Falsified Product Specifications at A Major Steel Supplier & Air Pollution Crackdown in China: A Look Back on Some Of riskmethods’ Top Stories in Q4…Thus Far
by Ali Jawin
Q4 is an intense time for every organization, and two major supply chain disruptions in the first half of Q4 have made it even more intense by raising questions and concerns for what is likely thousands of enterprises. While we can’t know for certain how many more supply chain disruptions will occur before the new year begins, these two provide important lessons on what to look out for:
Kobe Steel Scandal
Kobe Steel isn’t the only organization to find itself in the hot seat for falsifying data, but unlike other recent data falsification scandals, this has the potential to put human lives at risk. Kobe Steel, one of the world’s largest steelmakers, supplies the steel that ends up in cars, airplanes and locomotives. The company supplies approximately 50% of the wires used in valve springs of automotive engines in the entire global market. So, when it came to light that 500 of Kobe Steel’s customers received products with falsified specifications, people demanded to know where this steel ended up, and if the products made with this steel were safe. Many of these demands remain unmet at this time.
The scandal has left global automakers, aircraft carriers and other manufacturers scrambling to identify any potential dangers in their products due to the data falsification. While it does not appear that any safety problems have been discovered, European aviation safety authorities have announced a directive, advising aircraft manufacturers to stop using Kobe Steel products until all the safety checks are complete.
The fallout still continues, and while it still may be too early for some to tell, this scandal has the potential to be considered one of the biggest of the year, demonstrating the dangers of not knowing the dependencies that exist within your supply chain network.
China Shutters Factories to Fight Pollution
An estimated 40% of China’s factories have been shut down while the government conducts an unprecedented crackdown on manufacturers and other sectors seen as contributing to hazardous levels of air pollution. The majority of the closures thus far have been concentrated in the Jilin, Shandong and Zhejiang provinces as well as the cities of Chengdu and Chongqing, affecting multiple manufacturing industries such as metals, plastics, rubbers and others.
The situation is not likely to change as China is still facing “huge pressure” to meet politically important 2017 air quality targets, and has indicated that it will shutter twice as many factories in the coming months. With even bigger emissions cuts likely to come in an effort to avoid the nearly record-breaking levels of choking smog that descended upon key northern regions in the beginning of 2017, it is more important than ever to ensure you have the appropriate mitigation strategies in place.
This is not the first time that the Chinese government’s attempt to reign in dangerous levels of air pollution have affected global supply chains. As AgriBusiness Global notes, riskmethods notified its customers that the Shanghai government ordered over 255 industrial facilities from August 24th through September 16th in 2016. Soon after, authorities in the neighboring Zhejiang and Jiangsu provinces issued similar orders for manufacturers within a 300-km radius from Hangzhou. Why? To reduce pollution in Shanghai before world leaders arrived for the G20 Summit hosted in early September 2016.
With this alert, riskmethods customers were able to immediately gain visibility to which suppliers were located in the area of impact, saving them the stress and time that it would have taken them to understand the impact otherwise.
So what now?
Some supply chain disruptions are harder to predict than others, but with advanced planning, many supply disruptions can be avoided, or the consequences mitigated. Get ahead of these disruptions by watching a recent recording of a webinar with Spend Matters Peter Smith, “Unavoidable Supply Chain Risk: How to Prevent Avoidable Risk & Mitigate the Unavoidable”.