Executives’ Lack of Proper Risk Governance Is Putting Their Businesses in Jeopardy

Despite overwhelming evidence of business disruptions that can occur from failing to manage various risks, company executives are not adequately identifying and preparing for risks that can have potentially catastrophic implications on business operations, according to DuPont Sustainable Solutions’ (DSS) annual global survey of company executives. If left unchanged, a company’s operational performance, business continuity, right to operate and ability to deliver consistent value to shareholders could all suffer.

“Old ways of looking at risk are insufficient in today’s global business environment if executives want their organizations to be sustainable and prosper,” said Davide Vassallo, Global Managing Director of DuPont Sustainable Solutions. “Running a successful business is more complex today than ever before, with executives facing numerous challenges on a daily basis both within and outside their organizations. With these challenges come numerous associated risks that executives must successfully anticipate and mitigate. In order to transform an organization, executives should integrate risk into the organizations business strategy to engage employees, increase productivity and drive competitive advantage.”

The findings of DSS’ 2018 global operations risk management survey of executives show that while there is general agreement and acknowledgement among participating executives of important characteristics of a successful risk management program, leaders are failing to implement those characteristics in their organizations. This failure is manifesting in the following ways:

• Executives are not placing sufficient emphasis on risks that can lead to large-scale incidents. Executives appear to be allowing low incident rates to give them a false sense of security and are not paying attention to other indicators of potential significant events. While 78 percent of survey participants agree that low incident rates do not correlate to reduced risk, two-thirds of executives nonetheless acknowledge feeling safe when they see data indicating incident rates are low or trending to zero.
• Executives address gaps in risk management processes by adding more processes. Executives participating in the survey agree that processes and systems alone are inadequate to manage risk and ensure operational performance. They agree on the importance of having systems in place to manage risks that are integrated, complement each other and are regularly reviewed for effectiveness. Yet 44 percent admit that gaps in existing systems present a challenge for their organizations.
• Executives confirm disconnect among personnel in managing risk. One-quarter of surveyed executives feel front-line personnel are not aligned on top risks facing the company. More than half (55 percent) do not feel senior executives are fully aligned on top risks facing the organization which is an increase of 35 percent versus last year’s DSS survey, which is a general indication of a widening engagement gap between company leaders and front-line workers that prevents an organization from effectively recognizing and mitigating risks.

Although the MHI Annual Industry Report has been explaining the types of benefits transformative technologies—such as inventory and network optimization, cloud computing and storage, artificial intelligence, blockchain and more—will bring to companies both large and small, not many early adopter use cases have been published. To share the outcomes of some of the first tentative steps piloting NextGen technologies, therefore, the first quarter 2019 issue of MHI Solutions profiles four companies and their experiences in the article, “NextGen Technologies in Action.”

Among those featured is Generac Power Systems which, after an extensive period of domestic and international acquisitions that grew the company from $588 million to $1.5 billion in sales, sought to identify efficiencies across its new global supply chain to support growth and contain costs.

Alan Rowlett Jr., Generac’s Director of Logistics, saw an opportunity to transition the company’s current transportation management system (TMS). Already in the midst of connecting the newly acquired companies to its SAP enterprise resource planning (ERP) system, Generac looked to leverage the power of network optimization and cloud computing via a new TMS from C.H. Robinson, Navisphere.

Cloud-based, the software gives Generac’s logistics management team the ability to optimize shipments, select the best mode, and experience near-real-time visibility worldwide by incorporating trucking, ocean, air, customs brokerage, port services, and data management.

“Global visibility provides a common framework to dive into the details,” Rowlett says. “That kind of visibility enables different and more profound dialogue about our supply chain overall and how we can use it to our advantage.”

Among the benefits Generac has seen include a reduction in inbound international expenses by 9% and containerized freight expenses by 14%; a multi-million dollar reduction in global freight costs; and 33% reduction in containerized freight shipments, he adds.

To read the full Generac case study, as well as additional coverage on Walmart, Coca-Cola and Hirotec America, click here.

River Logic, a leading provider of prescriptive analytics solutions, today announces the release of a sponsored research perspective by Ventana Research’s Robert Kugel, Supply Chain Planning with Prescriptive Analytics: Technology Enables a More Effective Process. The research highlights the ever-increasing struggle to balance tradeoffs across today’s complex supply chains and the growing need for companies to adopt prescriptive analytics solutions in order to support strategic, tactical, and operational supply chain planning and decision support processes.

More than half (53%) of companies surveyed by Ventana Research say they have limited or no ability to understand the trade-offs.  Many companies are still too focused on optimizing performance on a per business unit basis rather than considering cross-functional performance improvements. Ventana notes that this siloed planning can result in “longer than necessary delivery lead times, higher freight costs, and bloated inventories.” Because of this, less than half (47%) of organizations have accurate supply chain plans (as revealed by Ventana). With respect to preparing optimized supply chain plans, Kugel notes that the best result is almost never achieved when the process consists of each unit applying simple rules to optimize its own performance.

Another key finding is four out of five companies use spreadsheets for supply chain planning, yet only 39% say that spreadsheets enable effective collaboration. Even worse, over 75% of companies say their supply chain plans aren’t integrated with manufacturing, procurement, or sales. Agility is crucial in today’s ever-changing world of supply chain markets. “Being able to re-assess feasible options and quickly adjust pricing, promotions, and volumes is critical,” says Kugel. If companies want to remain competitive, they need to move beyond spreadsheets for balancing trade-offs.

“Ventana Research’s findings confirm the expansive use of spreadsheets as the primary supply chain planning tool and highlight how ineffective that approach has been in achieving company-wide value from planning,” said Carlos Centurion, President of River Logic. “Nearly all of our customers — both in and outside of supply chain — shared a similar story before adopting our prescriptive analytics technology,” continued Centurion.

Ventana’s research also emphasizes that planning must include the ability to view and analyze operational and financial data simultaneously, in order to know how decisions will impact the company-wide profitability, as well as balance sheet and cash flow.

“Prescriptive analytics can give managers and executives the ability to assess trade-offs with greater insight and precision, especially if the analysis incorporates financial data,” notes Kugel.

About River Logic | River Logic, an innovator in prescriptive analytics since 2000, offers a wide range of Supply Chain & Logistics optimization solutions in addition to a Platform with which customers and partners can solve a near limitless number and type of planning and decision-making challenges. For more information, visit riverlogic.com.

BSI SCREEN’s new report highlights the top challenges, developments, and trends likely to impact supply chains this year

BSI has identified five major themes that are most likely to impact the supply chain in 2019. The analysis of how these five themes will affect supply chains this year forms the business improvement company’s annual analysis of global supply chain risks. The five themes are:

• Revision of the Minimum Security Criteria under the US Border Protection’s Customs-Trade Partnership Against Terrorism (CTPAT)
• Supply chain growth in Africa increasing exposure to varying risks
• Ongoing mass migration posing both security and corporate social responsibility risks
• Dramatic shifts in politics including those in Brazil, the US-China trade dispute, and uncertainty over Britain’s departure from the European Union
• The continued threat to supply chains posed by cybersecurity issues

BSI has also identified several key trends in supply chain risk from 2018:

• Food and beverage remains the top commodity stolen
• Metal has now entered the top five commodities stolen worldwide
• Poor working conditions led as the top labour violation recorded last year
• Labour strikes most frequently disrupted manufacturing operations

Jim Yarbrough, Global Intelligence Program Manager at BSI, said: “We’re seeing key shifts to global supply chains this year, driven by quite dramatic changes in the geopolitical landscape. The concern is that as supply chains change – with Chinese companies moving operations to Africa, for example, or the US sourcing goods from other Southeast Asian nations – major implications will also evolve.

“Increased exposure to labour exploitation, terrorism, corruption and natural disasters must be a consideration for companies making changes to their supply chain, and best practices must be maintained in order to prevent threats to business continuity or corporate social responsibility.”

The report provides analysis of each of these top supply chain challenges, developments, and trends to help organizations increase their understanding of potential exposures. A sample of the analysis by theme is identified below:

CTPAT Minimum Security Criteria
Within the United States, companies enjoying trade benefits under CTPAT will soon need to meet new criteria for certification in order to meet the evolving risks of today’s operational environment. As the revised criteria for CTPAT are unveiled, companies will need to undertake new efforts to achieve supply chain security and mitigate emerging risks.

Exposure to varying risks in Africa
BSI’s report reveals the potential for increasing movement of supply chains to Africa, particularly amongst companies based in China spurred on by the US-China trade dispute. Shifting manufacturing operations to Africa, where labour costs are lower and shipping to the US or Europe is cheaper and can be cost-effective compared to staying in China.

However, BSI warns that the relatively unchecked risk of terrorism in African countries, where 23 percent of all supply chain terror incidents take place, sets the operational environment apart from that of Asia. Companies whose supply chain moves to Africa must be wary of this increased risk, often compounded by corruption among security and customs personnel.

Migration continues to pose a risk
As conflict, together with political and economic conditions, continue to drive mass migration, businesses must contend with the double-edged challenge of security and corporate social responsibility risks.

This year’s report records an increase in stowaway and labour exploitation risks stemming from migrants traveling along three major flows: Central to North America, Intra Southeast Asia, and Africa and the Middle East to Europe.

BSI has also noted regression in countries such as Brazil – where budget cuts are reducing the resources available to carry out inspections – that could increase the risk of migrant labour exploitation.

Approximately half (48 percent) of all corporate social responsibility (CSR) incidents recorded by BSI in the last year involved migrants. The often desperate need for income to support their family leads many vulnerable individuals into labour exploitation.

BSI believes this issue will remain key for supply chains in 2019, and companies must invest in a more thorough understanding of their supply chain to truly assess the risk of migrant labourer exploitation.

Dramatic policy shifts
Recent shifts in political ideology in the governments of Brazil, Mexico, the United Kingdom, India, and the United States are setting the stage for an eventful 2019.

Newly-elected leadership in Brazil and Mexico are attempting to chart a new course in Latin America. President Bolsonaro in Brazil has swiftly undertaken efforts that may pose corporate social responsibility risks for some industries operating in Brazil, particularly in relation to the rights of workers, the LGBTQ community, and indigenous territories. BSI recommends companies take a more active due diligence role on business partners in Brazil, to fill gaps left by the government’s removal of some regulatory requirements.

Mexico’s president is undertaking new initiatives to curtail corruption that has historically underwritten organized crime, cargo theft, and oil theft in the country. The ramifications of such initiatives may have sweeping consequences for business continuity and cargo security, but despite President Obrador’s actions, BSI expects that security challenges will continue to affect businesses in the coming year, in particular in-transit cargo theft.

The US-China trade dispute has raised new concerns related to intellectual property protections and the relocation of relevant facilities for a host of businesses. However, companies looking to other Southeast Asian countries should weigh the costs of tariffs against the cost of increased risks to their supply chains. Exposure to child labour, forced labour, and natural disasters are each prevalent in other Southeast Asian countries.

The outcome of negotiations on Brexit remains unclear, creating ripples of uncertainty through supply chains operating within and through the United Kingdom and the European Union.

India’s ongoing elections in April and May could create a shift in politics with effects on global supply chains. Workers’ dislike of many recent policies, with strikes over low wages and fuel prices, could cause immediate disruption and longer-term changes.

Cybersecurity
Within this new global landscape, cybersecurity stands as an overarching and multi-faceted struggle for all parties throughout the supply chain. Securing data and facilities in a fast-paced and modular world connected by the Internet of Things is an emerging challenge that all supply chain professionals undertook in 2018 and will continue to grapple with in 2019.

To download a copy of BSI’s Supply Chain Risk Insights Report, please click here.

About The Study | The data and analysis within this report is pulled directly from our global supply chain intelligence platform, SCREEN. SCREEN provides insight into global supply chain security, business continuity and corporate social responsibility threats and trends in real-time. SCREEN allows users to visualize risk on a global scale and easily identify high-risk locations and potential exposures. Our spotlight news feature and proprietary global risk maps help organizations stay up to date with emerging threats and better protect their supply chain, brand and reputation. For more information about our data and intelligence platform, please contact us directly supplychain@bsigroup.com.

554 transportation industry professionals surveyed on what they believe is the biggest challenge for supply chains in 2019

Transportation management system creator Kuebix has released the results of a survey querying  transportation and supply chain professionals on what they believe to be the biggest challenge facing supply chains in 2019. All 554 submissions were gathered via anonymous surveys to ensure accuracy and impartial results. Respondents believe that the driver shortage/capacity crunch will be the biggest challenge for supply chains in 2019, with this challenge receiving over 44% of total votes.

Here are the full results of the survey:

• The capacity crunch/driver shortage – 44%
• Rising freight costs – 24%
• Managing customer expectations – 10%
• Lack of visibility and collaboration – 8%
• Final mile shipping – 7%
• Implementing a TMS – 5%
• Other – 8%

Respondents who opted to write-in their own answer by selecting ‘Other’ noted issues such as damages to products in transit, temperature control shipping, optimized inventory management, and lead time reduction.

It’s not surprising that so many individuals anticipate the capacity crunch/driver shortage to be the biggest challenge in 2019. The American Trucking Association estimates that there will be a shortage of more than 100,000 truckers by 2022 as Baby Boomers age out of the workforce and millennials fail to take up the mantle. The growth of e-commerce is also increasing the need for capacity as more and more consumers order online and expect rapid final mile delivery to their homes.

The driver shortage and capacity crunch are forecasted to worsen over the next few years. During 2019, companies need to position themselves with the necessary tools to grow relationships with carriers, secure much needed capacity, and maximize the trucks they are able to secure.

About Kuebix | Kuebix offers a transportation management system (TMS) with Freight Intelligence that enables companies to capitalize on supply chain opportunities through visibility, control and the use of predictive analytics. For more information visit: www.kuebix.com.

TÜV Rheinland, an expert in digital transformation and cybersecurity, recently released the results of a worldwide study, exploring how 370 industrial organizations protect their operational technology (OT) assets from cyberattacks. The findings show that as hackers increasingly attack OT, many companies are not aware of the threats cyberattacks pose to their OT assets. Moreover, their measures for cybersecurity are usually not tailored to operational technology.

Lack of concern toward OT cybersecurity is worrying
In the study entitled “Industrial Security in 2019: A TÜV Rheinland Perspective”, 40 percent of respondents stated that they had never assessed the risks posed by cyberattacks on their operational technology. A further 34 percent do not know whether their own company has ever investigated these risks. In addition, only one in five companies has tailored its measures for cybersecurity to operational technology. “The fact that OT cybersecurity is obviously not of high priority is worrying. Attacks from the Internet can shut down entire plants, which can result in production downtime and higher costs,” comments Nigel Stanley, Chief Technology Officer, Operational Technology and Industrial Cybersecurity at TÜV Rheinland.

Preventing hazards from the Internet
In the study, the authors emphasize the complexity of OT security in a networked world. For instance: Enterprise IT applications are constantly updated to respond to new threats. But computer controls for OT systems are not typically updated regularly. “Whether or not an OT system is connected to the Internet, preventive cybersecurity measures based on an understanding of the OT risk are a must. This is especially important as the safety of OT systems can be undermined by cybersecurity attacks,” says Nigel Stanley.

Protecting production data from theft
Those responsible should think about how to protect their own production facilities from physical intrusion. “Whoever is responsible for OT security should consider whether an intruder could insert a rogue USB stick into a system,” Stanley says. “A lot of valuable intellectual property is found in industrial plants and data theft can be just as rewarding for some hackers as disrupting the plant production line.”

Operational Technology (OT)
Operational technology is the name given to the computerized systems used to control physical assets such as valves, motors and pumps. Its use is prevalent across many industries and sectors including oil and gas, transportation, building management systems, water treatment plants and critical national infrastructure. Experts from TÜV Rheinland already have identified Operational Technology as a frontline for cyberattacks in their Cybersecurity Trends.

The study
The study was conducted by IT analysts from Bloor Research, who administered an online survey to 370 managers from companies worldwide, inquiring about how they protect their OT assets. While almost 70 percent of the respondents work in the manufacturing industry, a variety of other industries were also represented, including automotive, oil and gas, telecommunications, energy, chemical, logistics and public institutions. The study looks at the aspects of risk assessment, protection against and detection of cyberattacks, and provides information on protective measures and the recovery of assets after a cyberattack. The free study can be downloaded at: http://www.tuv.com/ot-security-us

Digital Transformation & Cybersecurity
For over 20 years, TÜV Rheinland’s Digital Transformation & Cybersecurity Business Stream has been helping companies from various industries, government agencies and public institutions use innovative technologies securely. With nearly 1,000 consultants worldwide, our experts have a high level of industry knowledge about digital transformation and cybersecurity. In an increasingly vulnerable world of networked systems and devices, our cybersecurity solutions aim to combine security and data protection. Our team carries out cybersecurity tests, industrial security tests and data protection tests on the Internet of Things (IoT) and cloud infrastructures, among others.

About TÜV Rheinland | TÜV Rheinland is one of the world’s leading independent testing service providers with 145 years of tradition. Employing over 20,000 people around the globe, TÜV Rheinland generates an annual turnover of almost 2 billion euros. The independent experts stand for the quality and safety of people, technology and the environment in almost all areas of business and life. TÜV Rheinland inspects technical facilities, products and services, accompanies projects, processes and information security for companies. The experts train people in numerous professions and industries. TÜV Rheinland has a global network of recognized laboratories, testing centers and training centers at its disposal for this purpose. Since 2006, TÜV Rheinland has been a member of the United Nations Global Compact for greater sustainability and against corruption. Website: www.tuv.com

While there’s been a lot of coverage of transformative technologies—such as blockchain, cloud computing, robotics, driverless vehicles and drones, and more—there have been far fewer case studies sharing the projects, and their outcomes, undertaken by early adopters. To that end, MHI Solutions magazine set out to share insights into “NextGen Technologies in Action” in the first quarter issue of 2019.

Among the featured examples is Walmart’s new Food Traceability Initiative, developed in partnership with IBM to leverage its IBM Food Trust blockchain platform. Initially focused on suppliers of fresh, leafy greens to both Walmart and Sam’s Club stores, those companies will be required to capture digital, end-to-end traceability event information using the IBM Food Trust blockchain network by September 2019.

“We’re committed to providing our customers with safe, quality foods,” says Frank Yiannas, vice president of food safety for Walmart. “Our customers deserve a more transparent supply chain. We felt the one-step-up and one-step-back model of food traceability was outdated for the 21st century. This is a smart, technology-supported move that will greatly benefit our customers and transform the food system, benefitting all stakeholders.”

As noted by Yiannas, today the most frequently used process to address food contamination issues in the industry is “one-step-up and one-step-back” traceability.

“If you think about the food system, it’s pretty complex,” says Yiannas. “It involves farmers, processors and distributors—and the way traceability is done today, each segment of the food system does it their own way. Most actually do it on paper or on systems that don’t speak to each other, and so you can never have a full view of what’s happening in the food system.”

Yiannas says that’s why Walmart spent a year working with IBM and 11 other food companies to develop and test the open-source blockchain-enabled food traceability network built. In an initial pilot conducted by Walmart and IBM, the amount of time it took the retailer to trace an item from store to farm was reduced from seven days to just 2.2 seconds.

Walmart’s aim is to now extend the technology in order to help reduce the number of people who fall ill during food incidents while at the same time reducing losses for retailers and suppliers during a recall.

To read the full article, as well as additional case studies about augmented reality (AR), network optimization and cloud computing, and autonomous mobile robots (AMRs), click here.

Passive RFIDs has a competitive edge over active RFID but technological advancements are helping to close the gap, finds Frost & Sullivan

The growth of Industrial Internet of Things (IIoT) and cloud have given a huge boost to the adoption of radio frequency identification (RFID) technology in Manufacturing 4.0. The interconnectedness of devices has resulted in massive volumes of RFID data that needs to be managed and analyzed, prompting RFID manufacturers to develop high-memory tags that can hold more information, software platforms with a business intelligence layer, as well as cloud-based solutions.

“Due to the rising need for resource and cost efficiency, manufacturers are demanding complete visibility and adopting RFID solutions that aid the real-time location tracking and monitoring of their assets, business processes, and personnel,” said Nandini Bhattacharya Industry Manager for Measurement & Instrumentation at Frost & Sullivan. “Passive RFID has experienced high-volume deployments in the past and will continue to grow, especially in the ultra-high frequency segment, while active RFID, although a smaller market, has potential in real-time location system (RTLS) applications.”

Frost & Sullivan’s recent analysis, RFID in Global Manufacturing 4.0 Market, Forecast to 2025, focuses on the trends, challenges, and factors driving the market sectors of tags, readers, and software and services. It provides product revenue and units forecasts, country-wise breakdown of each region, competitive analyses, and a list of key market participants, along with their respective market shares. The study also offers participants deep business intelligence to accelerate growth in a fast-paced market.

“As the total cost of ownership (TCO) of an active RFID system is prohibitive, small and medium enterprises opt for the more affordable passive RFID solutions,” noted Bhattacharya. “Active RFID manufacturers need to focus on the standardization of active 433 MHz RFID to drive its growth. The rising ubiquity of ultra wide band (UWB) and Bluetooth low energy (BLE) RTLS solutions will give the solution an added boost.”

Overall, the growing demands for automation and digitization are creating considerable growth opportunities for RFID vendors that:

• Offer solutions that can be easily integrated into the existing manufacturing infrastructure and can enable IoT connectivity.
• Provide precise and accurate RTLS solutions at competitive prices.
• Develop devices with faster read rate, ability to read more number of tags in a single read as well as highly sensitive antenna, compatible form factors, and increased mobility.
• Gauge customers’ requirements and re-structure their business models accordingly.

RFID in Global Manufacturing 4.0 Market, Forecast to 2025 is part of Frost & Sullivan’s global Mechanical Power Transmission Growth Partnership Service program.

About Frost & Sullivan | For over five decades, Frost & Sullivan has become world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success. For more information, visit ww2.frost.com.

The last 50 feet of delivery in cities is a challenge that will only continue to grow along with urban populations and the popularity of e-commerce shopping. Yet many metropolitan areas aren’t set up to accommodate the number of delivery vehicles now entering their boundaries. They also don’t have enough loading docks and designated curbside loading zones to meet the increasing demand. And the problem is only going to get worse.

In MHI’s new video, “Urban Logistics Strategies,” experts Randy Bradley, Assistant Professor of Information Systems and Supply Chain Management at the University of Tennessee, and Barbara Ivanov, Director of the Urban Freight Lab at the University of Washington, outline the challenges and possible solutions. Among them are multiple ways that cities and logistics providers can collaborate to address the common obstacles in the final 50 feet.