EventWatch 2015 Annual Report

EventWatch 2015 Annual Report

About the EventWatch Annual Report™

The EventWatch Annual Report aggregates, analyzes, and summarizes supply chain event information generated by the EventWatch® 24x7 global event monitoring, alert, and analysis service. EventWatch is the leading service of its kind and used by global corporations to improve their event responsiveness and crises preparedness. The EventWatch Annual Report is used by supply chain risk practitioners, analysts and executive stakeholders to understand global supply chain risk trends through a variety of lenses. It answers questions like: Which event types are most common or becoming more common? How does my industry compare to other industries in terms of the number of events experienced? Which regions are impacted the most? And, what months see the most incidents?

What makes the EventWatch Annual Report different from “Top 10 Supply Chain Event” lists and other year-end reports and commentary is that it is driven by data and focuses on impacts to specific brands, suppliers, sites, and parts, based on a calculation of value-at-risk. To accomplish this it leverages the Resilinc supplier repository which includes risk information associated with over 80,000 supplier sites – representing over 1.5 million parts.  Already on-boarded suppliers and sites represent up to 90% of a company’s upstream supply chain. This contrasts with other publications which provide a more qualitative assessment, based typically on estimates of damage to public or shared infrastructure; this tends to bias the focus toward downstream/logistics-related disruptions.

The Supply Chain Events Year in Review

A number of geo-political, macro-economic, social/technology and environmental trends continue to impact supply chain continuity. In 2015, the total number of supply chain bulletins (i.e. “alerts” and “notifications”) reported by the EventWatch 24×7 global event monitoring, alert, and analysis service more than doubled compared to 2014, and has averaged over two bulletins a day during the one year period. In 2015, 741 supply chain event bulletins were published, compared to 339 in 2014, a 118% increase.

2015 saw a high level of disruptive supply chain activity as several significant events occurred throughout the year, from the major explosions at the Port of Tianjin last summer to numerous chart-topping typhoons in the critical Asia-Pacific region. The arrival of El Nino in the latter half of 2015 spiked erratic and disruptive weather events which, in turn, impacted global supply chains. While there were no “severe” disruptions on par with the 2011 Tohoku Earthquake/Tsunami or the 2011 Thailand floods, there was a notable increase in medium and low potential disruption events over the prior year. As per last year’s report, companies often over-emphasize preparing for the highest impact risks and crisis scenarios without considering that smaller, more frequent disruptions could have a larger impact on business revenue.

The chart below provides a Top 3 summary breakdown of all alerts and notifications by event type, industry, geography, and disruption potential rating for 2014 and 2015 for comparison purposes. More detailed charts on each of these categories follow.

In comparing 2015 event data with previous year data for trend-identification purposes, it is important to note that the significant increase in the total number of total and sub-category events reported via EventWatch bulletins can be attributed to (1) more events occurring and (2) the Resilinc EventWatch team processing and sharing information on a larger number of events1. Moreover, Resilinc estimates that up to 70% of the increase in supply chain activity can be explained by the second factor. As a result, the data breakdowns provided in this report will include not only the absolute number of events, but percentages of totals in order to normalize the data across years. This will enable us to draw trend conclusions on a relative basis (e.g. Factory fires accounted to 13% of supply chain events in 2014 compared to 17% in 2015).

It should be noted that EventWatch alerts and notifications are not always confirmations of a specified disruption, but more accurately confirmations of events that typically precipitate supply chain disruptions. EventWatch email bulletins are categorized into three types: EventWatch Notifications provide preliminary unverified information on potential supply chain disruptions that Resilinc is currently monitoring and investigating; EventWatch Alerts inform subscribers of potential indirect and direct impact from events that may require customer action; and EventWatch Event Impact Notifications identify specifically impacted suppliers, sites, products, mapped parts, geographic locations, and the potential revenue impact for a given event, to which urgent action is recommended.

1In 2015, the significantly larger number of event alerts and notifications reported is partially explained more specifically by (1) expanded staffing of the event monitoring team, (2) revisions to the report publishing criteria and process, (3) the rapid expansion of the supplier database, and (4) additional event types being tracked for the first time in 2015 including cyber-attacks, management change/reorganization/company split, regulatory changes, and forest fires.

Top 5 Most Significant Supply Chain Events

 

The Top 5 most significant events ranking below is based on the estimated revenue impact to Resilinc customers. The table below provides additional potential impact data including average site time to recovery (TTR) and the number of supplier sites impacted. Extreme weather events, specifically typhoons, dominated the top 5 most significant supply chain events list. Of the Top 5, the Tianjin explosions was the only notable event not precipitated by natural causes. All 5 of our most significant events occurred in the Asia-Pacific region.

Number of Supply Chain Event Bulletins by Event Type

For a third year in a row, factory fires/explosions were the most commonly reported supply chain event and represented 17% of EventWatch bulletins in 2015. In 2015, merger & acquisition activity rose from the 4th most common event to the 2nd most common event, from 10% of bulletins in 2014 to 14% in 2015. Labor strikes/disruptions dropped from 2nd to the 3rd most common supply chain event but represented 13% of total notifications in both 2014 and 2015. Typhoon/Hurricane/Cyclone category dropped in ranking from 3rd to 4th despite the potential impact of El Nino.

As per the table above, the chart below illustrates the top 5 event types each year in terms of percentage of total EventWatch bulletins. Note that the top 5 supply chain disruptions have accounted for approximately 60% of all EventWatch bulletins.

Several new event types have been added to the EventWatch bulletin repertoire. The additions include cyber-attacks, management change/reorganization, regulatory change, forest fire, tsunami, environmental pollution, and company split.

Number of Supply Chain Event Bulletins by Industry

The top 3 industries for supply chain events in 2015 were automotive, life sciences, and high tech, respectively. For a third year in a row, the automotive industry was the most frequently impacted industry. Based on volume of notifications and alerts, high-tech dropped from the 2nd to the 3rd most impacted major industry, displaced by life sciences by a very small margin. In many instances, a particular event would impact multiple industries.

Number of Event Bulletins by Region

In 2015, the majority of supply chain events reported by EventWatch occurred in Asia, followed closely by North America and the rest of the world (RoW). In 2014, the lion’s share of supply chain events emanated from North America and RoW events ranked as a distant 4th. In 2015, however, RoW events increased significantly and jumped in rank from 4th to 3rd.

Number of Event Bulletins by Severity

As in 2014, medium potential for disruption events were the most common in 2015. Medium-level events shot up from 42% to 52% of EventWatch bulletins. The combined number of events rated severe and high in potential disruption was down from a combined 35% to a combined 9%. Low-rated events were up from 24% to 39% and jumped in rank from 3rd to 2nd.

The chart below is consistent with current supply chain impact research that suggests smaller, more frequent medium and low-level disruptions are more costly in aggregate than those caused by high-impact, infrequent events.

It is important to note that our severity thresholds have evolved as the scope of reported events has continued to expand. What may have qualified as a “severe” potential disruption impact event one year may be rated “high” the following year. Similarly, what may have been labeled a “non-impactful” event one year could be classified as a potentially low-disruption event. This likely affected the results in 2015 which show no events with a “severe” potential disruption impact and significantly fewer “high” potential disruption impact events.

Number of Event Bulletins by Month

Some seasonality in particular event types can be observed. For example, seasonal weather patterns can have a great influence on the occurrence of supply chain events. The impact of El Niño, which peaks during winter, can be seen in the particularly high number of bulletins sent in December. Another observed correlation is increased Merger & Acquisition activity near the end of the calendar year.

December also witnessed an unusual increase in factory fires/explosions. August had a rare spike in activity due to the devastating Tianjin explosions and its subsequent disruptions.

The chart below shows the number of event impact notifications sent per month. In 2014, EventWatch event impact notifications peaked during the summertime; in 2015, the latter half of the year saw a rapid climb in event impact notifications, particularly due to El Niño weather activity, a surge of factory fires, and an apparent increase of Merger & Acquisitions toward the end of the calendar year.

About Resilinc EventWatch®

Resilinc EventWatch® is a global supply chain event monitoring and analysis service providing email reports and cloud analytics personalized to your company with meaningful business impact insights from disruption events such as natural disasters, factory fires, and labor stoppages. To learn more about the EventWatch service, please click here.


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