Record jump in factory fires will have 'ripple effect' on entire supply chain

25 January 2023

Factory fires saw an “exceptionally large increase” in 2022 with rates of reported incidents almost doubling, according to a report.

A record number of fires took place in 2021, but by 2022’s third quarter this record had been surpassed, driven by an increasing gap between regulations and process execution, shortages of skilled labour, component shortages, and adverse weather conditions such as extreme heat. 

The report, by supply chain data collector Resilinc, said 3,609 factory fire alerts were recorded in 2022, up from 1,946 for 2021 – an 85% year-on-year increase. Fires were the most common cause of supply chain for disruption for the fourth year in a row.

Resilinc said procurement teams should be mapping suppliers far more thoroughly, past tier one, to gauge where risk of accidents lay.

In June 2022, a fire at Smurfit Kappa’s paper mill in Birmingham destroyed 8,000 tonnes of paper and cardboard, raising fears for packaging deliveries, while a fire at an Ocado warehouse in July 2021 held up thousands of customer orders. In March 2021 included an incident in March at a major semiconductor factory in Japan, which halted production for a month but took considerably longer to reach full capacity again.

A spokesperson for Resilinc told Supply Management: “We’ve witnessed an exceptionally large increase in the number of factory fires from 2021 to 2022. Supplier mapping and monitoring is an easy win for businesses looking to reduce factory fire risk.

“If most attention was given to supplying products with the greatest potential to cut into a company’s topline instead of suppliers with the largest spend, then supply chain oversight would be far more effective – minimising the risk posed to supply chains by factory fires.

“Procurement teams typically pay attention only to the top 20% of suppliers which make up 80% of the spend, however this means a significant risk remains as there is zero visibility over 80% of your suppliers who make up the other 20% of the spend.

“In changing this risky strategy, businesses will find that due diligence is a far more effective way to increase resilience in 2023: when companies map multiple tiers of suppliers, they gain a greater understanding of potential revenue risk when disruptions occur.”

The US reported the most fires in 2021 (450), the report found, with almost triple the incidents of India (150). Germany and South Korea reported just below 150, and Mexico around 100.

A case study of an incident in October 2020 found a three-day fire at a semiconductor manufacturing plant shut down production lines for around six months – leaving procurement teams “scrambling”. This cost sourcing organisations “tens of millions of dollars”.

The report stated: “Now, imagine if that risk had been flagged and escalated by one or more of the organisations who were sourcing chips from this site? Alternate suppliers could have been secured or pressure to install sprinklers could have been applied; the cost of installing an automatic sprinkler system could have been paid by one of the sourcing organisations.” 

The top 10 industries affected by factory fires, ranked by number of alerts, were: 

  1. Automotive

  2. Manufacturing

  3. Food and beverage

  4. Aerospace

  5. Life sciences

  6. Home furnishings

  7. Healthcare

  8. Oil and gas

  9. Industrial chemicals

  10. Consumer electronics

Bindiya Vakil, Resilinc CEO, said: “The increase in factory fires is a worrying development because of the ripple effect it causes to the whole supply chain… An increase in the cost of vital parts produced by your supply chain should a supplier suddenly be unable to fulfil your requirements could be hugely damaging to your own business. This is where the need to multi-tier map and monitor your suppliers properly becomes crucial.”

Resilinc’s report was based on its EventWatchAI platform, which monitors disruptions across 160 countries through news and social media sites.

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