Everstream Analytics Annual Risk Report 2019

Everstream Analytics Annual Risk Report 2019

Foreward

The supply chain risk environment is dynamic and continually evolving. Risks are increasingly being called out in companies’ publicly filed financial statements and as supply chains become more strategic, disruptions are turning into board level issues. Each year brings new challenges for companies, with different threats, unexpected events, and unpredictable consequences. In 2018, for example, a ransomware attack on a shipping line sent ripples across global supply chains, while low water levels on the Rhine disrupted production at steel and chemical plants that rely on barge transportation.

To help you understand the nature and impact of changing supply chain risks, our first Annual Risk Report explores the major issues that came to prominence in 2018, and provides insights into areas of concern for the coming year.

At Everstream Analytics, our teams of analysts monitor hundreds of risk events every day, tracking their impact on the supply chains of dozens of industries. In this report, we’ve used that experience to highlight a portfolio of threats that de- serve particular attention during 2019 and beyond.

In addition to global risks, like international trade tensions and the growing impact of climate change, this report takes an in-depth regional perspective, looking at key issues across five parts of the world, from truck strikes in Brazil to the theft of high-value pharmaceutical products in Kuwait.

Wherever you operate, the intelligence provided here will help you to re-evaluate your own risk environment. It aims to provide you with the insights you need to evolve your strategy, adapt your networks and, ultimately, to protect your bottom line.

Executive Summary

This report, based on risk and incident data collected by Everstream Analytics, summarizes the major supply chain challenges of the last 12 months and analyzes their impact.

Ground transportation and civil unrest incidents were the two predominant risk clusters recorded by Everstream Analytics last year. In the United States, policy decisions by the Trump administration translated to high levels of protest activity. In other countries, such as Mexico, Brazil, and India, civil unrest was often tied to organized labor at factories and locations of supply chain and logistics significance such as ports and border crossings. In France, fuel tax protests by the Gilets Jaunes movement blocked key roadways and brought ground transportation to a halt.

While North America experienced fewer disasters and weather-related incidents than in 2017, the Asia Pacific suffered eight major tropical storms, which caused significant supply chain disruptions in Japan, China, South Korea, Taiwan, and the Philippines. A month-long summer drought in Europe brought water levels on the Rhine and adjacent rivers to record low levels, halting shipping traffic on large stretches and causing multiple chemical and steel makers to declare force majeure.

Part 1 of this report takes a forward-looking approach and presents a list of the top 10 supply chain risks to watch in 2019. These range from strategic topics, such as trade disputes, economic uncertainty, and structural change, to operational challenges such as industrial unrest and container ship fires.

Part 2 highlights seven key issues that shaped the risk landscape in 2018 by causing significant disruption and financial losses: trade disputes, including the US-China trade war and the uncertain Brexit process; supply chain cyber-attacks; climate change-related disruptions; port congestion; high fuel prices; cargo theft; and industry zone shutdowns.

Part 3 of the report provides summaries of major incidents across five geographical regions: North America, Latin America and the Caribbean, Europe, Africa and the Middle East, and Asia Pacific. Each summary includes a breakdown of incidents by month, country, and risk type, as well as a detailed description of some of the high impact events that affected the region’s supply chains in 2018.

Finally, Part 4 of this report describes the methodology used by Everstream Analytics to classify supply chain risks into four quadrants, according to impact and likelihood.

10 Top Trends to Watch in 2019

The modern economy relies on the smooth operation of complex and sophisticated supply chains. The ability to move materials, components and finished products in a timely and efficient manner has delivered benefits for many: reducing the cost of manufactured products, improving access to advanced technologies or life-saving medicines, and opening new markets and new business opportunities for producers.

Yet modern supply chains are also vulnerable. Transportation delays, theft, natural disasters, inclement weather, cyber-attacks and unexpected quality issues can disrupt cargo flows, creating short term costs and delivery challenges. And shifts in local, national and international trade and regulatory policies can upset the fundamental economics of established supply chains.

As we anticipate the challenges the new year brings, below is a list of trends to look out for in 2019 and to examine their implications for your supply chain network.

1. Trade Wars Drive Manufacturing Network Restructuring

Global trade tensions have led to the imposition of new import tariffs on a wide range of consumer products and industrial components. While the biggest fight has been between the US and China, other countries and regions, notably the EU, have also been drawn into the fray. As the impact of the new arrangements begins to bite, companies are starting to adapt their supply chains in response.

In June 2018, US motorcycle maker Harley Davidson announced that manufacturing of products destined for EU markets would be switched from US factories to facilities in Brazil and Thailand. We expect this trend to accelerate in 2019, especially if the US and China introduce further tariffs, or if the UK and EU fail to agree an orderly Brexit. German carmaker BMW has already announced that it is considering transferring production of its Mini brand from the UK to the Netherlands, and plans to make SUVs for Chinese customers at plants inside the country. Honda also recently announced that it will be shutting down its flagship plant in Swindon by 2021.

2. Rising Demand and Fragile Supply Create Raw Material Shortages

While companies are increasingly pursuing local or regional manufacturing strategies for finished products, the production of many key raw materials remains highly globalized. As such, supply of some key materials is vulnerable to widespread disruption caused by demand spikes or production bottlenecks. In recent months, plastics suppliers across Europe have warned of impending critical shortages of certain polyamide materials, which are used in the production of engineered plastic components such as car parts. The issue is rooted in the low supply of adiponitrile (ADN), a precursor chemical. ADN is manufactured at only five plants in the world, and shortages have been driven by operational problems and maintenance shutdowns. Companies in the automotive, textile, electronics, and packaging industries may be forced to switch to other products, at least temporarily, although this may not always be possible.

An area of growing concern over the longer term is the materials used in lithium-ion batteries, which are used in a wide range of high-value products from mobile phones to electric cars. The German Mineral Resources Agency forecasts that demand for lithium will quadruple by 2035. And because two-thirds of the world’s supply of cobalt, another essential component in lithium-ion batteries, is mined in Congo, some experts believe that instability in the region could drive a supply shortage in the near future. To secure their supply chains, Apple and some car manufacturers have already started to purchase cobalt directly on behalf of their battery suppliers.

3. Recalls and Safety Scares Put Quality Under Scruntiny

In highly regulated sectors such as pharmaceuticals and medical devices, attention to compliance and quality control is likely to rise, driven by wider public awareness of quality issues and stricter enforcement by regulators. Recalls of pharmaceutical products by the US Food and Drug Administration almost doubled between 2017 and 2018. Quality in the sector is increasingly a global issue as companies source more key materials, such as active pharmaceutical ingredients (APIs), from producers in developing economies. Various drugs used to treat high blood pressure were recalled in multiple countries last year following the discovery of potentially carcinogenic impurities. While the recalls affected products from several manufacturers, the cases were linked by the use of materials supplied by producers based in India or China. This added to concerns about weaknesses in manufacturing control and regulatory oversight in these regions. Conversely, China is now the world’s second largest pharmaceutical market, and overseas companies hoping to serve the country’s fast-growing middle class are coming to terms with the unique regulatory requirements of the China Food and Drug Administration (CFDA).

4. Climate Change Impact Heats Up

As it did in 2018, the changing climate is likely to have wide-ranging effects on global supply chains. Indeed,
2019 may be the warmest year on record, as the long-term increase in global temperatures is exacerbated by the “El-Niño” effect – a periodic warming of the surface waters in the Pacific Ocean that can affect global weather patterns. Forecasters expect an El Niño to form during the first few months of 2019, and it may last until the Northern Hemisphere spring.

A hotter atmosphere is linked to a range of problematic effects, including an increase in the frequency and severity of drought conditions, periods of intense rainfall, tropical storms, and damaging wildfires. The timing and severity of climate related disruption can be as unpredictable as it is dramatic, however. Water shortages had a material impact on supply chains in Europe during 2018, with low water levels disrupting inland shipping. Over the long term, however, climate change can be expected to drive increased risks of flooding and extreme weather patterns.

5. Tougher Environmental regulations Make Polluters Pay

In moves intended to tackle climate change, local air quality, and other forms of environmental pollution, authorities around the world are introducing new regulations and stepping up enforcement efforts. Some of the most significant effects of these policies are expected in China, where strict rules have been introduced to reduce emissions from the burning of coal, including enforced production shutdowns and plant closures.

Beijing has recently introduced a more flexible approach to its controls, allowing local authorities to adapt measures based on regional emission levels, but major industries including steel, aluminum, and cement all face increased scrutiny. In 2019, anti-pollution measures may be expanded to a broader range of industries across Asia. China is introducing a new soil pollution law targeting manufacturers. And in January 2019 Thai authorities halted rail construction work in Bangkok for a week due to smog.

The US Environmental Protection Agency will announce new rules governing nitrogen oxide emissions from trucks in 2019, as concerns over the health impact of these gases receive growing attention around the world. In Singapore, meanwhile, industries that produce more than 25,000 tonnes of greenhouse gas emissions per annum will be subject to a new carbon tax. The global recycling industry will continue its transition as other countries in South East Asia follow China’s lead in closing their doors to scrap imports. This rapid policy shift will force big waste producing countries in Europe and elsewhere to ramp up development of domestic recycling capacity.

6. Economic Uncertainty and Structural Change Put Suppliers Under Threat

The global trade war, uncertainty over Brexit, and stricter environmental regulations could become driving factors in putting financial pressure on lower tier industrial and automotive suppliers, bringing insolvencies to the forefront of supply chain risk management in 2019.

In Europe, customs delays due to Brexit could bankrupt 10% of UK businesses that have EU suppliers, according to a survey by the Chartered Institute of Procurement and Supply. And higher costs for raw materials caused by import tariffs, as well as the implementation of stricter vehicle emissions tests such as the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), have led to increased financial pressure on lower tier component makers in the automotive industry. Coupled with a trend towards electric vehicles which require fewer components, many lower tier suppliers may be forced to adapt their business models.

7. Cargo Caught Up in Industrial Unrest

Industrial action is a perennial risk in transport operations. Strikes, overtime bans, or work-to-rule can affect any transport mode, almost anywhere in the world. For shippers, the impact of these events can range from the mildly irritating to the considerably disruptive. We expect the risk of strikes to increase in 2019, fueled by a combination of local labor relations disputes and a growing sense of dissatisfaction among workers with wider economic and social change. The impact of industrial action on cargo operations varies by transport mode: In the aviation sector, strikes tend be short in duration and well-publicized. Port strikes can last longer, but their effects are usually less acute than aviation strikes since they affect shipments of a less time-critical nature. In the road transport sector, strikes are often organized with little advance notice, and disruption can lead to a widespread and long-lasting cascade of residual effects.

A significant number of ongoing industrial disputes already threaten to disrupt transport operations in various parts of the world during 2019. In Brazil, temporary measures brought in to stop a truckers strike are due to expire, and if negotiations between drivers and the new administration are not successful, action could resume as early as March. A nationwide cargo transportation strike is anticipated across the United States on April 12. In India two general strikes, involving hundreds of millions of participants, have already taken place, with repeat action presenting a significant risk to transport and manufactur- ing operations. And in France, continued action by Yellow Vest protesters may cause delays at ports, borders and on the road networks.

8. Hazardous Transport: Container Ship Fires

Following two large fires on Maersk-operated container vessels in 2018, a number of container ship fires and accidents in the first week of 2019 highlighted again what may become more commonplace occurrences. The largest incident occurred on January 3 on the Hapag-Lloyd owned vessel Yantian Express while transiting the Atlantic Ocean from Sri Lanka to Halifax, Canada. Industry experts say that it could take weeks before the ship will be unloaded and damages can be assessed, likely causing millions of financial losses to customers who generally insure only a small portion of ship containers. There is a major container cargo fire at sea roughly every 60 days, according to insurance company Allianz Global Corporate & Specialty. Most of the fires start in containers storing dangerous goods, which are often improperly secured. While container line Maersk has begun to implement random inspections of inbound containers to the US, insufficient firefighting capabilities on most ships as well as a trend towards larger container ships indicate an ever-growing risk for maritime-dependent supply chains.

9. Battles at the Border Increase Wait Times

Public discourse following the migration influx to Western Europe and ongoing high-profile migrant caravans traveling to the United States has increased many countries’ focus on physical border security. As a migrant caravan approached the San Ysidro port of entry between Tijuana and San Diego on November 25, 2018, confusion, chaos, and violence towards US Customs & Border Patrol agents in the vicinity of the port of entry led authorities to close the border crossing to all vehicle and pedestrian traffic for a period of 5 hours. In the United Kingdom, the looming uncertainty of post-Brexit trade policies leaves open the question of what new tariff and customs regimes may look like, and how those new regimes may affect and potentially reorient UK-affiliated supply chains. Operationally, all supply chains dependent on UK-based suppliers or EU-UK lanes will be forced to develop contingency plans as the March 29 deadline for a policy implementation approaches without a clear indication of what those new policies will be. Companies face the immediate risk of increased costs and border crossing wait times, especially in the period where customs agents are adapting to new processes. While border closures at ports of entry will remain extremely rare, Everstream Analytics anticipates an increase in the frequency of these high-impact events in 2019.

10. Drones Strike a Blow to Aviation Safety

Despite progress in the implementation of drone aviation regulations in many countries, the combined ease of drone accessibility and the lack of public awareness surrounding aviation regulations suggest that airport disruptions related to air traffic safety are likely to become more frequent in 2019, and thus present a greater risk of disruption to aviation logistics operations. In the UK, close-proximity drone aviation safety incidents have increased by 1,850% since 2014. In December 2018 repeated drone sightings at London Gatwick Airport resulted in the cancellation or delay of over 1,000 flights. Although documented civilian drone aviation safety incidents remain concentrated in the Manchester-Milan corridor in Europe and across the United States, airports have also reported cases of near-misses with drones in Canada, China, France, New Zealand, and Poland. Some countries, such as Bangladesh, Egypt, Nigeria, Kenya, Israel, Russia, and Saudi Arabia have mitigated this risk through strict regulations or outright bans.

A Look Back on the Year: The Supply Chain Risk Landscape of 2018

The trends of 2019 have been shaped by the events that transpired during the past year. A look back on 2018 shows how the risk land- scape has evolved in these 12 months. Changes in long-established trade practices, extreme weather patterns, maritime delays, rising fuel prices, cargo theft, and industry zone shutdowns triggered by environmental policy measures have all shaped the way we have come to view supply chain disruptions today.

Trade Disputes

2018 has been marked by a backlash against global economic integration through protectionist measures and a withdrawal from free trade agreements or economic blocs. In bids to protect domestic jobs and stop unfair transfer of US technology, the US with- drew from several trade agreements including the Trans Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA). The country also imposed new unilateral import tariffs on a wide range of products, targeting both developed and developing economies. Most of the affected countries and trading blocs retaliated on equal terms. In Europe, the UK and the EU are working to agree on an orderly withdrawal of the UK from the EU to avoid disrupting integrated supply chains.

In bids to protect do- mestic jobs and stop unfair transfer of US technology, the US withdrew from several trade agreements including the Trans Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA). 

US v. China: billions in tariffs

The US-China trade war has been particularly pronounced. Vowing to stop unfair transfer of US technology and reduce the USD 375 billion (EUR 327 billion) trade deficit with China, the US has imposed three rounds of tariffs on Chinese products, totaling USD 250 billion (EUR 218 billion) worth of goods. Affected products included aircraft parts, batteries, flat-panel televisions and medical devices. In response, China imposed tariffs on USD 130 billion (EUR 113 billion) of US product imports, targeting soybeans, chemicals, coal and medical equipment. Talks are ongoing to end the trade war, with a 90-day truce having been agreed until March 2019.

A disorderly departure from the EU could create border congestion and delays at ports due to new customs checks, in particular between Dover and Calais, where 10,000 trucks pass each day. 

US v. the rest of the world: protectionism on the rise

The US also imposed tariffs on specific products, notably steel and aluminum, citing a national security threat from unfair trade practices that allegedly threaten US jobs. Trading partners affected by the action, including Canada, Mexico and the EU, retaliated by levying taxes on specific US products. They increased tariffs on a range of goods, including agricultural produce, motorcycles, metal and dairy products. Separately the US, Mexico and Canada signed a new free trade agreement which is likely to alter automotive supply chains in North America. The US and the EU are exploring a free-trade deal amidst a looming US threat of tariffs on EU car imports.

Brexit: the battle to avoid border chaos

In a standoff over future trade relationships, the EU and the UK have agreed on the terms of the UK’s withdrawal from the bloc in March 2019. At the time of writing, however, the UK parliament had not ratified the agreement. Companies across sectors have started to trigger contingency plans to mitigate the potential negative impacts from a no-deal Brexit. They fear that a disorderly departure from the EU could create border congestion and delays at ports due to new customs checks, in particular between Dover and Calais, where 10,000 trucks pass each day.

Supply Chain Cyber Attacks

The reasons for the significant rise in the number of cyber security incidents affecting supply chain organizations and infrastructure are complex. Threat actors increasingly see supply chain and transport infrastructure as an appealing target, whether their aim is to obtain trade secrets, blackmail their victims or cause economic disruption. Moreover, increasing digital integration, combined with the growth of IoT technologies (which may be poorly secured), provides new opportunities for criminals to enter and disrupt supply chain networks. In 2018, Everstream Analytics recorded a total of 65 cyber attacks that directly impacted supply chain assets, with November experiencing the highest number of incidents at 20. Out of the incidents reported throughout the year, ten involved manufacturing actors, six affected airports or airlines, five occurred at couriers or postal services, five at ports or shipping companies and two applied to railway-related firms.

In 2018, Everstream Analytics recorded a total of 65 cyber attacks that directly impacted supply chain assets, with November experiencing the highest number of incidents at 20. 

Manufacturing: the new cyber security frontline

2018 saw an increase in incidents affecting manufacturing operations and infrastructure. In June, Tesla took court action against a former employee accused of leaking data on its manufacturing operating system. In December, employees of companies involved in the Italian automotive industry were the target of an extensive email phishing campaign. The objective of these incidents, and several others, was to access commercially sensitive information. Other reported cases involved lapses in cyber security that left information or even physical assets open to exploitation. In October, sensitive documents relating to a number of major automotive original equipment manufacturers (OEMs) were exposed by manufacturing equipment company Level One Robotics.

Air transport: data breaches and terminal disruption

Airport and airline-related breaches were regularly observed during the year. Incidents included customer data breaches, such as the cyber-attack on British Airways and the accidental leak of customer data by Nigerian Airline Arik Air. Attackers also targeted airport information systems, for example at Bristol Airport in the UK and Tabriz International Airport in Iran. In these instances, flight operations were unaffected, but airports had to resort to manual systems to keep passengers informed.

Maritime: ports held to ransom

Port and shipping line cyber incidents also continued to be a common occurrence in 2018. A ransomware attack against shipping line and terminal operator COSCO had the widest impact of any attack last year, affecting ten countries and taking more than a week to resolve. The Port of San Diego also experienced a disruptive ransomware attack.

Climate Change

2018 was the 4th warmest year on record, with the Arctic region experiencing the 2nd lowest overall sea-ice coverage ever seen. Aside from the strategic and existential threats posed by climate change to trade and global economies, the most significant effects of climate change on supply chains were the result of wildfires, drought, low water levels and melting ice.

The Rhine – Europe’s main river shipping artery – halted shipping operations on large stretches as it fell to its lowest level in history, disrupting the inbound flow of raw materials to chemical and steel plants.

Wildfires: raging out of control

A combination of droughts and prolonged hot weather caused the most destructive and deadliest wildfires in history in the US state of California, the most serious wildfires in the modern history of Sweden, and in Greece, the second-deadliest wildfire of the last 20 years. Business in affected regions had to cope with roadway closures, power outages and staff evacuations. In addition to the operational impact, businesses experienced adverse effects on human health and air quality which contributed to the challenging conditions.

Low water: river transport runs aground

Dry weather led to serious disruption of river shipping in several parts of the world. In Europe, the Rhine – Europe’s main river shipping artery – halted shipping operations on large stretches as it fell to its lowest level in history, disrupting the inbound flow of raw materials to chemical and steel plants. Companies were also faced with higher costs or partial shipping closures due to low water levels on the St. Lawrence River in Canada and on the Parana River in Argentina as cargo loads had to be reduced, requiring more ships to transport the same amount of goods.

Tropical cyclones: more frequent, more intense

An unusually high number of super typhoons hit the western Pacific, with the most powerful storm of the year Mangkhut, causing more than USD 30 billion (EUR 26 billion) in financial damages when it made landfall in Hong Kong. Further up the coast, three powerful back-to-back typhoons in summer 2018 severely disrupted manufacturing and logistics in the greater Shanghai region.

Melting ice: new transport possibilities open up

Not every climate-related issue had a negative effect on supply chains. The Venta Maersk, a commercial container ship, was able to exploit the lack of ice to successfully navigate the Northern Sea Route of the Arctic Ocean from Vladivostok to St. Petersburg for the first time. This route could eventually cut journey times between Asia and Europe by up to two weeks, allowing ships to avoid travelling through the Suez Canal or past the Cape of Good Hope in South Africa.

Port Congestion

Across the world, ports faced a range of disruptive events, from challenging weather conditions and strikes to an adjustment of global trade flows driven by changes in government policies and customs regulations. Whether these events led to temporary closures, reduced capacity or an increase in demand, the result was same: delays and unpredictable schedules affecting cargo operations at ports.

On average, these extreme events resulted in port closures of between 1 and 2 days, with vessels forced to reschedule and knock-on delays as facilities worked through the resulting backlogs. 

Extreme weather: feeling the heat

The weather took its toll on many ports this year, from winter storm disruption in the east and northeast US between January and March to tropical storms and typhoons in Asia Pacific later in the year. On average, these extreme events resulted in port closures of between 1 and 2 days, with vessels forced to reschedule and knock-on delays as facilities worked through the resulting backlogs. Less dramatic weather also affected port operations. Frequent dense fog and low visibility regularly affected ports along the north eastern coastal areas of China, with intermittent suspension of pilot services and closures of up to 12 hours. Elsewhere, facilities were affected by a range of difficult weather conditions, including high winds, strong swells and heat waves, which resulted in low productivity or brief operational suspensions.

Policy changes: supply chains scrapped

China’s ban on scrap import led to a major ripple effect of port congestion from the United States, Europe to Southeast Asian ports. Cat Lai and Hai Phong ports in Vietnam were heavily congested with scrap imports from the west. This caused authorities to impose a three-month temporary ban from June to October 2018, which was later extended until further notice. As of October, there were still reportedly 4,000 containers of scrap at Cat Lai Port including 3,000 containers that had been left for more than three months.

In Europe, intermittent port strikes in Portugal, particularly at Port of Setubal, lasted for 40-days and are likely to resume again in early 2019. 

Strikes and cyber-attacks: delays and disruption

More localized disruption also affected operations at several major ports. As described above, the port of San Diego and COSCO’s terminal in Los Angeles were hit by cyber- attacks that forced them to revert temporarily to manual systems while the IT issues were resolved. And in Europe, intermittent port strikes in Portugal, particularly at Port of Setubal, lasted for 40-days and are likely to resume again in early 2019. The last round of strikes in 2018 affected shipments of cars made at a Volkswagen plant nearby as well as other goods.

High Fuel Prices

Supply chains relying on road transportation experienced an unprecedented level of disruption in 2018 as weeks-long cargo transportation strikes and protests over high fuel prices hit countries in Europe, Latin America, Asia, and Africa. Faced with higher transportation costs, truck drivers blocked major highways and key access roads to airports and ports, causing fuel shortages and disrupting countrywide road freight traffic.

The Brazilian government ended the strike by promising subsidies and set freight rates which expired at the end of 2018, potentially bringing the dispute back in the spotlight in early 2019.

Brazil: truckers bring cargo movement to a stop

Protests over fuel prices were most pronounced across Latin America, and in particular in Brazil. Over a 10-day period, a nationwide truckers’ strike brought supply chains to a standstill in May 2018 as roadblocks sealed off highways, halted container movements, and caused fuel shortages at gas stations and airports. The government ended the strike by promising subsidies and set freight rates which expired at the end of 2018, potentially bringing the dispute back in the spotlight in early 2019. Week-long trucker strikes also hit multiple regions across Colombia in November and December 2018, while one-day strikes were reported in Paraguay and the Dominican Republic.

India and China: roadblocks cause chaos

A nationwide truck drivers’ strike also caused logistics and production disruption across India in July 2018. Cargo transporters associated with the All India Motor Transport Congress (AIMTC) protested against high fuel prices and toll fees for more than a week in various states including Andhra Pradesh, Kerala, and Tamil Nadu. Erected roadblocks partially impacted container movements from and to major ports in Mundra, Pipavav, and Visakhapatnam. On the other side of the Himalayas, an 8.5 percent increase in fuel prices contributed to a protest led by truck drivers in multiple Chinese provinces in June 2018, including in major cities such as Shanghai and Chongqing. Traffic on major highways was reportedly shut down, mainly affecting less-than-truckload shipments.

France: Gilet Jaunes movement takes to the streets

In Europe, a grassroots movement branded ‘Yellow Vests’ or ‘Gilets Jaunes’ caused widespread disruption across France and southern Belgium in the months of November and December 2018, with protesters blocking highways, bridges, border crossings, container ports, and industrial sites. Turning into a political movement against the government, the protests were initially organized to demonstrate against rising fuel prices and a newly installed tax on fuel, affecting more than 2,000 locations in Paris, Marseille, Toulouse, Rouen, and Le Havre, among others. Damages caused by the protests cost the French economy an estimated USD 5.03 billion (EUR 4.4 billion).

Guinea: Conakry faces mass demonstrations

Anger over a 25 percent hike in oil prices also fuelled a general strike in the Guinean capital of Conakry in July 2018. Mass demonstrations and road blockades impeded traffic across the city as protests turned into violent clashes with police forces. As truck drivers and port workers later also conducted strike actions, shipping companies started to warn of potential delays and congestion due to the suspension of container pick-up and delivery activities at the Port of Guinea.

Increasingly, these are choreographed incidents in which large numbers of people remove cargo from deliberately overturned trucks or derailed trains. The Mexican chemicals industry has been particularly affected, mainly by thieves targeting polyethylene.

Cargo Theft

Cargo theft trends vary significantly by region, depending on the setup of local supply chains and transport infrastructure, the modus operandi of local criminal groups, and the approaches adopted by law enforcement agencies. Notable shifts in these patterns are outlined below.

North America: successes for law enforcement in US and Canada, while Mexico struggles

The US and Canada saw a declining rate of cargo theft incidents in 2018. Much of that can be attributed to successful law enforcement investigations and the formation of regional cargo-theft task forces. US authorities took down major gangs in both New Jersey and the Miami area. Mexico, on the other hand, experienced a high number of cargo thefts and train robberies. The five states with the most cargo theft incidents were Puebla, Guanajuato, Jalisco, Coahuila, and Sonora. Increasingly, these are choreographed incidents in which large numbers of people remove cargo from deliberately overturned trucks or derailed trains. The Mexican chemicals industry has been particularly affected, mainly by thieves targeting polyethylene. Reported losses due to polyethylene theft amounted to over USD 2.5 million (EUR 2.2 million).

Latin America: instability boosts crime

Worsening economic conditions and political instability in Venezuela have fueled a surge in truck and train attacks, with food and beverages the preferred target. Although there are no official records of cargo theft incidents in Chile, Everstream Analytics recorded over 71 incidents in 2018. The great majority of these robberies were committed in the “Bermuda triangle” of crime, which is the area between the ports of San Antonio and Valparaíso, and the capital city of Santiago. In Brazil, electronics, and food and drinks continued to be the most stolen product types, with truck hijacking and warehouse theft being the most common modus operandi.

In 2018, Everstream Analytics reported a monthly average of 150 cargo theft incidents in Europe, with more than 240 incidents occurring during peak months. 

Europe: asleep at the wheel

In 2018, Everstream Analytics reported a monthly average of 150 cargo theft incidents in Europe, with more than 240 incidents occurring during peak months. The top five countries most targeted for cargo thefts include the UK, Germany, Belgium, the Netherlands and France, where goods ranging from clothing and electronic consumer products to pharmaceuticals and auto parts are regularly stolen. 2018 saw the rise of a new modus operandi for truck theft, with criminals using sleeping gas to knock out truck drivers before stealing manufactured goods and personal belongings. In December 2018, thefts from moving trucks were again in the spotlight of supply chain security in Europe as criminal gangs stole electronics goods in Romania and the Netherlands.

Industry Zone Shutdowns

Governments in many fast-developing regions have stepped up efforts to reduce the environmental impact of industrial operations. Increasingly, they are doing so by enforcing temporary or even permanent shutdowns of businesses in areas where pollution limits are being exceeded. In 2018, government interventions were particularly notable in China and India.

This winter, the emission control rules in China have been extended to 79 cities, although the impact on specific production sites is likely to vary following criticism of last year’s “one-size-fits-all” approach.

China: air quality a priority

China’s national government enforced a cut in coal consumption in 28 northern cities between November 2017 and March 2018 in an effort to reduce the impact of winter smog. In April 2018, Xuzhou authorities temporarily suspended operations at several steel plants in the city to meet the latest smog-reduction measures. The impact of pollution control measures is not limited to energy-intensive industries such as steel production.
The authorities also shut down polyester plants that use to coal as feedstock, affecting the textile industry in Shandong and Hebei. This winter, the emission control rules have been extended to 79 cities, although the impact on specific production sites is likely to vary following criticism of last year’s “one-size-fits-all” approach.

India: states take action against polluters and plastics producers

Tamil Nadu State permanently shut down a copper plant belonging to Vedanta subsidiary, Sterlite Industries in May 2018, following months of protests against pollution. The plant was located in Tuticorin and had annual production capacity of 400,000 tons. The closure reportedly affected 800 small and midsize companies, especially cable, wire and electric device manufacturers that use copper from Vedanta. After introducing bans on a range of plastic products, Maharashtra State shut down 16 plastic manufacturing plants in Pune, Satara and Sangli. Suppliers of plastic raw materials may be affected by further regulatory measures in 2019, impacting production, packaging, and supply chains.

Overview and Regional Summaries

Overview

Figure 02: Incidents by Month

In 2018, May to August was the period with the most supply chain disruptions worldwide, which coincides with the beginning of the cyclone season in the South Pacific and the hurricane season in the Atlantic. Of the events reported for each risk cluster, a noticeable number of ground transportation and civil unrest incidents were captured worldwide. These often had logistics significance, such as the start of the Gilets Jaunes demonstrations in France and elsewhere, the May truckers’ strike across Brazil, or the 8-day July Bharat Bandh strike in India.
Other categories of importance to supply chains included industrial fires, most impactful at chemical and steel factories as well as petroleum facilities, and natural disasters, with the potential to halt productive facility operation and/or shut down logistics channels.

Figure 03: Overall Incidents by Risk Cluster

Observations from the year show that earthquakes were the most frequent category of high impact events. Some of the most impactful earthquakes in 2018 include the November Anchorage earthquake in Alaska, the September Atsuma, Hokkaido earthquake in northern Japan, and the October earthquake that hit the Ionian Sea island of Zante in Greece.

Figure 04: High Impact Events by Risk Category

2018 also saw a large number of cargo theft incidents, particularly in Europe, and in Latin America and the Caribbean. Metropolitan areas in countries like Mexico, Brazil, Chile, Venezuela, United Kingdom, Germany, and Italy continued to be explicit hot spots for cargo theft. Likewise, train derailments continued to be an important safety concern for supply chain professionals in 2018, and they became increasingly so when dangerous goods were involved.

Regional Summaries

In this section, a summary of all incidents reported by Everstream Analytics is presented for five geographical regions: North America, Latin America and the Caribbean, Europe, Africa and the Middle East, and Asia Pacific. Each summary includes a breakdown of incidents by month, country, and risk type, as well as a recap of some of the high impact events that affected supply chains in those regions in 2018.

North America

Figure 05: Incidents by Month

During 2018, May was the month with the highest number of incidents. Historically, May is a month with a high number of labor-related protests and this year was no exception, reinforced by a large number of demonstrations against President Trump’s policies. In contrast, December was the month with the lowest number of incidents, which is partially explained by the resolution of a series of industrial actions that threatened to disrupt holiday supply chains.

Figure 06: Incidents by Country

In contrast to other regions comprised of multiple countries, North America consists of only the United States, Canada, and Mexico. However, these three countries represent approximately 28% of the world’s gross domestic product (GDP) with just less than 7% of the world’s population. The large number of supply chain incidents in North America is also a testament to the integration of the North American supply chains, facilitated through the North American Free Trade Agreement (NAFTA) of 1994 and the United States-Mexico- Canada Agreement (USMCA) of 2018. The majority of North American incidents are driven by events in the United States, followed by Mexico and Canada. This is due to not only the size of the US economy, but also because the United States is the number one export and import partner of many countries worldwide.

Figure 07: Incidents by Risk Cluster

The largest cluster of incidents in North America was civil unrest, which typically means protests in excess of 100 participants. In the US, policy decisions by the Trump administration, especially those that affect migrants, often translated to more protest activity in 2018. In Mexico, civil unrest was often tied to organized labor, such as union activity at facilities and locations of supply chain and logistics significance, such as cargo transport hubs, borders, and factories. Another contributor in Mexico was an uptick in political demonstrations related to the July 1 general election, and the December 1 inauguration of Andrés Manuel López Obrador as President.

Historically, May is a month with a high number of labor-related protests and this year was no exception.

In terms of natural disasters and weather related incidents, North America saw a lower number in 2018 than the previous year, partially due to the less intensive 2018 hurricane season. Hurricanes Florence and Michael, affecting mainly the Southeast US, had a minimal destructive impact on industrial production and port operations. However, the flooding caused by the two hurricanes resulted in considerable interruption to interstate, national, state, and local roads.

Civil unrest incidents and natural disasters are often accompanied by ground transportation disruptions. Other contributors to ground transportation incidents during the year included occurrences at the US-Mexico border. While the migrant caravans of 2018 were initiated in Central America, their growth upon arrival in Mexico impeded road and rail logistic flows, and contributed to disruptions across Mexico’s southern states and the US-Mexico border.

Fires were another major point of concern for supply chain professionals as they created large disruptions to manufacturing down the production line. In 2018, North America saw a series of industrial fires that resulted in millions of dollars in damage. One example was the May 2 Meridian Magnesium fire, an incident that impacted supply chains of four different auto manufacturers of sedans, trucks, and vans across the US. In Mexico, July saw a large industrial fire at one of two Alpek chemical plants in Altamira, Tamaulipas. The fire caused an eight-week shutdown in the production lines at the Purified Terephthalic Acid plant.

In 2018, North America saw a series of industrial fires that resulted in millions of dollars in damage. One example was the May 2 Meridian Magnesium fire, an incident that impacted supply chains of four different auto manufacturers of sedans, trucks, and vans across the US.

Other high impact events recorded by Everstream Analytics included train accidents and derailments, closely followed by earthquakes. While there were several earthquake and rail disruptions across North America in 2018, one that best embodied both categories was the November 30 earthquake off the Alaskan coast. Anchorage was profoundly affected by this event, with several roads broken throughout the city, including one leading to Ted Stevens International Airport. This incident was particularly notable as Anchorage is the fourth most important city in the US for international air freight shipments. Another notable impact of the earthquake was the complete suspension of Alaska Railroad services on the lines from Anchorage to Fairbanks.

Figure 08: High Impact Events by Risk Category

While improved police work and security measures contributed to the reduction of cargo theft incidents in 2018 in the US, major areas of logistics importance, such as Los Angeles and Long Beach, New York and New Jersey, Chicago, Detroit, Memphis, Atlanta, and Miami continued to experience high rates of cargo theft incidents. Mexico also continued to experience a surge in cargo theft during the year. The five states with the most number of reported cargo thefts were Puebla, Guanajuato, Jalisco, Coahuila, and Sonora.

While chronic port congestion, especially at the Port of Los Angeles and Long Beach, continued to be an issue this year, perhaps the most acute incident of port congestion was experienced at the Canadian ports of Montreal and Vancouver. What started in April grew to be up to 2 weeks’ worth of congestion by the end of the month, affecting the flow through major logistic thoroughfares such as the Quebec-Windsor corridor and Pacific Canada.

Finally, numerous trade regulation and restrictions that affected North American supply chains in 2018 merit mention. The US-China trade war, stemming from policy decisions by the Trump administration to confront alleged unfair trade practices by China, reverberated into a series of reciprocal tariff applications worldwide. Starting primarily with Section 301 and with tariffs related to steel and aluminum, trade restrictions imposed by the US later came to include metal imports from Canada and Mexico. As the year progressed, trade negotiations between first the US and Mexico, and later between the US and Canada, yielded a successor agreement to NAFTA called the United States-Mexico-Canada Agreement, or USMCA.

Notable Incidents From The Year

January: Blocked railroads in Michoacán, Mexico impact automotive supply chains. From late January to mid- February, teachers affiliated with the CNTE blocked major railroads essential for importing car parts and exporting finished vehicles across Mexico. The blockades caused over USD 21 million (EUR 18.3 million) in lost revenue, where most of the impact was on steel and automotive compo- nent shipments destined for manufacturers in North American and Asian markets.

February: FDA warns US-based pharmaceutical company over quality control violations. On February 8, the FDA warned pharmaceutical and nutritional products manufacturer Nexgen Pharma Inc. for failing to use quality standard equipment in its manufacturing process. The warning was issued following an inspection at the manufacturer’s facility in Irvine, CA.

March: President Trump signs orders imposing tariffs on imported steel and aluminum. On March 8, President Trump signed two orders imposing duties of 25% on all imported steel and 10% on all imported aluminum. According to the Office of the United States Trade Representative, these tariffs prevented the entry of USD 50 billion (EUR 43.6 billion) worth of Chinese steel and aluminum.

April: Railway workers go on strike across Canada.

Around 3,000 employees of the Canadian Pacific Railway walked off the job on April 21 to ask for a new collective agreement and more predictable schedules. The strike had a major impact on railways across the country, exacerbat- ing delays and extending delivery times.

May: Michigan supplier fire causes ripple effect through the automotive manufacturing industry. On May 2, an industrial fire caused significant damages to a Michigan magnesium parts plant, halting the flow of parts to several auto manufacturers. In the days after the fire, Ford shut down its F-150 and Super Duty assembly lines in Dearborn, MI; Kansas City, MO; and Louisville, KY; Mercedes-Benz canceled shifts and adjusted production hours in Tusca- loosa, AL; GM suspended production of GMC Savana and Chevrolet Express full-size vans in MO due to the parts shortage; Fiat Chrysler stopped assembly of the Chrysler Pacifica minivan in Windsor, ON; and BMW downsized production of X5 and X6 SUVs in SC.

June: CSX train services halted for three days after derail- ment of 23 freight cars in Princeton, IN. On June 17, CSX train services in Princeton, IN were halted for three days after the derailment of 23 freight cars, 5 of which included propane tank cars. The Princeton, IN rail yard is a notable transit point between southern Illinois, southern Indiana, and northern Kentucky.

July: Engineering firm Level One Robotics and Controls suffers data breach in Canada. On July 20, it was reported that engineering firm Level One Robotics and Controls was hit in a considerable data breach that exposed details about factory records and diagrams from several auto manufacturers including FCA, Ford, GM, Tesla, Toyota, and Volkswagen. The source of the leak was determined be one of Level One’s backup servicers lacking password protection or special access permissions.

August: 400 tons of polyethylene stolen from freight train in Hidalgo, Mexico. A Ferrosur freight train was robbed
on August 13 at the Paula station in the municipality of Tizayuca, Hidalgo. The thieves were able to steal more than 4.3 tons of polyethylene, a material used to manufacture plastic containers, pipes and cable coatings. Polyethylene is a commonly stolen manufacturing material from ground cargo transporters in Mexico.

September: Automotive, aerospace, and pharmaceutical industries shutter plants ahead of Hurricane Florence. Several automotive, aerospace, and pharmaceutical plants halted operations and suffered structural damages at coastal facilities in VA, NC, SC, and GA during the passage of Hurricane Florence. Flooding of several north-south interstate highways and port closures were also reported.

October: Voestalpine’s Texas plant shuts down for 14 days following a fire. Austrian steelmaker Voestalpine shuts down production at its Portland, TX plant for 14 days after a fire on October 24, which broke out after a gas leak. Voestalpine supplies steel products to the automotive, aerospace, energy, and railway markets.

November: Migrant caravan affects rail cargo crossing near in Tijuana, San Ysidro. On November 25, a security incident at the San Ysidro border crossing impeded the flow of cross-border rail traffic from Mexico to the United States. The Central American migrant caravan had overwhelmed local police blockades in Tijuana and had proceeded to the rail cargo crossing area. Reports of the caravan indicated increased incidents of migrants using rail transport as a means to reach the border.

December: Severe port congestion reported at Canadian ports of Vancouver and Montreal. Increased container throughput, a lack of labor supply, a shortage of railcars, and adverse weather conditions caused average dwell times at Canadian ports of Vancouver and Montreal to increase significantly throughout the month of December. Industry sources reported that average dwell times at the Port of Vancouver reached 8-10 days and up to 14 days for the Port of Montreal.

Latin America and the Caribbean

Figure 09: Incidents by Month
Figure 10: Incidents by Country

Across the Latin America and the Caribbean region, a large number of the incidents were reported from South American countries like Brazil (21.19%), Argentina (13.9%), Chile (12.6%), and Colombia (7.9%). For Central American countries, Guatemala led the group, followed by Nicaragua and Costa Rica. Despite the ever-important northern portion of the Pan-American Highway passing through these countries, the coverage of incidents in Central America can be attributed to the relative size of their respective economies. Finally, included in the Other section and accounting for 26.1% of the regional incidents, are countries like Ecuador, Uruguay, Paraguay, Bolivia, Panama, El Salvador, Honduras, Belize, the Dominican Republic, Haiti, and other Caribbean countries.

Figure 11: Incidents by Risk Cluster

Across risk clusters, the large majority (44.7%) was civil unrest, ground transportation, and labor incidents, covering nearly half of all incidents observed for this region. A common occurrence in the region thatpage26image48310592page26image48304064page26image48303680page26image48313664

conflagrated the three risk clusters are industrial actions. Such actions often included major metropolitan areas, and occasionally spread to the entire country, affecting the unimpeded flow of goods. Examples of these include a series of general strikes in Argentina, primarily centered on the Rosario Province in September and November, as well as the Brazil truckers’ strike in the latter half of May. Moreover, countries like Peru, Dominican Republic and Bolivia also saw a series of truckers’ strikes over the price of diesel, security concerns, and non-payment of debts.

A common occurrence in the region that conflagrated the three risk clusters are industrial actions. Such actions often included major metropolitan areas, and occasionally spread to the entire country, affecting the unimpeded flow of goods.

Although the majority of civil unrest, ground transportation, and labor events were related to organized labor, they were closely linked to the political events that unfolded in 2018 in the region. The general strikes in Costa Rica and Argentina were centered on public discontent with the economic policies of their incumbent national administrations; the Brazil truckers’ strike had public policy implications as well. Additional examples include the nationwide demonstrations in Nicaragua against President Ortega that led to widespread ground transportation disruptions and border delays.

Additionally, the year was characterized by a number of minor and moderate natural disasters in Latin America and the Caribbean, which in total accounted for 12.2% of all incidents in the region. Natural disasters included floods, volcano eruptions and earthquakes, where Chile, Peru, Ecuador, Nicaragua, and Guatemala continued to be hotspots. The eruption of the Fuego volcano in June caused widespread disruption throughout the heart of Guatemala. Effects included roadway disruptions at the Pan American Highway near the volcano as well as ash clouds passing north to Mexico’s southern states.

Figure 12: High Impact Events by Risk Category

Other high impact events in the region included earthquakes and cargo thefts, accounting for over two-thirds ofincidents during the year. A notable earthquake in the region was a 7.3 magnitude earthquake in northern Venezuela on August 22, which caused widespread disruptions to the already troubled transportation infrastructure of the country. Another notable disruption attributed to this earthquake was the operation and flight suspensions at El Dorado International Airport in Bogota.

Cargo theft was also a common occurrence in the region in 2018, and while law enforcement efforts were progressively dedicated to its interception, several hotspots remain throughout the region. These hotspots include San Jose in Costa Rica; Port of Spain in Trinidad and Tobago; Cali, Medellin, and Bogota in Colombia; the Caracas metropolitan area in Venezuela; Piura, Lima and Callao in Peru; Santiago metropolitan area in Chile; Buenos Aires and Santa Fe in Argentina; and the major metropolises of Brazil’s Atlantic coasts, the Brasilia metropolitan area, and Cuiaba near the border with Bolivia.

In Brazil and Chile, the theft of electronics and spirituous beverages gained considerable traction in November to the extent that state military police forces coordinated special operations to crack down on the activity, particularly those perpetrated by organized crime syndicates, in order to secure cargo passage for the 2018 holiday season.

Two notable incidents that contributed to cargo disruption were the airline industrial actions at LAN Express in April and the Aerolineas Argentinas G20 strike in November. The LAN Express strike, an industrial action started by employees of the LATAM subsidiary, lasted throughout the month and impacted both domestic and international air travel in Chile, Peru, Colombia and Argentina. The Aerolineas Argentinas strike was initially low-key at the beginning of November, yet gained widespread attention with several hundred cancellations at the height of the G20 conference in Buenos Aires on November 30.

In Brazil and Chile, the theft of electronics and spirituous beverages gained considerable traction in November to the extent that state military police forces coordinated special operations to crack down on the activity, particularly those perpetrated by organized crime syndicates, in order to secure cargo passage for the 2018 holiday season.

Notable Incidents From The Year

January: Container ship damaged by crane at the Port of Valparaiso. Industry sources reported that Singapore- flagged container ship Cap San Tainaro was damaged by a crane at the Port of Valparaiso, Chile on January 12. A mast on the upper bridge was reportedly broken, but containers were not damaged. The vessel was idle for 5 days for repairs before continuing its voyage to Callao, Peru.

February: Cargo operations affected by power outage at Ezeiza International Airport in Argentina. A city-wide power outage in Ezeiza impacted cargo clearance operations at Ezeiza International Airport in the greater Buenos Aires area on February 21. Inbound operations were affected, resulting in delays of up to 24 hours.

March: Alunorte refinery in Brazil shuts down alumina production lines due to force majeure. On March 27, aluminum producer Hydro Alunorte reduced half of its alumina capacity to preserve equipment at its alumina refinery in Barcarena, Brazil, following orders from local authorities to cut production by 50% due to concerns over possible flooding and water contamination after heavy rainfall in the area. As of this writing, force majeure is still in effect at Alunorte alumina plant, which is still operating at half capacity.

April: LAN Express workers go on strike in all Chilean airports. From April 3 to 26, LAN Express crew members conducted a strike that led to 2,000 cancellations of domestic and international LATAM flights, affecting 400,000 passengers and resulting in losses of USD 1.5 million (EUR 1.3 million) daily.

May: Countrywide cargo transporters’ strike disrupts manufacturing supply chains in Brazil. From May 21 to 31, a nationwide truckers’ strike across Brazil impacted all aspects of supply chains, including, but not limited to, ground cargo transportation, air transportation, fuel distribution, customs clearance, and commodity prices. The labor dispute between truckers, distributors, and
the government was triggered over fuel subsidies and minimum shipping rates. The strike was resolved with temporary legislative measures on the subsidies and rates at the end of May.

June: Nicaragua’s political crisis significantly disrupts road freight transportation. Demonstrations against the government of Daniel Ortega across Nicaragua impacted ground freight transportation during the months of May and June, and impeded the navigation of domestic routes and cross-border commerce. Industry sources reported on June 13 that only 8% of expected shipments were able to cross borders at the peak of the crisis.

July: COSCO Shipping Lines face operational challenges after ransomware spread. On July 23, 10 country-level offices of COSCO Shipping Lines were impacted by a ransomware incident that paralyzed customer-facing communications, 6 of which were in Central and South America (Argentina, Brazil, Chile, Panama, Peru, and Uruguay). The incident impacted automated online pro- cessing and email communication with clients for 8 days.

August: Construction at San Jose Airport in Costa Rica disrupts night departures/arrivals. Construction at Juan Santamaría International Airport’s (SJO) runway in San Jose disrupted scheduled nighttime flight patterns starting August 20 and lasting for a period of 4 months. This affected air freight productivity at SJO, as most cargo flights are scheduled at night.

September: Cargo handlers go on strike at TCBuen container terminal in Colombia. A freight transporter strike launched at the beginning of September at the APM’s TCBuen container terminal of the Port of Buenaventura resulted in dozens of container ships stranded at sea and incurred daily losses of over 1,682 million pesos (USD 542,000; EUR 472,000). The strike ended on September 21 after successful negotiations between the port workers’ labor union and APM Terminals.

October: Production halted at Sao Paulo pharmaceutical factory following fire. On October 20, a fire broke out at the EMS Hortolandia pharmaceutical factory in Sao Paulo, halting production of liquid, semisolid, and solid pharmaceuticals. The fire consumed 15,000 square meters of the 65,000 square meter factory.

November: Dockworkers at the Port of Valparaiso in Chile declare strike. On November 19, 750 dockworkers at the South Pacific Terminal of the Port of Valparaiso started a strike, lasting through December, to demand salary raises and bonuses. The terminal in question moves 1 million twenty-foot containers annually. As a result of the strike, the Chilean Chamber of Commerce reported commercial losses of over USD 16 million (EUR 14 million), as well as an impact on 56% of the country’s fruit exports.

December: Truck carrying USD 653,000 worth of copper concentrates stolen in Calama, Chile. A group of armed criminals stole a truck carrying 26 tons of copper concentrates outside Calama in the Antofagasta region on December 19. According to the police report, the empty truck was recovered in the Ojo de Apache sector
a few days later, but without the cargo which was valued at 450 million pesos (USD 653,000; EUR 572,000).

Europe

During the year, March experienced the highest number of incidents, mainly due to large-scale weather events such as winter storms, which halted air and ground transportation across multiple countries. The second highest number of incidents occurred in May, a month when many labor- related protests typically take place.

Figure 13: Incidents by Month

Compared to regions such as North America or Latin America and the Caribbean, incidents in Europe are more evenly spread across multiple countries. That being said, most incidents were recorded in Germany and the United Kingdom, respectively the 4th and 5th largest economies in the world. Together both countries accounted for more than one-third (36.4 %) of all incidents in Europe. Secondary markets in Europe are led by France, closely followed by the Netherlands, Russia, and Italy.

Figure 14: Incidents by Country

A large majority (44.7%) of events reported by risk clusters included air and ground transportation incidents. This is not surprising as these are the two main modes of transportation in the region and both are sensitive to weather, labor, and infrastructure-related disruptions. Examples of severe ground transportation incidents that occurred in Europe in 2018 include two train accidents which disrupted railway traffic on key rail corridors for more than 2 weeks: one on the Brenner Pass in January due to a train derailment and the other near Milan in June, which impacted intermodal services between Genoa and Switzerland. Another ground transportation incident with important supply chain implications was the Morandi Bridge collapse in Genoa in August, which led not only to widespread disruption of road traffic, but also impacted operations at the city’s port for a number of days.

Most incidents were recorded in Germany and the United Kingdom, respectively the 4th and 5th largest economies in the world.
Figure 15: Incidents by Risk Cluster

Other clusters with a large number of incidents were civil unrest, which encompasses protests and riots, and fires, which comprises of explosions, industrial fires and vehicle fires. Together these made up for about one-fourth of all incidents (24%). In terms of protests, May and November were particularly active months due to a series of protests related to Labor Day (May 1) and the widespread Yellow Vests protests in France and Belgium, which disrupted highways, ports, border crossings and access roads to industrial areas. As for industrial fires and explosions, which tend to cause ripple effects on downstream manufacturing industries, Europe saw a large number

of disruptive incidents in 2018. For instance, when a major fire broke out at Prodrive Technologies in Eindhoven in December 2018, companies in the semiconductor industry such as ASML issued warnings that their supply might be disrupted from January 2019.

Examples of severe ground transportation incidents that occurred in Europe in 2018 include two train accidents which disrupted railway traffic on key rail corridors for more than 2 weeks: one on the Brenner Pass in January due to a train derailment and the other near Milan in June, which impacted intermodal services between Genoa and Switzerland.

Additionally, 2018 was a year marked by a month-long drought in Europe encompassing summer and autumn, which brought water levels on the Rhine and adjacent rivers to record low levels. This halted shipping traffic on large stretches and caused multiple chemical and steel makers in Germany, France, and the Netherlands to declare force majeure on their deliveries.

Overall, Everstream Analytics recorded over 5,000 high impact events in Europe in 2018, with the large majority being between the months of August and November. High impact events were led by cargo theft, industrial fires & explosions, and train accidents which together accounted for almost two-thirds of all incidents (63.5%). Cargo theft predominantly threatens electronics and consumer goods supply chains as goods are typically stolen while in transit. Many cargo theft hot spot areas in Europe are therefore located in Germany, Belgium and the Netherlands, where goods are transiting between supply chain sites.

Figure 16: High Impact Events by Risk Category

In 2018, natural disasters such as earthquakes and flooding also caused critical disruptions to European supply chains. In October, Greece was struck by a powerful earthquake
of magnitude 6.8, where the epicenter was located approximately 38 km southwest of Zakynthos Island.

The event caused some damages to the local port, and resulted in disruptions of several days. Meanwhile, Italy, Spain, France, and the UK were hit by heavy floods that killed several people and caused significant damages to roads, bridges, and railroads. Other high impact events that affected Europe in 2018 were industrial actions and port congestions, two key supply chain issues for sourcing and logistics professionals as they cause delays and higher costs for shipments.

Additionally, 2018 was a year marked by a month-long drought in Europe encompassing summer and autumn, which brought water levels on the Rhine and adjacent rivers to record low levels.

Notable Incidents From The Year

January: Powerful storms cause rail and air traffic disruptions across Europe. In early and mid-January, storms Eleanor and David caused more than USD 2.86 billion (EUR 2.5 billion) in damages to transportation and infrastructure across Europe. Rail services were halted for an entire day in Germany while hundreds of flights were canceled at key European airports, including London, Amsterdam, and Paris.

February: Heavy snowfall disrupts truck movements in France and Italy. Heavy snowfall and icy road conditions caused authorities in France and Italy to implement driving bans for trucks heavier than 7.5 tons on key highways and national routes in early and late February. Most of the international road links to airports in Rome and Paris, as well as ports in Liguria, were cancelled or delayed for several days, impacting the collection, processing and delivery of domestic and international shipments.

March: Fire causes significant damages at SAM Automotive plant in Boehmenkirch, Germany. On March 10, a large fire at the SAM Automotive plant in Boehmenkirch caused more than USD 34.2 million (EUR 30 million) in damages. Subsequent supply shortages forced car maker Audi to temporarily halt its car production at the Ingolstadt plant. The fire reportedly exacerbated financial issues at SAM Automotive, causing it to declare insolvency in August 2018.

April: Record-long strike disrupts rail-dependent supply chains across France. Workers at French state-run rail company SNCF walked out intermittently on 36 days between April and June 2018, inflicting more than USD 457 million (EUR 400 million) in financial losses to the company. As SNCF’s cargo branch controls 60% of the French rail freight market, rail-dependent industries such as automotive, metallurgy, and chemicals experienced significant service delays and capacity shortages.

May: Widespread congestion on the Europe-China rail corridor increases transit times. In May, transit times for freight trains using the Europe-China rail corridor were unusually long due to adverse weather, increased train traffic, and operational challenges at rail terminals. Congestion issues were largely reported on the eastern end of the Eurasian land bridge, in particular near Dostyk at the China-Kazakhstan border and near Erenhot on the China-Mongolia border.

June: 6-week walkout at Neue Halberg Guss disrupts automotive supply chains in Europe. In June and July 2018, 2,000 employees of the engine block manufacturer Neue Halberg Guss (NHG) walked out on their jobs for six weeks at two German factories in Leipzig and Saarbruecken. The strike was triggered by the company’s decision to close the plant in Leipzig in late 2019. The strike forced major customers including Opel, Deutz, and Scania to adjust production schedules, temporarily lay-off workers, or halt sales of some of their main products.

July: Low water on Rhine River disrupts steel and chemical production in the region. Historically low water levels on the Rhine River disrupted river shipping on large stretches between Duisburg and Basel from July to November 2018. This resulted in limited loading capacity on barge ships, longer transit times, and higher freight costs. The crisis forced steel and chemical companies including ThyssenK- rupp and Solvay to declare force majeure on chemical products that have end uses in the automotive, electronics, and life sciences sectors.

August: Widespread disruption reported as highway bridge collapses in Genoa. On August 14, the Morandi Bridge collapse in Genoa paralyzed freight movements in and around the port city. For several weeks, supply chains relying on shipments through the Port of Genoa were significantly compromised as rail tracks to the port were affected and alternative routes were congested, both of which resulted in higher transportation costs. According to the local chamber of commerce, the bridge collapse cost companies in Genoa a total of USD 482 million (EUR 422 million) in damages.

September: Police busts major cargo theft ring in Hainaut, Belgium. On September 25, a major cargo theft ring composed of 22 individuals was dismantled by police forces in the Belgian province of Hainaut. The ring was reportedly responsible for up to 200 cargo thefts targeting weapons, electronic products, perfumes, and alcoholic beverages. Most of the thefts occurred on truck stops along the E42 highway between Liege and Charleroi, two industrial cities in southern Belgium.

October: Unseasonal weather events cause disruption in France and Italy. In late October, unseasonal and unexpectedly powerful weather conditions caused widespread disruption in several regions across France and Italy. Large snowstorms swept across southern and central France, cutting power to more than 200,000 homes and businesses and leaving 950 trucks and cars stranded on major roads. In Italy, hurricane-force winds and widespread flooding shut down road traffic and operations at ports and airports in Liguria.

November: Yellow Vests protests block highways, bridges, and borders across France. In November and December, a grassroots movement branded ‘Yellow Vests’ caused widespread disruption across France. The protests were organized to demonstrate against rising fuel prices and a newly installed tax on fuel. Disruptions occurred at more than 2,000 locations, including at bridges, border crossings, industrial sites, and key container ports such as Calais, Le Havre, and Fos-sur-Mer, with total estimated losses of up to USD 5.03 billion (EUR 4.4 billion).

December: Fire at Prodrive Technologies causes ripple effects through the semiconductor industry. On December 1, a fire at a plant of Prodrive Technologies, a Dutch electronic components supplier, caused ripple effects through the semiconductor industry. As production was temporarily halted and inventories destroyed, one of its major customers, chip-gear manufacturer ASML, said that the fire would likely lead to delivery delays in early 2019. In January 2019, ASML confirmed that the fire adversely impacted its first-quarter sales by USD 343 million (EUR 300 million).

Africa and The Middle East

Figure 17: Incidents by Month

In the Africa and the Middle East region, the highest number of incidents occurred in May, and the lowest in December. As a considerable amount of incidents in the region are security related, the peak of incidents in May is attributable to a build-up, and associated warnings related, to the Battle of Hodeida in Yemen between Saudi Arabia and the Houthi rebels.

The wide distribution of incidents by country can be attributed to the high number of countries within the Africa and the Middle East region. South Africa and Nigeria emerge as notable hubs for supply chain risks in this region with the highest number of incidents in 2018. While the two countries have roughly equivalent economy sizes (South Africa at USD 349.4 billion in GDP; Nigeria at USD 375.8 billion in GDP), South Africa’s population is over three times less than that of Nigeria, highlighting theunique supply chain risk of doing business in South Africa. Moreover, South Africa’s role as an anchor of the South African Development Community together with its developed logistical infrastructure, and Nigeria’s weight in West Africa as a critical energy-producing economy render both key markets for economic and supply chain activity in the region.

Figure 18: Incidents by Country

Following the two largest sources of incidents are Iraq, Palestine, Kenya, the Democratic Republic of the Congo, Egypt, Syria, Somalia, and Saudi Arabia, where war or terrorism-related events dominate the news. The largest share overall, however, comprises the remaining 48 sovereign states of Africa and the remaining states of the Middle East at 43.33%.

South Africa and Nigeria emerge as notable hubs for supply chain risks in this region.
Figure 19: Incidents by Risk Cluster

A wide variety of incidents were reported in Africa and the Middle East over the course of 2018. Almost one fourth of these incidents were war and terrorism related, and the remainder comprised of port disruptions and ground transportation incidents, among others. Civil unrest events in the region typically revolved around political events, such as demonstrations involving the airing of grievances towards political leadership, and escalations stemming forth. Notable security incidents in the region includes a series of ISIS attacks in As-Suwayda in Syria on July 25, and a Boko Haram assault in Metele, Borno on November 18.

Examples of war and terrorism related incidents that resulted in port or ground transportation disruptions include the November suspension of Israel Railways services between Ashkelon and Sderot due to rocket fire from Gaza; the Battle of Hodeida in Yemen, which not only congested and prevented any entry or exit from the city’s port (yielding to significant congestion), but also disrupted ground-based distribution operations across the country; as well as the shutdown of the Port of Tobruk in Libya on December 20 due to militia invasions.

While labor was a relatively small risk cluster for the region at 4%, there were some notable events. A series
of industrial actions in Iran took place throughout the year, intended to draw attention to economic concerns. Some of these incidents included a May truckers strike concentrated around Tehran, and an October steel work- ers strike concentrated in the city of Ahvaz. Moreover, in South Africa, the National Union of Mineworkers of South Africa (NUMSA) featured prominently in industrial actions across the country, most notably in a nationwide plastics sector and automotive manufacturer strike in October that affected firms from component makers to OEMs.

When accounting exclusively for the high impact event risk categories, October saw a number of significant events. Besides organized labor incidents as exemplified by the Iran and South Africa ones above, the October peak can also be attributed to the passage of Tropical Cyclone Luban into the Gulf, one of two very severe cyclonic storms that month.

The most common type of high impact events that occurred in Africa and the Middle East was explosions. This was due in part to the preponderance of security related incidents in the region, including, but not limited to, the Yemeni Civil War, the Syrian Civil War, the Al-Shabab insurgency, the Boko Haram insurgency, and the South Sudanese Civil War.

Figure 20: High Impact Events by Risk Category

Floods were the second notable category of importance. Part of this is attributable to seasonal flooding in July and August in parts of Africa, which mostly occurs around flood plains. The most noteworthy incident was a flood in eastern Sudan on August 14 that left 45,000 displaced.

Port congestion and disruption comprise a combined total of 15% of all of the high impact events in the region. Due primarily to volume and mismatches between chassis and container availability, such events are common at large ports such as Durban in South Africa and Alexandria in Egypt. Additional congestion and disruption hotspots in the region include Lagos, Port Sudan, Pointe Noire, Mombasa, Dar es Salaam, Haifa, Salalah, Dammam, and Kuwait.

Cargo has also proven to be vulnerable in the region on both land and sea. While piracy incidents in the Horn of Africa have been minimal since the 2008-12 peak in Somali piracy, the practice still continues elsewhere on the conti- nent. The Gulf of Guinea, specifically the Bight of Biafra, became 2018’s hotspot for piracy in Africa, with cargo ships and tankers as the primary targets. On land, truck hijacking was a notable occurrence in South Africa. Large metropolises and port cities, such as Johannesburg, Port Elizabeth, Durban, and Cape Town feature these types of events, where cargo trucks and the rail networks alike are targeted, with goods stolen ranging from low value grocery cargo to high-end products such as electronics.

Notable Incidents From The Year

January: Nationwide power outage disrupts operations across Kenya. A damaged insulator on a transmission line resulted in widespread power outages across the country for a period of 7 hours on January 9.

February: Government seizes DP World container terminal in Djibouti. On February 22, following protracted legal and political disputes, the government of Djibouti unilaterally terminated a contract with United Arab Emirates government-owned DP World for the operation of the Doraleh Container Terminal, and expropriated the assets within. The Doraleh port is particularly crucial for landlocked Ethiopia as more than 95% of the country’s imports come through Djibouti.

March: Increased checks at the Botswana-South Africa border delay shipments. On March 22, local sources reported that increased border checks by customs officials, as well as IT complications with the customs system of Botswana, resulted in a long queue of trucks at the Botswana-South Africa border. Shipments were estimated to be delayed in both directions by up to 24 hours.

April: Customs system outages in Uganda impact ship- ment clearance. Uganda Revenue Authority’s ASYCUDA World system experienced an outage beginning on the morning of April 9 and continued intermittently through at least April 19. As a result, customs clearance operations for all high-value shipments nationwide faced long delays.

May: Tropical Cyclone Mekunu causes widespread disruption in southern Oman. On May 24, Cyclone Mekunu began to cause widespread flooding and supply chain disruptions throughout Southern Oman. Most notably, the Port of Salalah declared force majeure and did not receive another vessel until June 2, gradually resuming normal operations over the following week. In turn, Octal, the world’s largest producer of PET sheets and a leading clear rigid packing material supplier, declared force majeure for their manufacturing operations in Salalah.

June: Strong winds and IT complications halt operations at the Port of Durban. On June 4, waterside operations at the Port of Durban were suspended due to strong winds – a common challenge for the port. On June 15 and June 17, Pier 2 experienced a halt in operations due to IT system malfunctions. The port of Durban is the largest and busiest shipping terminal in sub-Saharan Africa.

July: Bulk carrier run aground blocks Suez Canal in Egypt. On July 15, a collision involving 5 ships in the Suez Canal caused shipping traffic to be suspended for 48-hours. Dozens of shipping vessels heading both northbound and southbound were forced to delay their transit while the damaged vessels were removed from the canal.

August: Strike by local customs workers closes Yemen’s al-Mahra border crossing. The al-Mahra border crossing between southeastern Yemen and Oman (where 70% of Yemeni imports are processed) was closed on August 13 for several days due to a strike by local customs workers. Dozens of cargo trucks were reported stranded in the region for multiple days. The strike was in protest against a 100% increase in Yemeni import taxes.

September: Strikes by NUMSA members cause production disruptions. Members of the National Union of Metalworkers of South Africa (NUMSA) initiated labor strikes at various sites in the steel industry, mining, plastics manufacturing, and auto manufacturing operations across South Africa. The strikes, which became increasingly violent, affected over 120 companies across the country.

October: Nerve pain medicine worth USD 13.65 million stolen from warehouse in Kuwait City. 10,000 packets of the drug Lyrica made by Pfizer went missing on October 28 and were later spotted on the black market in Kuwait City. According to local media sources, the importing and distributing companies responsible for the drugs are suspected of assisting in the disappearance. The stolen cargo had an estimated value of USD 13.65 million (EUR 11.6 million).

November: Congo-based Katanga Mining halts cobalt exports due to high uranium levels. Katanga Mining, a Congolese subsidiary of Glencore, announced on November 7 a halt in cobalt exports from its Kamoto Project, while it constructed a uranium removal facility to accommodate greater processing capacity for uranium-exposed cobalt. Given permit approval, sources indicated that the facility should be complete by Q2 2019.

December: Libya’s National Oil Corporation declares force majeure at the Sharara field. Libya’s National Oil Corporation declared force majeure on December 10
after armed protesters forced a production halt at the country’s largest oil field. Production has not yet consistently returned to normal as looting has taken
place on site and new security measures have not yet been deemed sufficient. Revenue losses are estimated at USD 32.5 million (EUR 28.36 million) per day.

Asia Pacific

Figure 21: Incidents by Month

Across Asia Pacific, May to September was the period with the highest number of incidents. This reflects the annual tropical cyclone season in Asia Pacific as well as other events that took place across the region such as the US-North Korea summit, security summit in Qingdao, and the Asian Games.

The top incidents recorded in the region were in India, the sixth-largest economy in the world, followed by Australia and Japan. In total, these three countries accounted for 38% of all incidents reported in Asia. Out of the 46 countries in the region, Philippines, China, Pakistan, and Indonesia followed with the most number of incidents.

Figure 22: Incidents by Country

Although China is certainly a key player for global supply chains, the lack of reliable and consistent incident-level data, particularly in remote areas, makes it difficult to draw definitive conclusions about the size and distribution of supply chain disruptions.

Figure 23: Incidents by Risk Cluster

The large majority of incidents recorded in 2018 in Asia Pacific were around the ground transportation (17.6%) and civil unrest (12.6%) risk clusters. This is mainly due to the numerous strikes and protests in the region that normally involved blocking of highways and major roads leading to airports. Some noteworthy examples from the year include protesters blocking a section of Shahrah-e- Faisal highway and preventing access to Karachi and Port Qasim in April 2018, as well as a nationwide truckers’ strike in India in July that disrupted both land and air freight cargo movement for about 8 days.

Ground transportation incidents in Asia Pacific can also be attributed to a number of traffic regulations imposed by local authorities in various Asian countries to curb smog and traffic congestion. In November 2018, Delhi banned heavy vehicles from entering the city for 6 days to curb air pollution. Similary, due to mass inter-city travel during public holidays, authorities in Indonesia implemented odd-even license plate policies to limit vehicle movements through tollgates, especially during the Eid-al-Fitr period.

Ground transportation incidents in Asia Pacific can also be attributed to a number of traffic regulations imposed by local authorities in various Asian countries to curb smog and traffic congestion.

Natural disasters involving tropical storms and typhoons were also covered widely, given that eight major tropical storms battered the Asia Pacific region in 2018 and caused supply chain disruptions. Many manufacturing plants in the southern and central regions in Japan halted productions due to Typhoon Jebi in July 2018. Additional storms that impacted supply chains include September’s Typhoon Mangkhut/Ompong, which resulted in significant flight cancellations, port closures, and cargo ship ground- ings, as well as October’s Typhoon Kong-rey in South Korea and Okinawa, which impacted maritime navigation and triggered flight cancellations, widespread flooding, and power outages.

Additionally, Everstream Analytics recorded a large volume of high impact events in Asia Pacific during this year. As most countries in the region sit along the Pacific Ring of Fire, earthquakes, volcano eruptions, and tropical storms are more common in comparison to other regions. Thus, it is not a surprise that earthquake events rank the highest at 43.61%.

Eight major tropical storms battered the Asia Pacific region in 2018 and caused supply chain disruptions.
Figure 24: High Impact Events by Risk Category

Explosion and industrial fires were also some of the most common high impact events in Asia Pacific. Short circuit faults, machine overheating, and carelessness in working areas are the common causes of industrial fires in the region. Notable examples include an explosion and subsequent fire in April at one of the production lines for OLED and LCD panels for LG Display in South Korea, which resulted in a production halt of 14-hours, as well as an explosion at the Heibei Jinwantai Chemical Fertilizer plant in Xinle City, which resulted in 6 fatalities and 7 injuries in November. An event that affected the automotive and energy industries in particular was the production halt stemming from a fire at the Hot Strip Mill in the Bokaro Steel Plant in Jharkhand State in India.

In 2018, port congestion, which is predominately caused by adverse weather conditions such as dense fog as well as storms, heavy rain, and flooding, primarily affected ports in China, India, and the Philippines, and led to extended delays and ultimately increased costs for shippers in the region. In September, port congestion issues in the region were exacerbated by Typhoon Mangkhut, which caused a temporary closure of Manila Container Yard as well as Port of Hong Kong.

Other events of note in the region include cyber attacks and trade regulations. In the area of cyber security, perhaps one of the most impactful incidents was the intrusion of a virus at Taiwan Semiconductor on June 8 that reduced production for 2 months, impacting customers such as Apple, Qualcomm, and Broadcom, among others. The US-China trade war, starting in March, has also resulted in considerable impact to the region not only in the context of goods subject to Section 301 tariffs such as steel and aluminum, but for a growing number of consumer goods as well. While a brief reprieve was granted in December, the full effects of the trade war are yet to be felt.

Notable Incidents From The Year

January: Ports across Vietnam face heavy congestion following typhoon. Around 18,000 twenty-foot equivalent units of imported goods were impacted due to severe congestion that affected Cai Lai Terminal in the Port of Ho Chi Minh City, as well as Cai Mep International Terminal and Tan Cang Cai Mep Container Terminal in Vung Tau, following the passage of a typhoon in late December 2017.

February: Fire hits SDS Biotech K.K. chemical factory in Yokohama, Japan. An explosion and subsequent fire obliterated the top floor of the SDS Biotech K.K. agricultural chemicals factory in Yokohama, Japan on February 12. The plant manufactures agrochemicals, including the fruit tree and fungicide Daconil.

March: Lyttelton Port strikes impact shipments in New Zealand. Around 200 port workers staged intermittent strikes for 13 consecutive days in March against Lyttelton Port Company over wage issues. The sporadic strikes caused international and local shipping lines such as Maersk Line, APL’s New Zealand Express, and Pacifica Shipping to omit Port Lyttelton temporarily.

April: Load shedding protests block main highway in Karachi, Pakistan. Jamaat-e-Islami party members staged violent protests over frequent load-shedding and a water shortage crisis in Karachi on April 27. Protesters blocked a section of the Shahrah-e-Faisal highway at Malir 15 flyover, which is a major highway to Karachi from the Jinnah International Airport and to Port Qasim.

May: Truckers at Jawaharlal Nehru Port in India strike over port productivity program. Truckers at Jawaharlal Nehru Port Trust in Nhava Sheva protested for 4 days to pressure the authorities to reconsider a government-controlled transport solution. Despite the strikes ending earlier than originally planned, the protests caused shortages of trucks and trailers for freight movement at the largest container port in India.

June: Security Summit in Qingdao, China impedes logistics movement. The 18th annual Shanghai Cooperation Organization meeting held on June 9-10 in Qingdao, Shandong Province impacted air, ocean, and land freight movements. Flight frequency was reduced by up to 70% and transportation of dangerous goods and lithium batteries were prohibited via Qingdao Liuting International Airport as well as at Port of Qingdao for an interim period.

July: Nationwide truckers’ strike disrupts logistics move- ments in India. A nationwide truckers’ strike called by the All India Motor Transporter Congress started on July 20, and was called off after 8 days. The strike, held over cuts to levies on diesel fuel, disrupted the production and sale of vehicles in the country and affected deliveries for e-commerce firms such as Amazon.

August: Asian Games in Indonesia impacts traffic movement in Jakarta. An odd-even license plate traffic policy was issued on cargo trucks, including containers and trailers, during the Asian Games between August 18 and September 2 to curb air pollution and congestion in Jakarta. Tollgate operating hours were also temporarily restricted during certain times of the day.

September: Typhoon Jebi causes multiple factories to cease operations in Japan. Transportation services across Kansai and Shikoku regions in Japan were severely disrupted following a powerful storm on September 4. Factories across industries such as automotive, heavy machinery, semiconductor and electronics halted production temporarily. Container yards at Osaka and Kobe were also briefly affected.

October: Chinese authorities announce the possible closure of factories along the Yangtze River. The government of the Chinese province Jiangsu announced that over 1,000 companies are likely to experience closures over the next three years due to stricter environmental standards. The measures target in particular non-compliant companies in the steel, coal, and chemical sectors along the Yangtze River.

November: Delhi smog triggers deployment of environmental measures and temporary suspension of heavy truck movements. Delhi’s biggest power generator Badarpur Thermal Power Station was permanently shut down and production at coal and biomass-based industries were halted from November 4 to 10 to curb smog. During this period, over 2,200 vehicles had to turn back from Delhi’s borders as heavy vehicles were temporarily banned from the city.

December: Taiwanese LCD manufacturer suspends production amid financial troubles. Taiwanese LCD manufacturer Chunghwa Picture Tubes Ltd. temporarily halted production on December 15 at its Longtan and Yangmei factories due to financial stress. The shutdown came two days after a court ruled the company’s loans must be repaid immediately.

Chinese authorities indicated that over 1,000 companies are likely to experience closures over the next 3 years due to stricter environmental standards, potentially impacting steel, coal, and chemical sectors along the Yangtze River.

Making Sense of Supply Chain Risks

The 2019 Annual Risk Report presented an overview of the main disruptive events that affected supply chains around the world over the past year.

The findings presented are based on the re-inspection of the alerts issued by Everstream Analytics across various categories including, though not limited to, natural disasters, industrial action, maritime disruptions, industrial fires, environmental hazards, and security occurrences. As the risk landscape continues to evolve, a number of categories were added in 2018 to our monitoring including: cyber incidents, such as data breaches, ransomware attacks, and phishing; production issues like force majeure, insolvencies, and industrial zone shutdowns; as well as regulatory incidents like trade restrictions.

Everstream Analytics has classified its portfolio of supply chain risk categories using a two-by-two matrix that plots the likelihood of a given risk along one dimension, and the impact of the event, if it were to occur, along another.

Understanding risks, and gaining a common understanding of how they impact supply chains across the organization, is no small feat, especially when the nature of those very risks is evolving each year. The task becomes more burdensome when exact consequences of supply chain disruptions are difficult to measure and quantify immediately, and the impacts are increasingly becoming more nuanced and far-reaching. To help companies achieve this goal, Everstream Analytics has classified its portfolio of supply chain risk categories using a two-by- two matrix that plots the likelihood of a given risk along one dimension, and the impact of the event, if it were to occur, along another. The scales for measuring these two indicators are given in the following tables.

In this framework, we define a very Highly Unlikely event as one that will occur only under exceptional circumstances and a Nearly Certain risk as one that can be expected to occur within the specified time horizon.

The four-quadrant diagram below presents a snapshot of the results of the risk classification. While the full spectrum of all risk categories are not indicated in the diagram, this offers an overview of the supply chain risks monitored by Everstream Analytics and ones that warrant continuous monitoring.

Exact consequences of supply chain disruptions are difficult to measure and quantify immediately, and the impacts are increasingly becoming more nuanced and far-reaching.
Everstream Analytic’ Supply Chain Risk Classification Matrix. Source: Everstream Analytics, risk categories shown are not exhaustive

The Quadrants Represent the Following

  • High impact, high likelihood incidents: Risks characterized as high impact and high likelihood often lead to significant interruption of business operations or loss of profit, which means that they should be actively monitored and mitigated.
  • High impact, low likelihood incidents: High impact and low likelihood risks are rare events; however, these risks must be monitored and contingency plans should be put in place in case these risks materialize.
  • Low impact, high likelihood incidents:
    Risks characterized as low impact and high likelihood are common events that are likely to be observed frequently, but have minimal disruption to business operations.
  • Low impact, low likelihood incidents: Negligible risks, classified as both low impact and low likelihood, can be expected to have little effect on businesses.

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