Supply chain pressure increasing as firms told to focus on risks

The global supply chain is in danger of collapse amid warnings that businesses need to understand the risks they fade in moving goods and supplies around the world.

Dorota Jilli, (above) a Senior Underwriter at international transport and logistics insurer the TT Club said the situation shows no signs of easing as issues which in themselves would be seen as a serious risk have combined to create a perfect storm.

She said challenges inherent in today’s international trade and the supply chains that service it are painfully obvious – higher prices of energy and food, shortages of and delays in delivering manufactured goods, dynamic changes in markets and sourcing regions.

The on-going effects of the pandemic, with its associated lockdowns and the war in Ukraine are proving catalysts to ignite underlying economic and environmental trends that will continue to fuel long-term changes in the pattern of global supply and demand, Jilli explained.

“We are suffering from a disappearing ability to absorb short-term shocks to the supply chain because of fundamental societal and geopolitical changes to the global equilibrium,” explained Jilli. “Yes, Covid and the war are disruptive and are driving up prices but the longer-term trends of production cost increases in Asia and stricter demands of ESG* mean that cheaper goods and transport services are features of a past global economy.”

Looking at the prevalent risks that operators face in this changed environment, she said levels of abandoned cargo is increasing, with delays through port congestion and lockdown closures meaning the incidence of consignee bankruptcy or goods being unwanted due to loss of markets is higher.

“This is particularly concerning when dangerous good are left in storage for excessive periods as the tragic incidents in Beirut last year and in Chittagong more recently attest.”

“Trends in cargo theft are also in flux with more essential goods such as food and beverages being targeted and luxury goods and electronics not so much as in the past,” said Jilli. “Cargo at rest, either at ports or inland staging areas, some of which have been hurriedly pressed into service as overflow facilities, is increasingly subject to theft. With shippers looking for ‘workarounds’ to reduce costs or avoid congestion, thieves have been quick to adapt their methodologies and the use of online means of deception and insider recruitment are now both more common.”

The TT Club said the correct use of data to analyse these trends is now crucial adding it is utilising its own claims experience along with theft reporting agency information to maintain and expand industry awareness of the evolving dangers. This, in addition to the developing technologies to support the supply chain and offer predictable and resilient sourcing without the geopolitical risks of foreign suppliers and other disruptions, is seen as a primary mitigator in the management of the developing, modern, longer-term risk profile.

Jilli concluded: “It is important to ensure that adequate risk assessments are undertaken across the full breadth of your operation in order to understand thoroughly the various risks and, where appropriate develop mitigating actions and controls, together with effective continuity plans to protect your business.”