intelligence Program Manager at BSI.

“Such complexity creates extreme levels of risk for organisations, both directly affecting the bottom line but perhaps more seriously, hidden threats to the supply chain,” Mr Yarbrough added.

“If ignored, this could do serious harm to a company's hard-earned reputation." 

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