Supply chain threats come in a number of formats and target various sectors of the supply chain. This is part three of a five-part series by Marina Meyer of Food Logistics.
Threats come in a number of formats and target various sectors of the supply chains.
For example, IBM’s X-Force Threat Intelligence Index 2022 found that manufacturing was the most attacked industry in North America. Meanwhile, a survey by Anchore says that software supply chain attacks targeted three out of five companies. Additionally, more than half of organisations (54%) now consider supply chain security as a top area of focus.
“Supply chain due diligence is increasingly important, particularly as ESG is emerging as a key indicator in positioning companies for success in the global marketplace. Visibility, transparency and knowledge are the keys to effective due diligence,” says Suzanne Offerman, director, product management, international trade, Thomson Reuters. “But obtaining this necessary transparency is seen as a challenge for many organisations, across industries and geographies, especially amid a complex regulatory landscape. That’s because many companies don’t have proper insight into the intricacies of their sourcing operations, like how they may rely on forced labour practices, for instance. This is extremely problematic; forced labour has a terrible human cost on vulnerable populations, as well as impacts how international companies operate.”
In an outline of the Top 5 threats set to impact supply chains in 2023, here’s no.3:
Limited warehouse capacity and fulfilment
Earlier this year, the Association for Supply Chain Management (ASCM) and KPMG LLP launched its monthly Supply Chain Stability Index, which provides indicators in assessing how well U.S. supply chains deal with the ups and downs of market volatility. Logistics was identified as the predominant cause of stress in the supply chain, accounting for 78% of variability, followed by capacity (10%) and supply (12%).
Basically, “[T]he Stability Index demonstrates supply chains are still fragile,” according to Douglas Kent, EVP of corporate and strategic alliances for ASCM, as expressed in Food Logistics’ SCN Summit: Future of Supply Chain webcast.
“If we look at pre-pandemic to now, we’re two times more fragile/less stable now than we were pre-pandemic. We looked at supply, demand and fulfilment, and more than 65% of the instability came from fulfilment, which is shocking because we don’t even think about that. We don’t typically adjust our forecast or our demand picture based on constraints in fulfilment. But when you think about it, it makes perfect sense. How much fulfilment disruptions have we had? Take a look at port closures, truck driver shortage and warehouse space constraints. They’ve been super prolific. We have these real issues,” he adds.
The e-commerce boom is also responsible for overturning warehouse capacity in the cold food logistics market. Case in point: many grocers and retailers incorporated a direct-to-consumer (D2C) arm to their business model, which required infrastructure changes to warehouses.
This D2C model has now become the catalyst for limited warehouse availability in today’s food logistics landscape.
“Warehousing capacity remains very volatile, especially in the cold storage market. Cold chains require a significant investment in assets or partnerships to ensure available warehousing capacity in key geographic markets to meet customer demands,” says Koepke. “In addition, the handoff between providers, inevitable delays and unpredictable extreme weather events makes cold chain shipping a challenge. Evidence of these difficulties is that roughly one-third of global fresh fruits and vegetables are thrown away because their quality has dropped below an acceptable limit. While major disruptions always pose a threat, it is the lack of monitoring, alerts, collaboration and communication that most often dooms cold food chain shipments.”
As a result, companies are now moving to lease facilities vs. own, creating a shortage in rental units available as well.
A total of 50 000 extra warehouses of more than 13 000 square metres are projected to be added to the global warehouse stock between 2022-2027, according to Interact Analysis, with 20% of all warehouses projected to be fulfilment centres.
Because these mega-warehouses are taking over, warehouse users are signing leases for 37 facilities of 1 million square feet or larger in the United States in the first half of 2022, up from 24 in the first half of 2021, according to a report from CBRE. Eighty-five of the Top 100 leases are new leases rather than renewals, and traditional retailers and wholesalers accounted for the largest share with third-party logistics (3PL) firms close behind.