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1
Global Supply Chain Intelligence Briefing
Copyright © 2015 BSI. All rights reserved
David HorlockManaging Director, Asia Pacific
Courtney FosterSupply Chain Solutions Manager
Jim YarbroughGlobal Intelligence Program Manager
2
Agenda
• Welcome • David Horlock, Managing Director, Asia Pacific
• BSI Supply Chain Solutions• Courtney Foster, Supply Chain Solutions Manager
• 2014 SCREEN Analysis and Report Overview• Jim Yarbrough, Global Intelligence Program Manager
4
Supply Chain Solutions
Courtney Foster Supply Chain Solutions Manager BSI Supply Chain Solutions
5
Holistic Risk Management Suite
Supply Chain Risk Experts
Financial Risk Modeling
Government Program Prep & Validation
Assistance
Risk Management Program Development
and Evaluation
Gap Analysis
Assessment Analysis
Customizable and Standard Assessments
Corrective Action Plans
Robust Supplier Risk Ratings and Reports
Global Supplier and Risk Mapping
Custom Risk Weighting Methodology
On-Site Visibility
Professional Global Auditing Network
Supply Chain Security, Corporate Social
Responsibility, and Business Continuity Audits
Intelligence Enriched Audit Reports
Informative Courses
E-learning
On-site Training
Customizable Courses
Security and Threat Awareness Training
Supply Chain Intelligence
Geographic Supply Chain Risk Data and Analysis
Global Risk Maps for 20+ Risk Indicators
Incident Reporting
Country Risk Reports
6
SCREEN Intelligence
• Where does the intelligence come from?o BSI audit findings and country trends – (90+
countries yearly)o Closed Sourced data (government intel)o Open source datao Association and NGO datao 400 – 1,000 incidents per day analyzed
• BSI is able to show you not only whereincidents are likely to occur, but also whenconditions are prime for heightened concerns
• SCREEN analyzes supply chain security, corporate social responsibility and business continuity global risks, threats and trends
7
2014 SCREEN Global Intelligence Report and Analysis
Jim YarbroughGlobal Intelligence Program ManagerBSI Supply Chain Solutions
Copyright © 2015 BSI. All rights reserved
10
Asia-Pacific
• Growing threat of illegal drug introduction in cargo shipments originating from China
• Air cargo modality threatened in Malaysia
• Cargo theft increasing in India
• Continued sea piracy operations
• Industrial environmental concerns addressed in China
08/12/2015
11
China – Illegal Drug Introduction• BSI recorded a significant upward trend in
incidents of illegal drug smuggling• Shipments of methamphetamine in air cargo
• Frequently placed in legitimate cargo en route to Australia and New Zealand
• Lufeng City a hot bed for methamphetamine and precursor production
• Consignments of pre-cursor chemicals, often destined for North and Central America, in both sea and air modalities• Used in the production of synthetic drugs in
Canada and Mexico• Reports of Mexican cartels trading illegally-
mined iron ore for pre-cursors from China20/04/2015
12
Methamphetamine Trade in Malaysia & Threat to Air Cargo
• Cargo shipments destined for Malaysia from certain countries face higher risk of UMC introduction
• Particularly true for air cargo consignments originating in Nigeria
• BSI incident data suggest Nigerian drug trafficking organizations prefer to traffic drugs via air cargo• Consignments generally consist of small home
appliances• Finished methamphetamine most commonly
trafficked drug from Nigeria to Malaysia
08/12/2015
13
India – Cargo Theft Increasing in Sophistication
• BSI has recorded a rise in sophisticated cargo theft techniques in India
• Criminal groups targeting cargo shipments after customs seals placed on container and prior to reaching port
• Shipment then diverted to group-controlled warehouses where paneling is removed
• Customs seals often left intact, delaying discovery until after shipment reaches customer
14
India – Cargo Theft Increasing in Sophistication
• Occurrence was geographically disperse – New Delhi, Navi Mumbai, and Chennai
• Supply chain employees integral parts of these criminal groups
• Implications for cargo integrity:• Incidents underscore gaps in security and tampering
detection in India• Ability to counterweight consignments exposes
capacity for UMC introduction into export shipments• Criminals’ ability to break into shipments without
breaking customs seal poses major UMC risk due to seeming legitimacy/verification of shipments
• Background security checks a must for supply chain employees/contractors
15
Southeast Asia – Sea Piracy
• Piracy in Southeast Asia continues to pose a threat to cargo vessels transiting the region – through which one-third of global trade passes• Of 178 pirate attacks recorded in first three quarters of
2014, 103 occurred in SE Asia (58 percent)
• The waters east of the Malay Peninsula pose significant risk to cargo vessels
• Pirate attacks appear to be conducted by both opportunists and highly-sophisticated criminal organizations
• Oil and other petroleum goods appear to be highly coveted by pirates who conduct vessel hijackings• Tankers carrying agricultural products, such as palm
oil, have also been targeted
• Container carriers have been targeted and boarded by pirates, but these groups tend to target onboard cash assets and personal belongings of crews
16
Southeast Asia – Sea Piracy
• Risk of piracy unlikely to drop over the short- or medium-term• Lack of coordinated international response leaves
enforcement up to national-level counter-piracy operations
• These operations often limited by limited intelligence and maritime security resources
• BSI assesses that a coordinated international response is unlikely to be implemented in the foreseeable future• Opposition by China to Western naval forces operating
in its perceived sphere of influence unlikely to abate• Stakeholder nations also likely to prevent meaningful
intelligence sharing, precluding an effective operational presence
• Number of available regional naval assets limited
Indonesian security forces practice boarding a pirated vessel during a simulation
17
Industrial Air Pollution in China
• Chinese Premier Li Keqiang announced in March that air pollution is a top priority for the government• Stance reflects government’s overall stance of a “war on
pollution”• In January, environmental laws were implemented that
grant more power to environmental inspectors, including the imposition of heavier fines
• In 2014, government closed roughly 8,000 coal-powered factories
• Government allocating $32.7 billion to environmental protection in 2015, an increase of 3.2 percent $20
$22
$24
$26
$28
$30
$32
$34
Billions
Allocation of China's Budget to Environmental Protection in USD, 2011-2015
Lowest average GDP growth rate in last four years, 1.73 percent
18
Increased Reporting and Reduced Emissions
• State-run media and governmental agencies increasingly reporting environmental findings• Government still controls media and internet
publications, like the removal of a popular air pollution documentary a week after airing
• However, government acknowledgement of environmental issues also increasing• In February, China’s Environmental Ministry
released statistics showing that only eight of the country’s 74 largest cities passed air quality standards
• In 2014, government issued a number of reports on water pollution and air pollution in the country
• China’s carbon dioxide emissions increased by only four percent compared to the eight percent average increase seen over the last ten years
0%2%4%6%8%10%12%14%16%
China's Annual CO2 Emissions in Kilotons vs. Ten-Year Average
Ten-Year Average
20
Europe, Middle East, and Africa
• Evolving threat of cargo theft in Germany
• Labor unrest in Europe and its impact to business continuity
• Increased threat of hijackings in South Africa
• The 2014 Ebola outbreak
• Conflict Minerals in the supply chain
• Supply Chain Terrorism
08/12/2015
21
Increasing Threat of Cargo Theft in Germany
• Factors contributing to the increasing threat• Increase in the median theft value• Spread of cargo theft incidents to more parts of the country• New modus operandi by cargo thieves
• BSI has noted an increase in the median theft value in Germany over the past year, from $39,882 in 2013 up to $49,457
• The increased value reflects higher-value warehouse thefts and more thefts of high-value goods• Cargo thieves steal $403,000 of high-spec aluminum from a cargo truck
parked near Magdeburg, Saxony-Anhalt• Thieves steal ten truckloads of beer worth $2.91 million after gaining
access to a warehouse through an office block• Thieves steal seven vanloads of air compressors and coolant systems
worth $1.36 million from a warehouse
• All of these incidents demonstrate increased sophistication, targeting of high value goods, or specialty goods intended for a specific black market
Areas of concentrated incidents of cargo theft
22
• Western Germany has historically been a high-risk area for cargo theft• North Rhine-Westphalia• Hesse• Lower Saxony
• The percentage of thefts that take place in these states is decreasing• 2013: 58.4%• 2014: 42.9%
• Recently BSI has seen a shift to central states• Western Bavaria near Würzburg• Thuringia• Saxony-Anhalt
• One law enforcement official reported 107 slash and grab thefts along the A2 and A14 in Börde, one district of Saxony-Anhalt, this year
• Indicates that thieves are becoming more adaptive, and potentially moving to new areas in organized groups
Spread of Cargo Theft Incidents to More Regions
23
• New cargo theft methods are emerging in Germany, indicating increasing sophistication of cargo theft operations
• Moving truck thefts have been reported in North Rhine-Westphalia• Previously seen in Italy and Romania• Usually targets high-value items such as computers• Most recent incident was in August
• BSI has also recorded incidents in which as many as ten trailers are broken into at a single rest stop, underscoring poor security in parking areas in Germany
• Hijackings are still extremely rare• Only two cases have been reported over the past two
years
New Modus Operandi by Cargo Thieves
Moving truck theft in progress
24
Labor Unrest in Europe
• Strikes continue to have major impact on trade in the region• Italy – logistics strikes• Germany – train driver and airline strikes• France – airline strikes• Belgium – general strikes
• Unions appear to be on the wane• Membership is down across the board• Companies are more willing to wait out strikes• Public discontent is rising
• Disruptions will persist though
Source: ICTWSS Database, version 4, April 2013
Union Membership in Europe, 1960-2011
25
Labor Unrest in Europe
• Membership is declining, but large numbers of employees are still covered by collective bargaining agreements
• This gives ever-smaller numbers of activist union members control over negotiations
• Decline of mainstream unions has led to the rise of more radical splinter unions• The Confederazione dei Comitate di Base in
Italy formed in the 1980s and now is highly active in labor strikes that block trade in northern Italian hubs in Bologna and Milan
Union members
8%
Workers covered by collective bargaining
agreements97%
Union Membership and Collective Bargaining in France
26
Increased Hijackings in South Africa
• Our intelligence expands beyond country-level risk ratings, and provides knowledge for, not only where incidents are likely to occur, but also when conditions are prime for heightened concerns.
• By understanding the conditions that lead to increased incidents, trends are identified and users are armed with actionable intelligence.
• Example: Data suggests that economic downturns in South Africa are generally accompanied by periods of increased hijacking activity
27
2014 Ebola Outbreak in West Africa
• Worst such outbreak in recorded history, with Guinea, Liberia, and Sierra Leone being hardest hit• Other nations with reported cases include the
United States, Spain, Senegal, Nigeria, and Mali
• Supply chains in affected nations have been disrupted, particularly in the agricultural and mining sectors
• Containment efforts likely to continue to disrupt supply chains and add costs for companies in the region which implement preventative measures
28
2014 Ebola Outbreak in West Africa
• Disruptions not limited to West Africa
• At least 39 nations implemented travel screenings or other trade restrictions for passengers and cargo from worst-affected nations
• Includes some Western countries which imposed screening cargo ships’ port call history• This measure was seen primarily in the Western
Hemisphere, including in the United States, Brazil, and Panama
• Containment efforts disrupted supply chains and added costs for companies in the region which implemented preventative measures
30Copyright © 2015 BSI. All rights reserved
Supply Chain Terrorism
Countries with Supply Chain Terrorism Incidents 2004 – 2014
31
Supply Chain Terrorism
• ISIS has carried out numerous attacks against the supply chain• Intended to disrupt trade, weaken local
governments
• Also notable in their efforts to control the supply chain• Proving to be major source of group’s revenue• ISIS generates approximately $3 million/day in
revenue; $8 million/month from taxing businesses
• Key element of this strategy is territorial control• Enables extortion, ability to export/smuggle
Area of cargo extortion by ISIS
32
ISIS Supply Chain Control in Iraq and Syria• ISIS uses blend of traditional terrorist and
criminal, “mafia-style” tactics
• Attacks against the supply chain• Kidnappings for ransom
• June 2014 kidnapping of 32 Turkish truck drivers near, Mosul held for 23 days
• Attacks targeting strategic oil facilities in Iraq
• Efforts to control the supply chain• Extortion of truckers at Iraq-Jordan border
• Average tax of $100-$300 on shipments entering Iraq from Jordan = $12,000/day
• Smuggling of oil into Turkey generating over $1 million/day
• ISIS fighters besieged French cement factory in northern Syria on Sept. 25• Capacity to produce 2.6 million tonnes of cement/year
Above left, an ISIS militant stands over the Baiji oil refinery, Iraq’s largest such facility. Below left, an ISIS ‘receipt’ given to a truck driver for paying an extortion fee
33
Spread to Other Regions?
• ISIS’s significant media presence extends its reach and influence• Other groups may be inspired by its
success, seek to replicate its tactics
• Most likely to be replicated in areas where terrorists control physical territory• Boko Haram has made recent advances in
Nigeria, now controls several cities in the northeast• Has failed to demonstrate capacity to administer these
regions and control their supply chains, however
• In North Africa, AQIM controls smuggling routes for drugs, weapons, and contraband goods• Has not yet extended control over legitimate supply chains
35
Americas
• Emerging trends that impact business continuity operations
• Evolving threat of cargo theft in Argentina
• Social Unrest in Mexico
• United States West Coast port operations and ongoing labor negotiations
08/12/2015
36
Argentina – Potential Shift in Cargo Theft
• About 79 percent of all cargo theft occurs in Buenos Aires Province
• Argentina to create new groups of prosecutors• Mission is to combat cargo theft in western suburbs of
Buenos Aires• Conduct research on cargo theft gangs operating in the
western region of Greater Buenos Aires
• Analyze past theft incident data
• Create strategies to reduce theft and dismantle gangs
• Specialized prosecutor groups are currently active in the northern region of Greater Buenos Aires• Largely successful in reducing the rate of theft in the
area• Partially due to cargo theft gangs shifting operations to
suburbs south and west of the city
Cargo Thieves
Cargo Truck
Security camera footage depicting thieves attempting to hijack cargo truck slowing down due to poor roadways at railroad crossing
Officials announcing creation of prosecutor groups
37
Argentina – Potential Shift in Cargo Theft
• Creation of new special prosecutor groups could further concentrate cargo theft in the southern suburbs• May allow for law enforcement to more efficiently
deploy resources and help reduce the rate of cargo theft in the area
• But data indicates that cargo theft shifted away from Buenos Aires province last year and is occurring more frequently in other provinces• Bulk of cargo transportation in Argentina is centered on
Buenos Aires• Provides ample opportunity for gangs to target
shipments of high-value goods• Thieves may continue to shift operations outside of the
province to areas with a lower security presence despite the likely lower volume of cargo shipments
38
Mexico – Social Unrest and Student Actions
• The disappearance of 43 students in Guerrero, Mexico last September triggered ongoing protests throughout the nation
• Many of these protests are conducted without major trade interruptions
• However, a significant number of events involve highway blockages and disrupt ground transportation
• A smaller number involve direct attacks on the supply chain
• Students may hijack delivery trucks to steal or sell their goods, hijack cargo trucks to block roadways, or set fire to either type of vehicle• Goods may be distributed to protesters or sold to raise
funds for a cause, i.e. families of missing students
Images from a series of protests in
Chilpancingo, capital of Guerrero State
39
Mexico – Normalista Attacks on the Supply Chain
• BSI has recorded approximately 81 cargo and delivery truck hijackings conducted by normalistas since October
• When cargo is stolen in these incidents, the affected shipments are almost exclusively food and beverage items
• Cargo trucks transporting other goods may be set on fire or maneuvered to block roadways
• Many hijackings occur in mass events during protests, such as those outside the Guerrero State Capital building in Chilpancingo, where more than 25 vehicles were attacked
• The heightened rate of hijackings and road blockages is likely to continue
• Initial actions focused on the disappeared students, but wave of anti-government sentiment is now providing momentum for protests
• President Enrique Pena Nieto submitted an Action Plan to address corruption and presence of organized crime in municipal governments
• The bill would abolish municipal-level police units and replace them with 32 state-level commands
• Unclear if the bill will pass Congress or have any effect• Law alone is unlikely to quell anti-government sentiment
40
United States – Congestion at Los Angeles and Long Beach
• Ports along the U.S. West Coast hampered by severe congestion
• Delays vary by port, but Los Angeles and Long Beach were the most heavily affected• Delays lasted anywhere from one week to two
months• Delays of 4-8 days were also reported at the
ports of Seattle, Tacoma, and Vancouver
• Contract negotiations between dockworkers and U.S. West Coast ports concluded with a tentative agreement
41
United States – West Coast Port Negotiations
• Contract negotiations between dockworkers and U.S. West Coast ports concluded with a tentative agreement
• The agreement has several key stipulations, including a controversial agreement regarding the arbitration process for labor disputes
• However, the agreement will not be reviewed by the rank and file of the dockworker union until April
• There are already some factions of the union calling for a rejection of the contract
• Final approval is likely to take at least a few months, during which time a large backlog of cargo vessels and containers must be cleared• Port efficiency has improved since the conclusion of the
negotiations, but some congestion yet remains
42
Questions & Next Steps
Copyright © 2015 BSI. All rights reserved
43Copyright © 2015 BSI. All rights reserved
Contact infoBSI Supply Chain [email protected]
http://bsi-supplychainsolutions.com