Early in the pandemic, we saw a major increase in the number of factory fires as reported by Resilinc’s EventWatchAI risk monitoring platform. While some of the increase was due to growth in our customer base and the number of suppliers monitored (more factories = more potential for factory fires) the trend line was rising at a much faster clip than business metrics would account for.
Overwhelmingly the increase was in large part driven by the pandemic’s impacts on factory operations, especially labor and regulatory issues. While lockdowns kept skilled workers at home and distancing precautions forced factories to operate with fewer staff, many factories were also retooling to make new products, such as chemical-based hand sanitizers. The skill deficits and rapid expansion into new products led to gaps in safety protocols, mishandling of chemicals, deferring maintenance on machinery and other fire hazards.
But as the rate of factory fires continued to increase—growing 129% year on year in 2021—Resilinc decided a deeper analysis was needed to give customers and others better understanding of fire risks in supply chains and some guidance on mitigating those risks. The result is the recently published report: Spotlight on Factory Fires.
By analyzing 305 factory fire events that occurred globally in 2020 and 2021, key data points and findings were arrived at. Among them:
- 59% of fires analyzed were caused by faulty equipment and machinery, while 18% of fires were associated with flammable liquids and gases. Issues with electrical lighting and equipment caused 10% of fires, human error, 4%. The least frequent causes: issues with hot work/welding, 3%; combustible dust, 3%; furnaces, 1%; and arson/deliberate fires, 1%.
- A small number of fires significantly exacerbated the semiconductor shortage. An October 2020 fire at a Japanese chip plant (with no fire suppression system) took production offline for six months and led to 20-fold price increases. This was followed by the March 2021 Renesas fire, also in Japan, that faced a four-month time to recovery.
- Indirect results of the pandemic and quarantine policies played the driving role: causing shortages of skilled workers and associated lapses in fire safety vigilance. Component shortages and extreme heat also played a role.
- Improperly installed and maintained equipment figured in many fires, a factor exacerbated by workforce issues that reduced staffing and training.
- Employees charged with handling flammable liquids often do not know the safety protocols for the materials; this results in hazards such as placing these materials too close to ignition sources. Inadequate vapor removal is a related factor.
Mitigating fire risks requires a four-pronged approach to supply chain risk management:
- Multi-tier mapping.
- Supplier risk assessment.
- Risk monitoring.
- Collaborating with suppliers to identify and mitigate risks.
The case of the October 2020 fire in Japan mentioned above highlights the return on investment from proactive fire risk mitigations. If the lack of a fire suppression system had been flagged before the fire, customers could have collaborated with the firm to offer incentives to install fire sprinklers. The cost to install a fire suppression system would have dwarfed the eventual losses incurred by the firm’s customers because of the fire.
Had the supplier firm declined to mitigate its fire risks, customers could have qualified additional suppliers and shifted business from the risk-flagged supplier to others. These kinds of risks assessments and proactive mitigations are only possible with a comprehensive, multi-tier supply chain mapping effort and supply chain risk management program.
