WINTER IS COMING: A STARK WARNING

In the hit HBO series The Game of Thrones, the House Stark motto "Winter Is Coming" is one of warning and constant vigilance. This winter, we are warning our FM Global Cargo clients to remain vigilant. In anticipation of significant challenges converging on EMEA supply chains over the next 6 months, cargo risk management efforts should be amplified to protect against cargo thefts and particularly from trucks.

Why? Cargo thefts are expensive. Over the last 10 years, our clients reported USD 78.8 million in theft claims, averaging around USD 100,000 per claim[i]. Moreover, for the first half of 2020 alone, Transported Asset Protection Association (TAPA) members reported EUR 85 million of product losses in EMEA and in the last 3 months cargo theft from vehicles was by far the most common modus operandi. In short, there is significant value to be protected from the risk of truck thefts. 

In the first half of this year TAPA reports EUR 85 million in product losses in EMEA

How? Depending on the nature of your products and their associated value, our FM Global Cargo Risk Engineers will recommend best practice guidelines for an ideal loss prevention scenario and work with you to evaluate what is most appropriate for the specifics of your supply chain exposure and risk. Contact your FM Global Cargo Risk Engineer today to find out more: [email protected]

What is coming? Already this year, we have seen significant disruption to the movement of goods within EMEA due to the COVID-19 pandemic. Mass lockdowns of the working population, localised restrictions on movement and reduced global trade, all led to decreased ports of call, blanked sailings, disruption to normal global container distribution and reduced air cargo capacity as passenger travel declined; in short there was widespread physical disruption to traditional supply chain networks. With the recent arrival of the second wave of the pandemic, we are likely to see further supply chain disruption in the coming months, as localised restrictions are rolled out disparately across countries within the EMEA region.

We are likely to see further supply chain disruption in the coming months.

Throughout the same period, cyber crime has also been disrupting supply chains across EMEA. Increased remote working and access to digital systems increased vulnerability to social engineering scams aimed at employees. Specifically affecting supply chains, there have been a number of supply scams based around fraudulent transactions and counterfeit products, as well as a series of cyber-attacks on well-known names in the logistics and maritime world; with GEFCO, CMA CGM and the IMO the latest to be reported in trade media.

This disruption and associated criminal activity will impact EMEA supply chains

This disruption and associated criminal activity is impacting supply chains just as many businesses will be hoping to make up for a poor financial year with increased e-commerce revenue during the holiday season. Thanksgiving, Black Friday, Cyber Monday, Christmas, January Sales and Blue Monday, will all mean an increased number of high value, desirable products being shipped throughout Europe over the next few months.

While McKinsey reported this year that not all sectors are equally exposed to supply chain disruption and that those in the medical devices, food and beverage and pharma sectors might be expected to be pretty resilient, we expect that the coming months are going to put significant pressure on businesses that move cargo along the cold chain for a number of reasons. 

We expect that the coming months are going to put significant pressure on businesses that move cold chain cargo

Firstly, the second wave will result in more people working from home once again, leading to an increased demand for home deliveries of fresh food and healthcare products. Secondly, an already augmented winter flu vaccination programme, potentially alongside an untested COVID-19 vaccination supply network, will put significant pressure on cold chain packaging suppliers and distribution networks. Thirdly, throughout this year, cold chain production facilities have seen several COVID-19 outbreaks, amid reports that the virus thrives in colder environments. Thus, there is the very real possibility that key cold chain production and packing sites will be locked down. This could also lead to an increase in hygiene measures and new regulations around production and trade, such as those already introduced for frozen imports in China, and consequently further disrupt the existing cold chain supply network at a time when it will need to be at its most resilient. An increased risk of cargo damage and theft will be the result of disrupted and delayed cold chains.

Brexit and the EU Mobility package could further complicate matters

As we move into 2021, we could also be facing the fallout from two regulatory complications across EMEA supply chains in the form of Brexit and the EU mobility package. On the former, we are mere months away from the possibility of ‘no-deal’ and there is already talk once more of customs delays, long queues of stationary trucks and unclear messaging on movement of people. The outcome of Brexit negotiations is yet to be seen, but additional supply chain disruption in the first few months of 2021 is a very real possibility.

Concerning the latter, the new EU regulation 2020/1054 requiring the regular return ‘home’ of truck drivers (every 3-4 weeks) and their vehicles (every 8 weeks) has already been rolled out in August of this year. While aimed at providing a better working life for drivers, the increased risk of cargo theft is perhaps one unintended outcome if more frequent and more prolonged breaks are enforced, particularly across regions of EMEA that do not have an adequate supply of secure truck parking.

On this point, TAPA has made great strides in developing its trucking security requirements (TSR) and its secure parking scheme, signing up many partners across EMEA. However, there is still a concern that there is an insufficient distribution of secure parking across EMEA to protect the number of partly or fully loaded vehicles that are likely to be exposed by the level of supply chain disruption so far outlined.

Is there sufficient availability of secure parking locations to cope?

This year, TAPA has also added a section to the TSR on Locking System Guidance (LSG) to mitigate the risk of cargo theft from parked vehicles in recognition of this significant exposure. Indeed, according to the TAPA incident information system (IIS) data, 59% of incidents reported for EMEA related to ‘theft from vehicle’ in the last 3 months and 68% of those were via ‘intrusion’. This suggests that physical theft prevention methods could go a long way to engineer your cargo truck theft risks.

Businesses need to build greater resilience into their supply chains to cope the expected increase in cargo theft exposure

In summary, we have already seen significant supply chain disruption this year and this has been accompanied by criminal activity and a significant number of cargo thefts. Indeed, TAPA recently reported that their members suffered EUR 85 million of product losses from EMEA supply chains in the first half of 2020. Over the next 6 months, the expected further supply chain disruption will likely mean more delays, re-routing to untested modes/lanes, more unscheduled or inadequately protected stops, and thus an increased exposure of stationary cargo to would-be cargo thieves. Businesses operating across EMEA need to respond now, by re-emphasising and augmenting their existing risk management strategies to build further resilience into the supply chain.

[i] FM Global Cargo claims reported between 1 January 2010 and 12 May 2020.