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Warning of Increased Threat of Cyber Attacks on Global Port Facilities

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The International Maritime Bureau (IMB), a non-profit organization established to fight maritime crime and malpractice is calling for vigilance across the maritime sector concerning an increasing threat of cyber-attacks.

According to the agency: “The threat of cyber-attacks on the sector have intensified in the past few months, with cyber security experts and the media alike warning of the dangers posed by criminals targeting carriers, ports, terminals and other transport operators.” In a recent address, an IMB official reported that incidents of petty-theft break-ins at office facilities, which at-first seem harmless, were apparently efforts by thieves to physically install spyware within a port operator’s IT network. Port facilities often use industrial control systems in managing operations, systems that are sometimes not controlled by informational security software.

The IMG advisory further warns of hackers utilizing social-media channels to target truck drivers and operational personnel who travel extensively and have knowledge of port routing and tractor-trailer overnight parking patterns. Hackers are seeking information such as release codes for shipping containers from terminal facilities.

Targets seem to be containers carrying high-value items such as pharmaceuticals, drugs, and other goods. Further noted by a consultant to IMG is that hackers are the new open sea pirates.

As if industry supply chain teams did not have increasing concerns on global supply chain vulnerabilities, this latest IMG warning is especially concerning.


Napa Valley Assesses Damage to Wine Inventories and Production Equipment

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Business owners in the Napa Valley area of California woke up today to the after-effects of the 6.0 magnitude earthquake that struck the region on Sunday.  The Napa Valley was very close to the epicenter of this earthquake and we all know and appreciate what this region’s most important commercial product is, namely great wines with global brand identity.

Reports indicate that the wine industry may have suffered some significant damage as a result of the quake and its aftershocks.  A report produced by business network CNBC features video and reports of damaged wine caskets and bottled inventory among growers and distributors, some of very expensive varieties. According to a report by CNN, the damage was isolated, some wineries being hit very hard, others not so. Wine producers and wholesalers are in the process of assessing overall damage along with trying to save stored aging wine.  Wine within damaged barrels will need to be transferred to other safe, secure, temperature-controlled facilities and the challenge is securing both additional barrels and available controlled storage that was not damaged. While insurance can compensate for lost inventory, exquisite wine cannot be replaced, and the harvesting and aging process must begin anew.  Larger producers may be in the position to sustain losses than smaller, specialized producers. That may well leave a hole in future revenues or cause a supply and demand imbalance, depending on the varietal product. The market for wine itself has its own challenges and is very much dependent on variety and brand.

Last week, we ran across a a syndicated AP published story regarding the bourbon industry.  Similar to wine making, it is an industry where long-term bets are made concerning current and future market demand. Distillers fund inventory aging for millions of gallons of product over a 2-5-10-15 year horizon. Super premium brands, currently the most popular, can often fetch large profits, but have to age 6 years or more.  The overall market for bourbon is booming, and distillers and distributors are banking on the continued boom in international demand to continue over the longer-term horizon.  Imagine your supply chain’s overall inventory averaging over multiple years. We observed that dynamic when earthquakes impacted the parmesan cheese producing areas of Northern Italy in June of 2012.

Wine and spirits supply chains feature unique challenges in long-term inventory management and associated supply and demand pricing strategies. Risk is an inherent factor, and major supply chain disruption caused by a natural disaster can be devastating to short and longer-term business results. They also add a new and far different aspect of product demand management challenges.

Napa wine producers will continue to recover from this natural disaster and hopefully, all producers, large and small, will be able to recover.  However, our community has yet another reminder of the fragile nature of today’s industry supply chains which can be significantly disrupted by a single natural disaster or event.

Bob Ferrari

 


Supply Chain Matters News Capsule: August 8; APICS, Hapag-Lloyd, Resilinc

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It’s the end of the calendar work and this commentary is our running news capsule of developments related to previous Supply Chain Matters posted commentaries or news developments.

In this capsule commentary, we include the following topics: APICS Finalizes Merger with Supply Chain Council (SCC); U.S. Manufacturing Growth Continues at a Scorching Pace; U.S. Regulators Approve Hapag-Lloyd and CSAV Merger But Additional Hurdles Remain; Resilinc Announces Release of Conflict Minerals Reporting Module

APICS Finalizes Merger with Supply Chain Council (SCC)

The merger of APICS and the Supply Chain Council  announced in April is now finalized. An APICS press release notes that the merger “was ratified by a near-unanimous majority of SCC voting members.APICS SCC is the new entity that reflects the combining of SCC and APICS Foundation research and development programs.

According to the announcement, APICS and APICS SCC will share more details about the benefits of the merger early next year.  The completion announcement does make note of broader training curriculum, capturing additional operational efficiencies in back-office support through the sharing of technology platforms.  The latest announcement does not include mention of prior SCC executives and staff.

 

U.S. Manufacturing Growth Continues at a Scorching Pace

U.S. manufacturing and supply chain activity in July was reported to have expanded for the 14th consecutive month and reached a new high. The ISM PMI index rose to 57.1 in July from the 55.3 recoded in July.  The new orders and employment indexes registered healthy gains, an indication of continued momentum as manufacturers move to the second-half of 2014. The New Orders index grew by 4.5 points while the Employment index grew a phenomenal 5.4 points from June. Industry growth was broad, with 17 of the 18 industries tracked reporting increased activity. An economist for Markit noted: “U.S. manufacturers are enjoying a summer of scorching growth.”

 

U.S. Regulators Approve Hapag-Lloyd and CSAV Merger- Additional Hurdles Remain

Also in April, two high profile ocean container shipping lines, German based Hapag-Lloyd and Chile based CSAV announced a merger deal. The combination of these two shipping lines is expected to create the fourth-largest global shipping company in terms of capacity.

This week, U.S. regulators gave the green light to the proposed merger. Chinese and European Commission regulators have yet to weigh in but business media is reporting that approval is expected.  That was the same expectation regarding approval of the proposed P3 Network involving the top three container lines, but China’s maritime regulators balked at approval.

Resilinc Announces Release of Conflict Minerals Reporting Module

Supply chain resiliency technology provider Resilinc announced a new release of the provider’s Conflict Minerals Module, designed to simplify compliance reporting, and align with the provider’s supply chain mapping software. The module is described as providing a network-based approach to enable suppliers to publish conformance information relative to the Dodd-Frank ACT utilizing a singular template. The module is offered at no-cost to the supplier, incorporates multi-language and time-zone report needs while supporting automated assessment tests to categorize incorrect responses and assist suppliers with accurate reporting.


Boeing Initiates Tactical and Strategic Supply Chain Moves

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Commercial aerospace and aircraft producer Boeing has recently initiated some supply chain risk mitigation and strategic sourcing moves which demonstrate responses to important business needs.

Many headlines of late report on the continuing tensions among Russia and the United States concerning ongoing events in the Ukraine. Today’s Wall Street Journal reports (paid subscription or metered view) that certain aerospace manufacturers, namely Boeing and United Technologies, have been augmenting safety stock supplies of titanium, a critical material utilized in the fabrication of critical aircraft components. One of the world’s largest producers of this material is VSMPO-Avisma, which has a parent company with direct ties to the government of Russia. VSMPO is reported as supplying upwards of 30 percent of the total volume requirements used in the aerospace industry each year. Ukraine, currently involved in political and social unrest, provides almost all of the concentrates used by VSMPO. The combination of severe economic sanctions being placed on the Russian economy and the unrest in Ukraine has logically prompted concerns about the continuity of titanium supply.

In its reporting, the WSJ cites sources as indicating that Boeing and UA have been stockpiling as much as six months of safety stock supply of highly customized titanium forgings, which are supplied by a single provider such as VSMPO.  Boeing confirmed to the WSJ the existence of the strategic reserves from its Russian supplier, with the material accounting for 15 percent of the airframe weight of the Boeing 787 Dreamliner. UA utilizes the subject titanium forgings to produce landing gears for Boeing and other producers, as well aircraft engine components for its Pratt & Whitney division. VSMPO further confirmed that customers had placed buffers in place as part of their risk management planning and that customers would go back to buying as needed for standard production. The WSJ further reports that Airbus has not acknowledged a safety stock strategy for titanium forgings.

Inventory management strategies are often a flash point among discussions involving supply chain planners and finance.  However, insuring continuity of strategic supply components can be a far different dialogue.  Supply Chain Matters has made note of other previous decisions made within industry supply chains to insure strategic continuity of supply when significant risk conditions are present.

South Carolina Facility Tapped

Electing to further dual source production, Boeing announced that the largest to date Dreamliner model, the 787-10 aircraft, scheduled for market delivery in 2018, will be built solely within the company’s non-union production assembly facility in North Charleston South Carolina. Statements to business and general media indicate that the sourcing decision was prompted by the stretched length of the aircraft’s fuselage.  The suppliers of this 114 foot long stretch fuselage are within Italy and Japan, and normally the fuselage components are flown in on a special fitted Boeing-owned 747 Dreamlifter cargo plane. Boeing indicates that the elongated fuselage components required for the 787-10 will not fit the existing cargo aircraft.    Boeing 787 production line

Regarding the South Carolina sourcing decision, a published report by the Seattle Times reports: “It makes clearer the profound impact of Boeing’s 2009 decision to bypass its unionized stronghold in Washington in favor of building a second 787 assembly line in nonunion South Carolina. In six years, Dreamliner final assembly will be equally divided between the East and West Coast sites.” The Times report further notes: “So by the end of the decade, the prospect for Boeing widebody-jet production is that North Charleston and Everett will each be rolling out seven Dreamliners per month, while Everett will in addition be producing up to eight 777s per month, plus two 767 tankers for the Air Force.”

Meanwhile, a labor union among Boeing’s Everett Washington production facilities were naturally not pleased with the sourcing decision, indicating that while not surprised, they were certainly disappointed in the final decision.

Reports indicate that the Everett facility will continue to sustain a production level of seven Dreamliners per month while the North Charleston facility will ramp-up from three aircraft per-month today, to five in 2016 and seven by the end of the decade. According to Boeing, both production facilities will have similar production practices and standards.

Bob Ferrari

 


Supply Chain Matters News Capsule- August 1; Apple, Amazon, West Coast Ports, D&B

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It’s the end of the calendar work and this commentary is our running news capsule of developments related to previous Supply Chain Matters posted commentaries or news developments.

In this capsule commentary, we include the following topics: Apple iTime Parent Approval; Amazon Introduces 3D Printing On-Demand Store; No Progress for West Coast Ports Labor Negotiations; Dun and Bradstreet Launches Supplier Risk Manager 2.0

 

Apple iTime Patent Approved

This week a posting on Seeking on Seeking Alpha indicates that the United States Patent and Trademark Office (PTO) revealed details of an Apple submitted device referred to as “iTime”.  According to the filing, this device is capable of integrating GPS, a heart rate monitor, accelerometer and haptic feedback along with a mini-smartphone with audio, touchscreen, video and calling capabilities.

 

Amazon Introduces 3D Printing On-Demand Store

A recent posting on Mashable indicates that Amazon is taking “on-demand’ to a new dimension with its inaugural 3D printing marketplace. The 3D Printing Store will supposedly allow customers to select and customize products that are printed and delivered to the consumer. The store features items such trinkets, accessories, toys and art pieces. According to the posting, Amazon is fronting a handful of 3D printing firms including Sculpteo, MixeeLabs and 3DLT for delivery of these services and products.

 

No Progress for West Coast Ports Labor Negotiations

A report this week on Supply Chain Management Review indicates that labor negotiations among The International Longshore and Warehouse Union and the Pacific Maritime Association involving operations of 29 U.S. west coast ports have been reported as “productive” but without resolution. It has been a full month since the existing labor contract expired at the end of June with no formal contract extensions. The report indicates that both parties temporarily suspended negotiations on July 25 but will resume discussions next week.

The open question remains as to what extent industry supply chains will take alternative routing actions to alleviate any potential disruptions in the upcoming weeks of holiday related goods transit.

 

Dun and Bradstreet Launches Supplier Risk Manager 2.0

Dun and Bradstreet announced the launch of its second-generation Supplier Risk Manager software application. The technology leverages D&B’s proprietary database of 235 million businesses, and provides predictive indicators to enable customers to monitor and receive “red-flag” alerts to supplier events that signify critical risk.  The application now includes what is described as a faster and more intuitive user interface.

 


Potential West Coast Port Disruption Raises Questions on Impacts to Upcoming Peak Shipping Period

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A commentary posted on Logistics Management makes the observation that the threat U.S. West Coast port disruptions as a result of current ongoing labor union contract negotiations raises an open question as to “peak shipping season” this year. News Editor Jeff Berman makes note that inbound container shipments destined for the ports of Los Angeles and Long Beach, which together account for upwards of 40 percent of incoming U.S. container traffic,  increased 16.5 percent and 8.8 percent respectively during June.  The premise presented is that buyers scrambled to move cargoes earlier to avoid the potential of goods being caught-up in a port stoppage.

Logistics Management further conducted a reader poll of 103 buyers of freight transportation and logistics services. That survey indicated 68.1 percent of respondents expecting a more active peak shipping season this year. Some respondents are reported to be concerned about potential transportation lane disruptions in the fall.

Meanwhile, as we approach the end of one month since contract expiration, no real news has come forward regarding the ongoing labor talks between the Pacific Maritime Association and the International Longshore Warehouse Union. That provides continued uncertainty and concern among industry supply chains.

Supply Chain Matters proposes to conduct its own reader poll. For those readers managing inventory, procurement, transportation and logistics services, here’s the question:

What are your organization’s current plans or strategies regarding a potential disruption or work stoppage among U.S. West Coast plants? 

Provide your responses in our interactive poll at the bottom of our right-hand panel. We will open this poll for two weeks and will announce the final results.

Bob Ferrari


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