Dramatic political shifts such as Brexit, cyber security and the possible movement of low-cost sourcing to Africa are among the key trends causing supply chain risk this year, according to the latest BSI Supply Chain Risk Insights Report.
The report said political uncertainties including the US-China trade dispute and Britain’s departure from the EU would be among the factors likely to disrupt supply chains over the next 12 months.
Trade frictions between the US and China were likely to have a knock-on effect as companies based in China might be tempted to shift manufacturing operations to Africa, where labour costs are lower and shipping to the US or Europe is cheaper.
This in turn would have consequences for supply chains due to the high risk of terrorism in African countries, where 23% of all supply chain terror incidents take place, according to the report.
“Although other countries in Asia are appealing alternatives to a degree, surging wages and persistent human rights challenges may lead companies to instead bypass these nations for the even more cost-effective Africa,” said the report.
“However, companies that begin to move operations to Africa must be wary of risks not typically encountered in supply chains traditionally based in Asia, challenging both security, business continuity, and corporate social responsibility professionals.”
It said risk in Africa was often compounded by corruption among security and customs personnel.
Another of the major factors listed in the report was the revision of US Customs and Border Protection’s Customs-Trade Partnership Against Terrorism (CTPAT) regulations, which could affect imported goods to the US.
The report identified Brazil’s newly-inaugurated Jair Bolsonaro as a source of potential risk, on the grounds that he has removed LGBT issues from the list of responsibilities of the Human Rights Ministry.
“BSI has previously identified the likelihood of this leaving the LGBT community in Brazil vulnerable to discrimination within the country,” said the report.
“This vulnerability has the potential to expose companies to higher reputational risks if they are unaware of such discrimination within their supply chains.”
Cyber security continues to present a challenge to all parties throughout the supply chain, the report said.
“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.”
Mass migration continues to pose a supply chain risk as conflict and political and economic conditions continue to provoke significant population movements.
As a result of mass migration “businesses must contend with the double-edged challenge of security and corporate social responsibility risks”.
The report said there had been an increase in stowaway and labour exploitation risks stemming from migrants travelling from Central to North America, within Southeast Asia, and from Africa and the Middle East to Europe.
Half (48%) of all corporate social responsibility incidents recorded by BSI in the last year involved migrants.
Food and beverage remained the most stolen commodity. The most stolen commodities also include metals, consumer products, alcohol and tobacco, and electronics.
Poor working conditions were the most common labour violation recorded last year, while labour strikes were the most frequent disruptor of 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.”
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