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BSI reports top supply chain themes for 2019

BSI SCREEN’s new report highlights the top challenges, developments, and trends likely to impact supply chains this year

23-Apr-2019
BSI reports top supply chain themes for 2019
BSI has identified five major themes that are most likely to impact the supply chain in 2019. The analysis of how these five themes will affect supply chains this year forms the business improvement company’s annual analysis of global supply chain risks. The five themes are:
  • Revision of the Minimum Security Criteria under the US Border Protection’s Customs-Trade Partnership Against Terrorism (CTPAT)
  • Supply chain growth in Africa increasing exposure to varying risks
  • Ongoing mass migration posing both security and corporate social responsibility risks
  • Dramatic shifts in politics including those in Brazil, the US-China trade dispute, and uncertainty over Britain’s departure from the European Union
  • The continued threat to supply chains posed by cybersecurity issues

BSI has also identified several key trends in supply chain risk from 2018:
  • Food and beverage remains the top commodity stolen
  • Metal has now entered the top five commodities stolen worldwide
  • Poor working conditions led as the top labour violation recorded last year
  • Labour strikes most frequently disrupted manufacturing operations

Jim Yarbrough, Global Intelligence Program Manager at BSI, said: “We’re seeing key shifts to global supply chains this year, driven by quite dramatic changes in the geopolitical landscape. The concern is that as supply chains change – with Chinese companies moving operations to Africa, for example, or the US sourcing goods from other Southeast Asian nations – major implications will also evolve.

“Increased exposure to labour exploitation, terrorism, corruption and natural disasters must be a consideration for companies making changes to their supply chain, and best practices must be maintained in order to prevent threats to business continuity or corporate social responsibility.”


The report provides analysis of each of these top supply chain challenges, developments, and trends to help organizations increase their understanding of potential exposures. A sample of the analysis by theme is identified below:

CTPAT Minimum Security Criteria
Within the United States, companies enjoying trade benefits under CTPAT will soon need to meet new criteria for certification in order to meet the evolving risks of today’s operational environment. As the revised criteria for CTPAT are unveiled, companies will need to undertake new efforts to achieve supply chain security and mitigate emerging risks.

Exposure to varying risks in Africa
BSI’s report reveals the potential for increasing movement of supply chains to Africa, particularly amongst companies based in China spurred on by the US-China trade dispute. Shifting manufacturing operations to Africa, where labour costs are lower and shipping to the US or Europe is cheaper and can be cost-effective compared to staying in China.

However, BSI warns that the relatively unchecked risk of terrorism in African countries, where 23 percent of all supply chain terror incidents take place, sets the operational environment apart from that of Asia. Companies whose supply chain moves to Africa must be wary of this increased risk, often compounded by corruption among security and customs personnel.

Migration continues to pose a risk
As conflict, together with political and economic conditions, continue to drive mass migration, businesses must contend with the double-edged challenge of security and corporate social responsibility risks.

This year’s report records an increase in stowaway and labour exploitation risks stemming from migrants traveling along three major flows: Central to North America, Intra Southeast Asia, and Africa and the Middle East to Europe.

BSI has also noted regression in countries such as Brazil – where budget cuts are reducing the resources available to carry out inspections – that could increase the risk of migrant labour exploitation.

Approximately half (48 percent) of all corporate social responsibility (CSR) incidents recorded by BSI in the last year involved migrants. The often desperate need for income to support their family leads many vulnerable individuals into labour exploitation.

BSI believes this issue will remain key for supply chains in 2019, and companies must invest in a more thorough understanding of their supply chain to truly assess the risk of migrant labourer exploitation.

Dramatic policy shifts
Recent shifts in political ideology in the governments of Brazil, Mexico, the United Kingdom, India, and the United States are setting the stage for an eventful 2019.

Newly-elected leadership in Brazil and Mexico are attempting to chart a new course in Latin America. President Bolsonaro in Brazil has swiftly undertaken efforts that may pose corporate social responsibility risks for some industries operating in Brazil, particularly in relation to the rights of workers, the LGBTQ community, and indigenous territories. BSI recommends companies take a more active due diligence role on business partners in Brazil, to fill gaps left by the government’s removal of some regulatory requirements.

Mexico’s president is undertaking new initiatives to curtail corruption that has historically underwritten organized crime, cargo theft, and oil theft in the country. The ramifications of such initiatives may have sweeping consequences for business continuity and cargo security, but despite President Obrador’s actions, BSI expects that security challenges will continue to affect businesses in the coming year, in particular in-transit cargo theft.

The US-China trade dispute has raised new concerns related to intellectual property protections and the relocation of relevant facilities for a host of businesses. However, companies looking to other Southeast Asian countries should weigh the costs of tariffs against the cost of increased risks to their supply chains. Exposure to child labour, forced labour, and natural disasters are each prevalent in other Southeast Asian countries.

The outcome of negotiations on Brexit remains unclear, creating ripples of uncertainty through supply chains operating within and through the United Kingdom and the European Union.

India’s ongoing elections in April and May could create a shift in politics with effects on global supply chains. Workers’ dislike of many recent policies, with strikes over low wages and fuel prices, could cause immediate disruption and longer-term changes.

Cybersecurity
Within this new global landscape, cybersecurity stands as an overarching and multi-faceted struggle for all parties throughout the supply chain. Securing data and facilities in a fast-paced and modular world connected by the Internet of Things is an emerging challenge that all supply chain professionals undertook in 2018 and will continue to grapple with in 2019.

To download a copy of BSI’s Supply Chain Risk Insights Report, please click here.

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