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Supply Chain Matters 2013 Predictions for Global Supply Chains- Part Six

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Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide a series of predictions for the coming year. We have maintained this tradition since the founding of the blog in 2008.

Readers can view the entire listing by clicking on this web link: 2013 Predictions for Global Supply Chains.   

In our Part One posting, we explored our first two predictions for 2013, the overall economic and business challenges, and our prediction of inbound commodity prices.

Our Part Two posting explored predictions #3 and #4, which noted a continued renaissance in U.S, based manufacturing and the very important challenge of supply chain skills development and retention.

Part Three posting explored Prediction #5, our industry specific supply chain challenges prediction.   Supply Chain Matters Blog

Part Four posting addressed the critical need for supply chain resiliency and responsiveness in 2013 as well an increased penetration of Chinese companies in other industry supply chains.

Our Part Five posting, predicted broader umbrella supply chain accountability in 2013.

In this Part Six posting we dive into predictions of higher levels of action required in the control and mitigation of broad theft and counterfeit materials among industry supply chains.

 

Prediction #9: Similar to what transpired in 2012, higher and more expensive incidents of counterfeit products, physical and IP theft, and other unscrupulous ‘grey” market activities within and across industry supply chains will motivate industry players to step-up mitigation efforts.

This collective area has been percolating for many years and we included a similar prediction in 2012.  The difference for 2013 is the need for various industries to step-up with action plans.  We anticipated that 2012 would be the year when government and industry finally become motivated to take action to address the growing incidents of non-conforming materials that have penetrated multi-industry global supply chains.   A snapshot of 2012 events clearly indicates that government stepped-up its enforcement efforts.

In Prediction #5, specific industry-related challenges for 2013, we noted that in 2012, Pharmaceutical and Healthcare supply chains had to respond to increased shortages of life-saving drugs such as Avastin for the treatment of cancer. U.S. government regulatory agencies clamped-down and discovered counterfeit drug supply routes that crossed multiple foreign countries and corporate entities with violations of drug safety standards.  What was once believed to be a suspected problem with counterfeit drugs originating from Canadian based distributors has turned out to be far wider in global origins and continues to be an area of strong concern. Supply Chain Matters believes that if it was not for the U.S. Presidential election event, there would have been more legislative cries for industry to step-up tracing and drug safety efforts. Unlike the U.S., Europe has been gearing up additional 2013 country-specific pilot programs for validating the genealogy of pharmaceutical drugs via serial number identification.

Cargo theft remains a persistent problem with thieves exercising rather sophisticated intelligence methods to target valuable cargos and their specific whereabouts.  It is a global problem.

This area also takes on broader dimensions. The Conference Board launched a December 2012 report titled: Safeguarding Intellectual Property and Addressing Corruption in the Global Supply Chain. This report features views from a broad range of Fortune 500 companies. Highlights of this report indicate that two-thirds of executives surveyed cite theft of trade secrets presents extensive risk in emerging markets, while only 36 percent rated their company’s compliance programs as effective in managing these risks. Other concerns are reflected in areas of corruption in the global supply chain.  Executives cited the importance of gaining visibility into subcontractors to third parties.  In 2012, high visibility incidents included Wal-Mart, which has been responding to allegations of corruption and fraud involving store selections in Mexico.  As we publish this commentary, Wal-Mart announced that it will audit all U.S. third-party warehousing and distribution facilities for potential labor abuses.  The November 2012 tragic fire at an apparel factory in Bangladesh that resulted in the death of over 100 workers had Wal-Mart in the media spotlight.  While the burned out factory was producing Wal-Mart labeled apparel, the global retailer claimed that this factory was unauthorized to produce such goods, and that an existing supplier subcontracted production without authorization. The retailer also stated that it, as well as the industry, needs to do more to monitor and control supply chain conformance.

This concludes Part Six of our 2013 Predictions for Global Supply Chains.

On Monday of next week, we will dive into our final prediction #10, increased adoption of cloud computing provided certain lingering customer concerns are addressed.

As always, readers are encouraged to comment on these predictions as well as add additional thoughts as to what to expect in 2013.

Bob Ferrari

© 2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

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