From the Magazine | Mitigating Supply Chain Risks In 2023

The logistics and supply chain industry, in the past 2-3 years, has been tirelessly trying to navigate the hurdles brought upon them by not only the onset of the pandemic but also the sudden spikes of COVID cases across the globe and the war at the European border, among others. These constant risks are affecting the health of well-established supply chains forcing them to constantly evaluate and re-evaluate their operations, methods, and risks to thrive rather than simply survive. Moving beyond the storm in 2023, we look at the risks identified by the industry and their ways of successfully mitigating them.

The year 2022 was yet another turbulent year for the industry. The value chain, which in the last decade, grew in length and complexities, was jolted by intensifying conflict in Ukraine, the rumbling geopolitical tensions, devastating climate events and the lingering effects of COVID-19. In fact, many of the market uncertainties that we are seeing today are the correction factors resulting from the unusual situations of the past two years caused by the pandemic.

Supply chains, which are operating in a world where disruptions are a regular occurrence, are barely able to enjoy the calm of readjustment and realignment. Now, as we embark on another year where the only certainty is uncertainty, supply chains which are agile to reset their strategy and accelerate transitions for the next stage of the journey are the ones that can move beyond the storm.

In this really tough environment, the concept of supply chain reliability has been brought to the forefront and changed.

In the past 12 months or so, supply chains, irrespective of the industry have been adversely impacted on account of the Russia-Ukraine conflict and unprecedented levels of inflation, thereby impacting the customer’s ability to pay, and causing demand to fluctuate – putting ‘Supply Chain Reliability’ at the forefront. Moreover, a reliable supply chain now means one that is characterized by a diverse supplier base, as it has become a business imperative to de-risk operations in times of uncertainty.

“When it comes to managing SCM function, apparently, gone are the days when one used to rely on a single source or in other words used to be dependent on one supplier / vendor / game plan. In today’s scenario, it is definitely advisable to have multi-vendor operations or Plan B to ensure seamless operations. And while there is always a risk factor involved with looking out for alternates as it can disrupt the long-established supply chain ecosystem, at the same time one can work on creating a robust ecosystem of interrupted supply chain and safeguard the business against certain known / unknown risks,” explains Mayur Chhabra, Head – Logistics and Supply Chain, JK Cement.

 Building a reliable supply chain and maintaining continuity requires investment and a balanced approach to not just one but the multiple challenges faced in today’s fast-moving environment. Therefore, we take a look at the risks faced by supply chains in 2023:

Lack of Workforce

As the global economy inches towards its steepest downturn since the 1970s, BSI data tracking the interplay between geopolitics, economics and labour unrest, tracked further disruptions to the labour market.

In 2022, nations including the US, France, India, Bangladesh, South Africa, and Argentina witnessed the major labour strikes, as per the BSI Supply Chain Risks Insights Report 2023. The Report also highlighted that Agricultural and Prepared Products was the top industry to experience most labour strikes at 31.3%, while Consumer Products & Mass Merchandising witnessed 7.7%, which was the lowest amongst industries like Petroleum, Natural Gas & Minerals, Automotive & Aerospace, Base Metals, and Industrial & Manufacturing Materials. Other industries saw 16% labour strikes in 2022.

Witnessing massive shortage of labour in trucking, manufacturing & warehousing facility, supply chains leaders are unable to meet people’s demand. Largely caused due to the external challenges such as pandemics, inflation, political instability and so on, labour shortage is creating a ripple effect to multiple sectors, making this issue all the more difficult to solve. This is directly impacting the supply chain, causing manufacturing and delivery delays, resulting in skewed inventory levels, with distributors feeling most of the shock, and leaving customers unhappy.

With the growing need of talent, especially skilled workforce, the industry experts across the globe have identified the lingering workforce shortage as an imminent risk in 2023. The industry inability to plug the skill gap, pressure placed on workers, and the risks involved have significantly impacted the organization’s attempt to employ and retain employees in the supply chain sector. The BSI report highlights that the labour strikes across the globe are further exacerbated by the rising cost of living and the loss of purchasing power for basic goods like food, fuel and shelter.

The lingering risk of cybercrime and cargo theft

With risks remaining the same, the nature of attacks and disruptions and vulnerabilities have changed. The supply chain which is already distressed is now more than ever becoming the target of cyber crimes and cargo thefts. Cargo thieves are targeting higher value goods, whether it be based on demand, like food and beverage products, or based on shortages, like electronic goods.

Diversifying their theft methods, it’s noted that thefts from facilities and theft from containers/ trailers, along with a dropoff in hijackings have increased globally in the past year.

Cybercriminals in the past year have also been disrupting the flow of supply chains, whether it was the attack on the port of Hamburg in Europe or IT at the port of Bangladesh in Asia or an attack at JNPT of India.

A report released in January by CargoNet estimates that $223 million in cargo was stolen across all cargo theft events in 2022. Clearly indicating that the past year saw these threats increase in volume and sophistication.

Now in 2023, these risks are expected to continue. As per KPMG In 2023 cybercriminals will likely be even more sophisticated when it comes to infiltrating supply chains to damage or steal from businesses.

The increase in cargo thefts and cybercrimes can be attributed to increasing living costs across the globe, unemployment, and even the lack of preparedness of organizations. Criminals could hack in through basic warehouse equipment such as a barcode reader or via Internet of Things (IoT) devices applied within your manufacturing and other operational sites.

Deepesh Kuruppath, Founder & CEO, CargoFL, sharing his observation said, “Most of the organizations lack cybersecurity awareness and preparedness. Consequently, they are inadequately equipped to tackle cyberattacks, leading to network compromises, data theft, and operational disruptions. Furthermore, the rise of cybercrimes targeting supply chains and cargo thefts can also be attributed to poor data management and inadequate information security practices. These practices can result in incidents such as data breaches, identity thefts, and other cybercrimes.”

The supply chain can also offer vulnerabilities that provide external parties with a pathway to get into your systems, particularly via your supplier network, which involves a large number of employees and third-party contractors who may have access to sensitive information or valuable goods.

Marking human error as a key cyber security risk, a recent report from the World Economic Forum highlighted that close to 95% of cyber-attacks that have been successful are linked to a human element/error.

Insider threats can be intentional or unintentional and can include theft, sabotage, or the accidental exposure of confidential information. “Supply chain platforms across extended value chains should have robust strategies for Data privacy and protection. This should be part of a formal risk mitigation strategy within the company and BCP plans should be agreed upon and practised on a regular basis,” said Ashish Pande, Director – Supply Chain, Nestle.

Highlighting that each solution is unique to the supply chain, Madhav Thappar, Vice President South Asia, Middle East & Africa at C.H. Robinson shares some of the best practices to manage the risks of cybercrime or cargo theft:

• Buy the appropriate amount of cargo insurance for ocean and/or air shipments.
• Ensure the valuation clause for a given shipment defines the maximum amount an insurance company will pay for a loss. Most valuation clauses include the commercial invoice value and any prepaid charges associated with the shipment, such as freight, customs clearance, or duty.
• Choose an insurance intermediary with experience or specific training in international logistics and transportation insurance.
• Work with a logistics provider that has in-house risk management professionals to help uncover potential liabilities in the supply chain.

Highlighting cyber vulnerability and ransomware as the most important emerging trend to look out for in the short, medium and long term, organizations need to be well prepared by investing in their IT department and digital skills across the business.

“While the future course of the pandemic is difficult to predict, it is important for companies to remain prepared and vigilant in mitigating potential risks to their supply chains. They should consider taking steps to make their supply chains more transparent and flexible, such as diversifying their supplier base, increasing safety stock, and investing in digital technology. Furthermore, companies should collaborate closely with their suppliers and partners to identify that they are implementing similar risk-mitigation strategies.”
~Suvendu Choudhury, Vice President, Operations – India, FedEx Express

“With the implementation of IMO 2023, we expect a reduction in carbon emissions and the adoption of measures toward energy-efficient systems. For the aviation industry, multiple measures are being undertaken to achieve the industry’s net-zero carbon emissions target, and the industry is collectively working towards the adoption of Sustainable Aviation Fuel (SAF). The airports can also be seen moving toward renewable energy. In India, more than 20 airports are already using renewable energy, and solar plants have been installed at over 50 airports.”
~Satish Lakkaraju, Global Head of Air Freight and Pharma, Wiz

Varun Chopra, Executive Chairman, GEAR India speaking on the possibility of COVID resurgence in India shares, “Given the COVID vaccination undertaken in most parts of the world along with better hygiene awareness and more importantly many organizations developing a China+1 Strategy (i.e. India, Vietnam etc.) I see a less than 10% probability of a resurgence of COVID in India.”

This is an abridged version of the cover story published in the April edition of Logistics Insider Magazine. To read the full story click here.

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