The most significant threats to the global business supply chain have been identified in a new industry report, with extreme weather and cargo theft topping the list. BSI's latest global supply chain intelligence report reveals the supply chain risks that caused the most damage to businesses in the last year, as well as predictions of the biggest threats in 2016.

In particular, it reveals that upwards of US$33bn worth of damages were caused from the year's top five disasters. US$22.6bn of losses were generated through cargo theft in 2015, with the highest threat zones (South Africa and China) having seen increases in on-road hijackings. Increased numbers of terrorism incidents contributed to major disruptions to international shipping in Europe and the Middle East. Cargo theft, labour unrest, terrorism, global health and migration will be the biggest threats in 2016.

A 2015 BSI report had previously noted a number of cross-border issues that threatened supply chains across the world. This included damages caused by cargo theft worth US$22.6bn; increased number of terrorism incidents contributed to billions of dollars in losses to global shipping companies; an influx of migrants in Europe that harmed supply chain integrity across the continent; economic downturns in Argentina, Brazil, and China; and issues of political transparency that drove social unrest in Africa and Central America. Extreme weather events, including many attributed to the El Nino phenomenon, caused supply chain disruptions and threatened business continuity in multiple regions. There were also several industries that were plagued by poor enforcement of labour regulations, allowing for significant rates of child or forced labour in Argentina and India, among other nations.

Nearly US$23bn was lost due to cargo theft worldwide in 2015 from a variety of supply chain threats, predominantly driven by security concerns. South Africa has seen a 30% increase in cargo truck hijackings over the last year, with thieves using violence and switching from targeting only high-value goods to also targeting lower value items. Daring vehicle shipment thefts have become increasingly commonplace in China, with a recent series of in-transit vehicle thefts occurring along the busy G45 highway. More sophisticated attacks were observed in India throughout 2015, where criminal gangs masterminded new techniques to steal goods without breaking customs seals in order to avoid detection – a major risk for companies participating in international supply chain security programmes.

In Europe, disruptions in trade caused by the ISIS terrorist group clearly highlighted the link between terrorism and the supply chain. Border controls in France following the November attacks in Paris are estimated to have cost the Belgian shipping industry US$3.5m. Terrorist-linked smuggling rings were also identified to be colluding between Spain and the Middle East, the groups illegally transporting shipments of stolen electronics, drugs, weapons and other contraband. Elsewhere, the Jordanian trucking industry suffered US$754m in lost revenue since conflict began in the Middle East in 2011.

In addition to theft, business continuity-related threats such as extreme weather events and political and social unrest, led to significant losses for individual companies and national economies last year. 2015’s top five natural disasters caused a collective US$33bn of damage to businesses. In 2016, BSI has identified emerging health crises, such as the Zika virus, could also pose a significant threat to the global supply chain and may lead to work stoppages and protests similar to the supply chain disruptions seen in conjunction with the Ebola epidemic.

Labour unrest and factory strikes have also caused considerable financial damage across the world. Factory strikes in China increased by 58.3% from the previous year due to pay disputes, as factory owners struggled to pay workers due to a slowing economy, leading to protests. The withholding of wages was cited as a major cause in 75% of protests and generated losses of up to US$27m in the footwear industry. Labour unrest is likely to continue in China in 2016, regardless of whether the economy improves.

Numerous cases of child and forced labour were exposed in 2015, highlighting the need for visibility into corporate supply chain to mitigate the risk of human rights abuses. Nearly 80% of Argentina’s textile industry was found to be sourcing from unregulated facilities, where forced, child labour and poor working conditions are common. BSI also noted an increase in the risk of child labour use in India due to the existence of loopholes in labour reforms approved in 2015. In response to these and other recent concerns, European countries and the United States last year moved to pass laws mandating reporting on corporate social responsibility issues in corporate supply chains.

“Companies are facing an increasingly wide range of challenges to their supply chain, from human rights issues to acts of violent theft and natural disasters,” commented Jim Yarbrough, global intelligence programme manager at BSI. “Such complexity creates extreme levels of risk for organisations, both directly affecting the bottom line but perhaps more seriously, hidden threats to the supply chain which, if ignored, could do serious harm to a company’s hard-earned reputation.”


The biggest threats to the global supply chain in 2016 (Source: BSI)

1. Global cargo theft cost estimated to grow by a further US$1bn in 2016. Increased concerns in China, Germany, India, Mexico, South Africa, and United States

2. Continued tensions in South China Sea predicted to lead to further protests and disruptions

3.Ongoing conflict in Syria will continue to impact supply chains. The ongoing migrant crisis will continue to lead to port disruptions. European Union/Schengen border controls predicted to have far-reaching impact.

4. ISIS is predicted to remain a significant threat to disrupt supply chains

5. Labour unrest in China is predicted to persist, as a slowdown in the Chinese economy continues and more jobs move to neighbouring countries.

6. Weather disruptions

7. Global health crises (inc. Zika)

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