FM Global: ‘Resilience is really becoming a requirement’ as supply chain issues persist in 2022

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Ongoing strains to the global supply chain require that business leaders consider means for establishing resilience amid pandemic-induced uncertainty. The latest insights released by the mutual insurance firm FM Global emphasize six aspects of the supply chain facing threats to their resilience.

埃里克·琼斯调频全球副总裁兼全球Manager of Business Risk Consulting, said the key lesson to draw from 2021 would be that resilience is not optional.

“Resilience is really becoming a requirement to having a successful business,” Jones said. “Companies need to understand where their pinch points are within their supply chain and develop strategies to mitigate those things as much as they can.”

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In its latest report, FM Global advises that businesses remain aware of six primary factors contributing to the current bottlenecks in the supply chain:

• Covid
• Cyber-risk
• Port backlog
• Truck driver shortage
• Deadly floods
• Chip shortage

The ongoing coronavirus pandemic has disrupted demand and product supply, which the mutual insurance company notes has led to imbalanced supply and demand. But while the pandemic has brought on supply chain problems, other contributing factors, such as the increasing use of chip-based products and intensified demand, won’t be going away when the virus becomes less of a threat.

There are many strategies companies can use to bolster their supply chain strengths, such as increasing buffer stocks, becoming more vertically integrated and diversifying their supply chains. Businesses can also find success in diversifying the set of logistics and ports of entry they rely on, Jones said.

“The need to create resilience and the need to create options and flexibility has never been more critical than it is now,” he said.

As technology continues to play key roles in enhancing business operations, cyber-risk is a growing concern worth addressing proactively. In May, a cyberattack on the Colonial Pipeline managed to disrupt the national fuel supply for days while also revealing the reliance of modern supply chains on digital systems. That reliance will only intensify with the arrival of 5G broadband cellular networks, FM Global noted.

“Cybercrime has become big business and a geopolitical flashpoint, making cybersecurity an integral part of business strategy,” FM Global said. “Cybersecurity requires vigilance, intelligence, employee training, advanced technology and international diplomacy.”

Some threats to the supply chain are more tangible, like the port backlog causing major shipping delays on a global scale, and experts say that is unlikely to be resolved soon.

Goldman Sachs has estimated that about $24 billion in goods have been awaiting entry outside of California ports as ocean-shipped goods continue to accumulate faster than workers can move them along.

“Unfortunately, there are no assurances that backlogs and elevated shipping costs won’t linger through the middle of next year or longer,” FM Global said.

Compounding the existing shipping delays is a truck driver shortage, the report notes. Many countries lack adequate truck driver staffing to move goods that have become backlogged at ports and other facilities.

Data from the International Road Transport Union recently found that about 20% of road transport driving jobs in Eurasia were unfilled, and the American Trucking Associations estimated that roughly 80,000 truck driving roles were unfilled in the U.S.

The ongoing shortage of workers to fulfill shipping needs is expected to bolster the case for autonomous-vehicle development and for lowering the interstate truck-driving age, FM Global notes.

Another shortage linked to the pandemic has arisen from the closure of factories involved in chip-related manufacturing. As the pandemic led to a surge in technology demand, the chip shortage has impacted several industries, including auto, gaming, smartphone and medical device manufacturing. Experts anticipate that this particular challenge could extend well into 2023 or later, but FM Global notes that this is a familiar shortage.

“Chip booms and busts have been common throughout the technology’s history and are likely to recur in the future,”FM Globalsaid.

The2021 FM Global Resilience Indexis designed to help businesses optimize their supply chains by providing data on the resilience of various business environments.

“These and other factors contribute to the global supply chain strain, and each business should evaluate the potential implications on their company,” said FM Global’s Doug Backes, Vice President and Manager of Staff Claims.

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