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Jim Yarbrough is global intelligence program manager at BSI, where he leads the company's team of supply chain risk analysts and assesses the potential threat of security, corporate social responsibility, and business continuity risks to countries and businesses worldwide. These assessments are integral to BSI's Supply Chain Risk Exposure Evaluation Network (SCREEN) tool. He also provides information and analysis about the threat to international cargo to governments around the world and to a number of Fortune 500 companies.
David Maloney, Editorial Director, DC Velocity 00:01
The critical supply chain risks we all need to know about. The labor shortage hits supply chains hard. And more consolidation among the nation's railroads. Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
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As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today: People who have never heard of supply chains are well aware of them now. With the shortages and slowdowns brought on by the pandemic, we have a better understanding of some of the vulnerabilities within our supply chains. And today, our guest will share about a new study looking at supply chain risk. Jim Yarbrough is the global intelligence manager at BSI. He leads a team of supply chain risk analysts and assesses the potential threat of security; corporate social responsibility; and business continuity risk to countries and businesses worldwide.
Welcome to Logistics Matters, Jim. Good to have you with us.
Jim Yarbrough, Global Intelligence Program Manager, BSI 01:43
Thanks, David. Nice to be here.
David Maloney, Editorial Director, DC Velocity 01:45
And as I mentioned, your company BSI released its annual Supply Chain Risk Insights 2021 report. First of all, can you tell us a bit about BSI and the purpose of the report?
Jim Yarbrough, Global Intelligence Program Manager, BSI 01:56
Yeah, sure thing. BSI is British Standards Institution, and our main mission, if you will, is to enable organizations to basically perform better, and we share knowledge, innovation, best practices to make excellence a habit all over the world, every day. And my organization within BSI, the intelligence program that you mentioned, we work with organizations all around the world to help understand where risks are in the supply chain and really try to quantify and qualify what those threats are, and those things can be related to criminal activities, such as cargo, theft and warehouse theft, but smuggling of illicit materials throughout the supply chain. But we also look at, you know, poor labor conditions or forced labor conditions around the world and business continuity disruptions, as you mentioned—and those those can be from natural disasters, of course, but also looking at manmade disruptions, any type of political strife or labor strikes, really anything that can disrupt the supply chain. And our mission in the intelligence organization is really to define what those risks are, you know, make our clients aware of what those risks are, but also help them mitigate those risks and become more resilient and really, you know, flesh out what those risks are within their own supply chains, and help improve those conditions all around the world.
David Maloney, Editorial Director, DC Velocity 03:29
You touched on some of the general areas of risk. What were some of the specifics that you found in this year's report that our readers should know about?
Jim Yarbrough, Global Intelligence Program Manager, BSI 03:38
You know, one of the larger things with supply chain risks in 2020, and moving into 2021, you know, in transit, cargo is always the most vulnerable for these criminal activities that we're speaking of. But during the pandemic, and then lockdown phases all around the world, there was a pretty significant shift in terms of in-transit cargo theft is still the number one way that criminals attack the supply chain, but warehouses themselves, we saw a large increase in warehouses becoming the targets for theft of commodities that we typically see, but also emerging commodities that were related to the pandemic—so hand sanitizer and PPE equipment. We started seeing a lot of thefts of those, you know, in stockpiles, as they became more popular on the black market, of course, and easier to sell, we saw increases in those areas. And then kind of the associated things like tobacco and alcohol—always targets of theft within the supply chain, but we saw pretty significant increases in those areas as well, specifically from warehouses. And we saw this trend, these trends that I'm speaking of, it was not isolated to a particular region. We saw it in Europe, we've seen it in Africa and South Africa, we saw it in South America, we saw it here in the United States, where I am, too.
David Maloney, Editorial Director, DC Velocity 05:13
Have some of the shortages, also, that we've experienced during the pandemic led to increased risk?
Jim Yarbrough, Global Intelligence Program Manager, BSI 05:20
Yeah, exactly, yeah. So, when those commodities become, you know, of more value to the open market, and the black market especially, we did see increased opportunistic criminal activity happening there as well. So, you know, like building materials, for example. So, you know, the price of building materials is much higher now than it was say, you know, at the end of 2019, and we saw an increase in the number of thefts around the world. And I'm talking about in the supply chain, so moving, you know, in transit, or in warehouses, where we saw increased thefts of building materials, for example,
David Maloney, Editorial Director, DC Velocity 06:01
We've been talking about theft of a lot of products, but there were other things that you covered in the report as well, that were risks, such as labor exploitation. Can you address some of the labor issues that are a risk for us?
Jim Yarbrough, Global Intelligence Program Manager, BSI 06:14
Yeah, well, one thing that we know that, throughout the pandemic, is that a lot of the most vulnerable populations in the world became more susceptible to the labor exploitation. So, I'll try to give you an example. So, like the typical migrant labor workforces around the world—and I'm talking about legal migrant labor forces, so seasonality workforces, like in California, for example, we have typical, typically, we see migrant labor being brought in for harvest seasons—the same thing in Canada as well—that have populations moving up from South America or from Mexico. Of course, they were not able to move and, you know, have that labor force during these lockdowns, but we have seen, because those people, you know, they have to have income as well, that they became more susceptible to poor working conditions, poor labor conditions in areas where we had not seen previously. And it's a pretty alarming trend that you know, that a lot of things from the pandemic, the, you know, the pain of the pandemic, from an economic standpoint, and looking at the sustainability of the supply chain and the resilience of the supply chain, it's typically the more vulnerable populations that are experiencing the worst pain from all of that.
David Maloney, Editorial Director, DC Velocity 07:49
Rght. How much do political situations around the world affect supply chain risk? I'm thinking of, like, Brexit, for instance, or countries dealing with China, and areas of conflicts around the world. How much they contribute to risk?
Jim Yarbrough, Global Intelligence Program Manager, BSI 08:02
In a very large way, frankly. So, you know, one thing I would also include in that category is regulatory changes that are happening through political change around the world. Even before the pandemic, the supply chain was becoming much more focused upon for regulatory changes, and there are a lot of political issues around that. So, you mentioned Brexit. One thing that—this is kind of an oddball thing, but it's, it's associated with Brexit, that we've seen increases in food fraud, for example, in the supply chain. So, the opportunity from the criminal standpoint to mislabel or misidentify ingredients within food and being shipped around the world, we have seen increases in that around the United Kingdom and Ireland and other areas of Europe that are, we believe, are associated somewhat with the changing political landscape. But also, like, looking at things like deforestation have become a much larger issue around the world. And what I mean by that, is that the countries around the world passing legislation looking at deforestation, meaning that your supply chain is going to become much more scrutinized, and there's going to need to be larger efforts and validation that goods produced around the world are not being produced in association with deforestation activity, for example, in South America. So, there's a lot of new focus and new efforts by regulatory regimes all around the world that are focusing efforts to address these issues of deforestation, forced labor. There's a lot more scrutiny and there's a lot more of a greater emphasis in terms of documenting and validating that your products and your business partners and your suppliers are not associated with these issues. And there's just a whole lot more effort around all of those things now.
David Maloney, Editorial Director, DC Velocity 10:15
Right. Now, a lot of these threats that you've talked about have been going on for a long time, and as we mentioned earlier, this is an annual report. Have we seen any progress in addressing some of these threats from year to year?
Jim Yarbrough, Global Intelligence Program Manager, BSI 10:28
Yeah, I think that, you know, from our perspective, we work with a large number of organizations, and I can speak personally that we have seen tremendous progress by the organizations that we work with that, you know, they are taking all of these issues very seriously, and they're really trying to root out these issues with, you know, just a large deal of effort by these organizations to make their supply chains resilient, and to make sure that they are not the guilty party, in these these large issues that we're seeing around the world. So, I believe, I fully believe that, yeah, this is this is really working, that there's a lot of greater emphasis, and we are seeing organizations improve the resilience of supply chain, to make sure that they are not associated with any of these bad things that we're talking about here.
David Maloney, Editorial Director, DC Velocity 11:19
Yeah. So what can companies do to reduce their supply chain risk?
Jim Yarbrough, Global Intelligence Program Manager, BSI 11:24
Yeah, knowledge is one of the biggest things, right? You know, these companies are dealing with hundreds, oftentimes thousands of business partners and suppliers around the world. It's extremely difficult to keep track. You know, if you're responsible for sustainability in your organization, or supply chain security, or compliance in the supply chain, it's a really large tasks to just understand, you know, where are your suppliers? Where are your business partners? Who are they? And so organizations are relying a lot more on software to make sure that they can map out their supply chain and understand, on a daily basis, who they're doing business with. And then, understanding, you know, what are the, kind of the inherent risks, depending on where you are in the world and what you are around the world? And that takes a lot of effort as well, too. So we we work really hard to make sure that we're providing intelligence and information and analysis to people to understand how likely is it that these issues may affect their own organization and the business partners and suppliers that they're working with. But also, every day when the world turns these risks change. You know, the commodities we were talking about in terms of what is being targeted for cargo theft, that's one thing, but also looking at how labor and people are being treated around the world in terms of the workforce, these things change every day. So arming your organization with a lot of knowledge and information, but also being able to rely on technology to help mitigate those risks and get a better understanding of what your supply chain really is on a daily basis. You know, I started this work myself about 13 years ago, and I think we've moved lightyears ahead of where we were back then, in terms of understanding what those risks are and disseminating that information across the supply chain. And making people actively engage in addressing these these issues.
David Maloney, Editorial Director, DC Velocity 13:29
We've just really scratched the surface today. How can our listeners obtain a copy of the Supply Chain Risk Insights 2021?
Jim Yarbrough, Global Intelligence Program Manager, BSI 13:37
Yeah, you can visit the BSI main website. It's BSIGroup.com. And right there on the homepage, you'll see a link to the Supply Chain Risk Insights 2021 report, and you can just freely download it right there. There's—it's an enormous report with a lot of great information. We have pulled together many great experts from around the world to contribute to this report. It's a fascinating read. I really encourage your listeners to download that report, but there will also be additional information there if you want to take any of these issues further, discuss that with us, we'd be happy to do that.
David Maloney, Editorial Director, DC Velocity 14:13
Great, thank you. We've been talking with Jim Yarbrough, the global intelligence program manager for BSI. Thanks for being with us today, Jim.
Jim Yarbrough, Global Intelligence Program Manager, BSI 14:20
Thanks, David. Have a good day.
David Maloney, Editorial Director, DC Velocity 14:23
Now, let's take a look at some of the other supply chain news from the week. Victoria, you reported this week on labor shortages as the economy roars back, and supply chains have been hit rather hard and have had a difficult time finding workers. What did you find?
Victoria Kickham, Senior Editor, DC Velocity 14:38
Yes, that's right, Dave. So, as we've heard quite a bit this past week, as you know, businesses across the country are struggling to find workers as the economy rebounds from the pandemic and companies need help to meet that growing demand. And as you say, transportation and logistics is no exception, and some in the industry say they might be among the hardest, hit. It started with last week's disappointing April jobs report, and that was followed by more data this week that show job openings continue to exceed hiring. Both reports came from the Bureau of Labor Statistics, and they're for different months, but they paint a picture that reflects the reality many transportation and logistics companies are facing. The second set of data I mentioned is from the Labor Department's Job Openings and Labor Turnover Survey. And it essentially showed that openings exceeded hiring in March by about 2 million. As we said, this is especially tough in transportation and logistics, which continues to roar back from the pandemic lows of a year ago, but is struggling, as you say, to find enough, in particular, truck drivers and warehouse workers to meet surging consumer demand. Just to give you one example, I spoke to Mark Allen—he's president and CEO of the International Food Service Distributors Association, also known as IFDA—who said his members are especially hard hit. And these are food-industry distributors—you know, companies that run warehouses and fleets that serve restaurants, schools, hospitals and other institutions. Allen said he'd heard from three large food-industry distributors as recently as last Thursday, so just before the April jobs report came out, and they said that combined, they needed to hire 8,000 truck drivers and warehouse employees to meet current demand. He said the industry had been feeling the pinch for drivers since the early part of the year, which is something we've talked about in the podcast before, but that they hadn't seen demand heating up on the warehouse side until mid- to late March. So, that's the situation pretty much.
David Maloney, Editorial Director, DC Velocity 16:36
Yeah. And we've heard a lot about the need for drivers and reported on that, but what's driving the problem with finding warehouse workers?
Victoria Kickham, Senior Editor, DC Velocity 16:44
Yeah, well, it really all comes down to the same set of factors you keep hearing across the board. Many point to the federal government's expanded unemployment insurance benefits, which they say is a disincentive to go back to work. There are also lingering fears over the virus, health and safety concerns. And also, you know, there are still workers who are at home caring for children who are in remote schooling in some places. So, those are the typical reasons that we hear. I also spoke to jack Kleinhenz, and he's the chief economist at the National Retail Federation. He cited the same set of factors in the retail sector. And he said, you know, it continues to be a problem, even though many companies are offering higher pay, in some cases, and other incentives to find employees. The good news though, both Kleinhenz and Allen said that many of these issues may be temporary, we hope, especially now that we've seen some states make efforts to address the unemployment insurance issue, in particular. Our readers have probably been following this as well, but a number of states have begun tightening unemployment requirements, and some have said they'll opt out of the additional federal unemployment insurance program before it's scheduled to end in the fall. And actually, Allen mentioned that there's a grassroots campaign among IFDA members to support some of those more creative options that states are trying in order to get people back to work. So, it's an ongoing issue, of course, but it's certainly one that we'll keep an eye on
David Maloney, Editorial Director, DC Velocity 18:08
Yeah. Certainly the are needs that need to be addressed if we're to keep our nation's products moving to meet the increasing demands. We'll certainly keep an eye on it. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 18:18
David Maloney, Editorial Director, DC Velocity 18:19
And Ben, you reported this week on acquisition and merger news among the nation's railroads. What can you tell us?
Ben Ames, Senior News Editor, DC Velocity 18:25
Yeah, that's right, Dave. Railroads often operate out of the headlines when people talk about some of the supply chain challenges, you know, whether it's the supply chain security that we're talking about with our guest, or labor, that Victoria was just talking about. But, in fact, whether you're talking about container ports, the Suez Canal, the Colonial Pipeline hack, all the different modes of travel—freight transportation—are connected. And we saw that this week, when Congress was talking about making some plans to take up the slack for gasoline delivery if the pipeline had stayed close much longer by turning to trucking and freight rail. So, this week, we heard about another move to connect rail and truck freight by strengthening their intermodal connections when CSX Railway said it had acquired a bulk liquid chemicals truck transportation fleet called Quality Carriers. The idea there is to link that chemical truck tanker network with CSX's rail network so they can work around some of the extreme capacity tightness that we're seeing in the truckload sector. And that [move follows] some other CSX reorganization in recent years toward the same goals, like it's 2020 deal to buy a large regional carrier in New England called Pan Am Railways. Also a push to expand its intermodal service network through a deal with Canadian Nationa—and that's designed to convert longhaul trucking to rail services. So, you know, as Victoria was saying, you know, people are getting creative to deal with some of these challenges.
David Maloney, Editorial Director, DC Velocity 20:03
Right. Do we see that trend happening in other parts of the rail sector as well?
Ben Ames, Senior News Editor, DC Velocity 20:08
Yeah, we sure do. It's been a busy couple of weeks. In a completely independent move, talking about Canadian National, Canadian National is also trying to buy a U.S. Midwestern freight rail line called Kansas City Southern. So, about three weeks ago, Canadian National said it was trying to outbid its rival, Canadian Pacific, which also wants to buy that line. The idea there is that both of the Canadian railways have extensive east-west lines, really running largely along the U.S.-Canada border, and Kansas City Southern basically runs north-south, through the Midwest, through Kansas City and all the way down into Mexico. So, linking either of those networks, you can move freight much more easily between all three nations. And that's really important as the new trade agreement, the USMCA, comes into effect to replace NAFTA. But interestingly, both the Canadian railways also said that if an acquisition goes through—and it's subject to quite a lot of government approvals, antitrust at various levels—the combined deal could convert significant volumes of truck traffic onto rails. And they argued that that delivers better fuel efficiency in terms of the gallons of gas required to move a ton of freight. And that's quickly becoming a more important measure in logistics, as more companies focus on sustainability, greenhouse gas emissions, carbon footprints. So, the fight to buy Kansas City Southern is still very much undetermined. We'll have to watch that closely and see whether either company wins, and what the long term impacts might be on both the rail and the truck side.
David Maloney, Editorial Director, DC Velocity 21:42
Right. It will be interesting to see how all that plays out. Thank you, Ben.
Ben Ames, Senior News Editor, DC Velocity 21:46
Yep, of course,
David Maloney, Editorial Director, DC Velocity 21:47
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And also check out the podcast Notes section for direct links on the topics we discussed today, including the link to the BSI website as well. Thanks, Ben and Victoria, for sharing highlights from the news this week.
Ben Ames, Senior News Editor, DC Velocity 22:06
Always enjoy it, Dave.
Victoria Kickham, Senior Editor, DC Velocity 22:07
Yes, you're welcome.
David Maloney, Editorial Director, DC Velocity 22:09
And again, our thanks to Jim Yarbrough of BSI for being with us today. We encourage your comments on this topic and our other stories. You can email us at email@example.com.
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We'll be back again next week with another edition of Logistics Matters, when we will discuss how West Coast port congestion has led many to shift to East Coast and Gulf ports for their cargo. So be sure to join us. Until then, please stay safe and have a great week.