Posts tagged "supply chain risk management"

The Menacing Task of Managing Supplier Capacity Risks

July 10, 2018 Posted by Supply Chain Risk Management, Supply Chain Risk Mitigation 0 thoughts on “The Menacing Task of Managing Supplier Capacity Risks”
Author: Jennifer Baljko

uphill-battleThere are a few things supply chain professionals dread. Like, that urgent call from a distributor about longer lead times for a critical part or talk that a third-tier supplier is filing bankruptcy or having to scramble for alternative sources of supply when a flood wipes out an important supplier factory.

It’s hard enough managing supply chain complexity on a good day. Add the ominous task of mitigating supplier capacity risks, and you could have a full-on nervous-making scene on your hands.

But, it deserves your attention. As Resilinc’s CEO Bindiya Vakil recently blogged, no company is immune to this risk. Companies the world over–and even of the likes of supply chain wonderhouses such as Apple Inc.–have been victims of supplier capacity shortfalls and part delivery interruptions at one time or another.

Additionally, a supply and demand mismatch in the aftermath of the Great Recession is causing headaches as well. Despite a pick up in demand, manufacturing capacity, which was cut in many sectors during the economic downslide, has not ramped up sufficiently. Many supply chain partners are either taking a wait-and-see approach to adding more capacity or have to contend with labor, regulatory or capital constraints. And, that’s adding significant pressure to the source, buy and make converations supply chain professionals are having today with suppliers.

Mapping Supply Chain Risks

While eliminating supplier capacity risks altogether throughout the entire end-to-end supply chain could be hard, if not impossible, there are ways to curtail their impact when then occur.

One key way is to define and measure supplier capacity risks. Having a tool or service that identifies supplier vulernabilities and proactively provides supply chain visibility to supplier practices and processes could give companies insights into existing and potential risks and lessen the impact of a disruption, Resilinc’s CTO and Co-founder Sumit Vakil pointed out in a recent webcast with Supply & Demand Chain Executive.

Additionally, companies that can identify challenges and expected benefits from developing and implementing a supplier capacity management solution will fare better than competitors in the wake of a disaster or crisis situation. Capacity management planning, for instance, helps companies address extreme product demand upswings, recover quicker when there is a supply chain disruption and optimize the market window for short-lifecycle products.

Another important step is to integrate supplier capacity management into their supply chain risk management strategy since they are so closely related. Companies that have a centralized repository of supply chain data, map multiple tiers of suppliers and have sense-and-respond capabilities will be able to assess capacity issues quicker, lower risks associated with those issues and ensure business and supply continuity.

By taking a few of these measures, you can start turning a menace into meaningful risk mitigation plan.

Has supplier capacity risk management got you thinking about what-if sourcing and supply chain planning scenarios? Not sure where to start?

Resilinc’s CTO and Co-founder Sumit Vakil will offer tips for creating an intelligence-driven, proactive approach to long-term supply assurance at this month’s Global Supply Chain Resiliency Council session.

Click below to register for the February 25, 2015 event at the Hyatt Regency Santa Clara in Santa Clara, Calif.

Where Are You in Your SCRM Journey?

March 11, 2016 Posted by Supply Chain Resiliency, Supply Chain Risk Management, Supply Chain Visibility 0 thoughts on “Where Are You in Your SCRM Journey?”

Author: Neil Shenoi

Across companies and industries, there is a growing awareness of the importance of supply chain risk management and resiliency programs. However, establishing an enterprise-wide supply chain risk management and resiliency program within your company doesn’t happen overnight, nor should it. It’s a multi-pronged process unique to each company, and each company is at a different stage of awareness, preparation, implementation, adaptation and maturation.

On the second day of the recent annual Global Supply Chain Resiliency Council event, we held a live poll at the conclusion of our customer training sessions to gauge where attendees were in their respective SCRM and resiliency journeys. The supply chain practitioners in attendance represent some of the largest companies with the most extensive global supply chains. As such, this post provides our poll’s findings to give you a better sense of where other major companies are in their SCRM journeys, and as to why they choose to pursue supply chain resiliency.


You will see that companies of all sizes, regardless of industry, can fall along a “resiliency spectrum”. While some are well into implementing and maturating their supply chain risk management and resiliency programs, others are still gaining awareness and planning their processes.


Major supply chain disruption events, a.k.a black swan events, can take a tremendous toll on business continuity and revenue, affecting some companies and industries more than others. When we published the whitepaper "Tianjin Explosions Global Supply Chain Impact: It's Worse than You Think",  we predicted that the crisis was, as the title suggests, worse than you would think. As the poll data suggests, the Tianjin explosions truly did have a far-reaching, rippling impact across industries.


Black swan events are unpredictable and can take a major toll on an enterprise. Having a formal Crisis Management program gives companies a significant competitive advantage when confronted with unexpected crises. As the poll indicates, Crisis Management programs are growing more common among enterprises with complex multi-tier supply chains. Given that 40% of the polled attendees either did not have a formal Crisis Management program or have non-centralized Crisis Management processes, it is fair to assume that companies that have implemented a cohesive Crisis Management program are better suited to respond and mitigate major supply chain disruptions than those that are not fully prepared.


It is important for SCM departments to identify their weak spots and figure out how they can become more resilient in the coming year. Nearly one third of the polled attendees recognized that governance, or the structures and processes by which supply chain constituents share power, can always have room for improvement and lubrication. One fifth wanted to bolster their Crisis Management programs to be resilient in the face of unexpected crises. About one sixth of the attendees want to address their business continuity planning. Nevertheless, risk mitigation appears to be the most common arena for improvement among companies across industries.


Some companies’ SCRM programs are driven from the top-down, while others are driven from the SCM upwards – the motivations to manage risk and become resilient are as varied as risk itself.

Learn More About SCRM and Supply Chain Resiliency

As the global supply chain risk terrain continues to evolve, companies across all industries realize they need to adapt. Although addressing and preparing for the encompassing scope of supply chain risk may be intimidating, waiting for risks to manifest and maintaining a reactive stance towards the supply chain risk can be far more damaging to a company’s revenue and brand.

For those who are unfamiliar with Resiliency, we highly encourage that you download "The Ultimate Guide to Supply Chain Resiliency". In this document, we provide supply chain risk management practitioners with concrete suggestions and guidance on how to create, roll-out, and institutionalize a global supply chain resiliency program (SCRP). The premise of this guide is that there is an unserved need for information on the topic of building and managing a SCRP that adequately addresses the crucial initial phase of building the business case, establishing strategic alignment, and securing executive sponsorship.

Supply Chain Risk Management & Supply Chain Resilience: Is There a Difference?

March 3, 2016 Posted by Supply Chain Event Monitoring, Supply Chain Resiliency, Supply Chain Risk Management 0 thoughts on “Supply Chain Risk Management & Supply Chain Resilience: Is There a Difference?”

Author: Wayne Caccamo

half_full_half_empty.pngI hear the terms supply change risk management (SCRM) and supply chain resilience used interchangeably by industry practitioners, stakeholders, solution providers, and industry analysts alike. So, are we essentially talking about the same thing or do we invoke one term over the other in certain circumstances to convey something different?

For all practical purposes, both terms describe the same business discipline and process and, as such, cover the same ground when you break down the concepts into its various components. However, the message that they each evoke is very different. They both describe the same “glass”, but one describes the glass as half-full (resilience) and the other half-empty (SCRM).

While risk is something you want to minimize, resilience is something you want to maximize. Risk is a threat, while resilience is an opportunity. For example, in terms of value propositions, the messages that flow easily from a discussion of SCRM are around cost and disruption avoidance, vulnerability identification and remediation, and other operational and tactical concerns. On the other hand, supply chain resiliency connects more easily with strategic themes like competitive advantage, market share, and ultimately brand and shareholder value.

For example, companies that recover faster from a supply chain disruption event through early detection and crisis response preparation, or avoid its impact altogether as a result of proactive planning, can gain a time-to-market and market share advantage over competitors that depend on the same suppliers and components to ship product. Studies have shown that the loss in market share and shareholder value from supply disruption events can take a decade to recover from, not to mention the brand/reputation impact of having to delay shipment.

Both the SCRM and resilience value propositions are real and compelling and relevant to the growth of SCRM/Resilience as a critical business discipline and function moving forward. One resonates with sourcing and supply chain operations professionals, while the other piques the interest of the C-suite. The discipline of SCRM/Resilience will reach escape velocity when the operations folks can drive the C-level messages up the chain and the C-suite can drive “buy in” from the top down with a viable operational improvement message.

So while the strategies and tactics to manage risk and achieve resilience may be the same (e.g. qualify additional/alternate sources for high revenue-at-risk components; improve supplier collaboration and planning; design products and supply networks for resiliency, etc.), the benefits may be perceived and valued differently. Let’s continue to use both terms because they both matter, but let’s also be aware of their nuances and evoke the term that is likely resonate most with whomever you are talking to.

Download the Ultimate Guide to Supply Chain Resiliency Program Success to learn tips on how to sell your SCRM/Resilience initiative to any audience.

Global Supply Chain Resiliency Council Names 2016 Award Winners

February 29, 2016 Posted by Supply Chain Event Monitoring, Supply Chain Resiliency, Supply Chain Risk Management 0 thoughts on “Global Supply Chain Resiliency Council Names 2016 Award Winners”

Author: Neil Shenoi

GSCRC_Logo.jpgThe winners of awards for supply chain resilience and risk management excellence were honored by the Global Supply Chain Resiliency Council at its annual event which took place on Wednesday, February 24th, 2016, at the Sheraton Palo Alto, in Palo Alto, California. This year’s event attracted over 100 attendees from all over the country. There are now almost 1,100 general members of the Resiliency Council.

Its goal is to bring together supply chain risk management (SCRM) and resiliency practitioners with industry experts and thought leaders to advance the professional discipline through opportunities to collaborate, develop and share best practices, and be recognized for innovation and leadership. The awards program is one of the key elements of the Resiliency Council’s strategy to accelerate enterprise adoption of supply chain risk management and resiliency as a professional discipline and mission-critical business process.

“As evidenced by the over 100% year-over-year growth in event participation and general membership, the Resiliency Council has emerged quickly as the leading SCRM professional community,” said Bill Hurles, Executive Director. “We continue to believe that recognition of companies and individuals within that community will be critical to the institutionalization of resiliency concepts and business practices within the enterprise.”

The awards program is designed to recognize organizations and individuals that serve as role models and leaders in driving supply chain resiliency strategy success within their company, supply chain network, and across industries. The awards committee considered nominations from its general membership of over 1000 members worldwide comprised of OEMs/brand owners, suppliers, and experts from the Council’s technical advisor, Resilinc. The six award categories and winners announced were as follows:



This award was based on a number of criteria and input related to customer collaboration practices and culture, technology adoption, and overall breadth and maturity-level of processes in place, as well as the organization's commitment to institutionalize best practices and demonstrate innovation and continuous improvement over time. Vonnie French, vice president supply chain operations, Rachel Yabut, senior project manager, and Dmitriy Krichevskiy, risk manager, accepted the award on behalf of Palo Alto Networks.



This award goes to the company that has done the most to advance the SCRM and resiliency discipline both within their company and across their industry. The industry leader is early to adopt advanced SCRM and resiliency processes and technology and is closely watched by its peers. As such, the company serves as a role model for industry peers via its commitment to institutionalizing SCRM processes and best practices and track record of achieving benefits and results. The industry leader also generously shares experiences and lessons learned with peers at industry events. Patricia Turney, executive director of supply chain, Rod MacLea, director of supply chain, and Martin VanTrieste, senior vice president of quality, accepted the award on behalf of Amgen.



This award recognizes the company that is most advanced in terms of technology adoption, the use of technology to achieve customer-supplier collaboration, and the overall maturity-level of technology-enabled processes and best practices in place. In addition, the committee considered organizational culture as it relates to technology adoption and risk taking, as well as the organization’s commitment to leveraging innovation and driving continuous improvement over time. Steve Darendinger, vice president supply chain, and Mark Graham, director supply chain, and Ashu Gupta, senior manager, risk & analytics, accepted the award on behalf of the company.



This award recognizes the educator that best supports further development of university-level education programs focusing on supply chain operations and resiliency and is best preparing the next generation of supply chain risk management superstars with hands-on training using real life scenarios, tools and case studies. In addition to talent development, this award also recognizes educators that play an important role in cross-pollinating ideas and strategies between academia and the business community. Yossi Sheffi is the Elisha Gray II Professor of Engineering Systems, MIT and the author of several books including the recently published The Power of Resilience.



This award recognizes individual success in championing the importance of supply chain resiliency within one’s company and being a change agent. The individual’s efforts to advance the profession–by sharing best practices, collaborating with key supply chain partners on successes and lessons learned, via active participation in industry events and media communication opportunities – was also a consideration in the selection process. Jamie Love is vice president of global operations at Sigma Aldrich.



This award recognizes the supply chain partner that collaborates most effectively with customers for mutual benefit. The Collaborator of the year is proactive, responsive, transparent, willing to share appropriate information, and committed to working with its customers to achieve multi-enterprise supply chain performance excellence, KC Wong, principal field applications engineer, and Clifford Bast, senior global manager, accepted the award on behalf of HGST.

About the Global Supply Chain Resiliency Council


The Global Supply Chain Resiliency Council is a professional community and network for supply chain risk management practitioners, leaders, and stakeholders. The principal goals of the Council are to (1) bring together SCRM and resiliency practitioners with luminaries  and thought leaders to advance the professional discipline through opportunities to collaborate, share best practices, and be recognized for innovation and leadership and (2) elevate the profile of supply chain risk management and resiliency challenges and opportunities vis-a-vis the C-level strategic agenda. The Global Supply Chain Resiliency Council has over 1,000 general members and has an open membership policy. Interested individuals within the business community and academia that wish to become a member of the community can do so by joining the LinkedIn discussion group by the same name.

Join the #Resiliency2016 Conversation on Twitter!

February 26, 2016 Posted by Supply Chain Event Monitoring, Supply Chain Resiliency, Supply Chain Risk Management 0 thoughts on “Join the #Resiliency2016 Conversation on Twitter!”

Author: Neil Shenoi

Yesterday marked the conclusion of the 2nd annual Global Supply Chain Resiliency Council conference and awards event. With over one hundred supply chain practitioners in attendance from around the world, the amount of collaborative knowledge and best practices shared made it an event for the books (at least, within the supply chain community!). Some of the most brilliant minds in the supply chain risk space, from IBM's Lou Ferretti to MIT's Yossi Sheffi to Amgen's Patricia Turney, presented their takes on global supply chain risk and resiliency. As the event was held over two days, the hashtag #Resiliency2016 emerged early on during the conference and gained momentum in the Twitterverse.

The great thing about Twitter is that digestible nuggets of information and wisdom can be instantly broadcasted at the touch of a button and filtered by utilizing hashtags. As such, many attendees (including myself: @resilient_neil) took to live-tweeting #Resiliency2016 to share the loads of valuable information they gathered from the event's sessions to the online supply chain community. As only a portion of the tweets spurned by the event are presented below, be sure to check out the #Resiliency2016 hashtag to get the full scoop.

Supply Chain Resiliency Management (SCrM) is a growing area of interest and study. Yet it can be daunting to sift through the swaths of information to find relevant tidbits on social media sites like Twitter. While the #Resiliency2016 hashtag was born out of the recent GSCRC event, let's take it a step further. We invite the supply chain community at large to use this hashtag, not only to bolster discourse, but gain visibility to target audiences. By keeping #Resiliency 2016 alive and trending, we can keep the online conversation surrounding supply chain risk and resilience alive in an easy-to-find nook in the Twitterverse. Don't get lost in the flurry, hop on #Resiliency2016!








Taiwan Earthquake Supply Chain Impact Analysis White Paper

February 17, 2016 Posted by Supply Chain Event Monitoring, Supply Chain Resiliency, Supply Chain Risk Management 0 thoughts on “Taiwan Earthquake Supply Chain Impact Analysis White Paper”

Author: Neil Shenoi

taiwan_site_press_release.pngAround 4 a.m. on February 6th, a 6.4 magnitude earthquake rattled southern Taiwan at the start of Lunar New Year, the island’s largest nationwide holiday. With a current death toll of 114, it is the deadliest earthquake to hit the island since the “921 Earthquake” of 1999. Taiwan is the world’s leading producer of semiconductors and integrated circuits (IC), and high tech companies are wondering how this earthquake could affect the global electronics supply chain. While initial reports of the quake emphasized minimal damage and interruption to the major chip foundries concentrated in southern Taiwan, there are less apparent global supply chain impacts that will likely be felt in the near future.

Resilinc has released a white paper analyzing the recent earthquake and the forseeable supply chain impacts. This analysis is organized into five parts:

  • Summary of the earthquake event
  • Review the global importance of the Taiwanese IC industry
  • Examination of the confirmed impacts to chip manufacturers on the island
  • Discussion of interruption risk factors associated with modern chip fabrication plants
  • Recommendations on how to mitigate impact to supply chains for future similar events

The report discusses the specific and confirmed impact to major semi-conductor, electronics components and assembly service providers including UMC, Innolux, and ChipMOS, and warns that there are many other smaller manufacturing operations in the affected area that have not released a public impact statement.

“Many of these companies located in the Southern Taiwan Science Park in both Tainan and Kaohsiung are dwarfed by these huge chip manufacturers,” said Neil Shenoi, EventWatch® Program Analyst at Resilinc. “That does not mean they are any less important to IC supply continuity from Taiwan. Companies should monitor Taiwan/Tainan based companies in the coming weeks because it is not always the large players that are at risk, but smaller sub-tier partners who might supply a Tier-1.”

The analysis concludes with several specific recommendations for addressing the lingering potential risks associated with the Taiwan quake as well as steps that should be taken now to avoid impact from future similar events. For example, high tech OEMS and brands should assume their competitors, as well as other companies from other industries, are vying for available inventory, capacity and freight bandwidth. Companies should also conduct mapping exercises to determine which sites, products, parts, and materials are derived from southern Taiwan and which may be impacted by the quake and then monitor and collaborate with suppliers to mitigate evolving risks.

Finally, Resilinc implores brands to take steps to proactively mitigate future vulnerabilities that will be exposed by similar incidents by investing in supply chain risk management (SCRM) and resiliency strategies and program initiatives. This includes people processes and technologies for (1) proactive risk identification, quantification and prioritization and (2) rapid crisis detection and response via 24x7 global event monitoring and analysis services.

“While this earthquake paled in comparison to the 921 Earthquake of 1999, businesses should not underestimate its looming supply chain impact,” said Shenoi.  “Though bigger companies may have a higher tolerance for such unplanned disasters and supply chain disruptions, younger and smaller downstream companies are more vulnerable and are urged to reap the benefits of investing in SCRM and resiliency strategies and programs that ensure proactive risk mitigation, crises preparation, and rapid response. It’s only a matter of time to tell how this earthquake will affect the global supply chain and for how long its ripple effect will be felt downstream.”

Resilinc Publishes 2015 EventWatch® Supply Chain Disruption Annual Report

February 3, 2016 Posted by Supply Chain Event Monitoring, Supply Chain Resiliency, Supply Chain Risk Management 0 thoughts on “Resilinc Publishes 2015 EventWatch® Supply Chain Disruption Annual Report”

Author: Neil Shenoi

AR_BLOG_PIC.jpgResilinc has published its 2015 supply chain events annual report which summarizes and analyzes nearly 750 unique supply chain alerts and notifications generated by the EventWatch® 24x7 global event monitoring, alert, and analysis service in 2015. 2015 saw a high-level of disruptive supply chain event activity as several significant events occurred throughout the year, from the major chemical explosions at the Port of Tianjin to numerous chart-topping typhoons in the critical Asia-Pacific region and the arrival of El Nino in the latter half of the year. Evident in the report, numerous geo-political, macro-economic, social/technology and environmental trends continue to impact global supply chain continuity.

The annual report analyzes global supply chain incidents and trends according to risk type, industry, geography, severity, and seasonality, comparing 2015 data in these categories with 2013 and 2014. The report also includes the EventWatch Top 5™  Supply Chain Events for 2015, a key takeaway for supply chain practitioners. In this post, we provide an overview of the report; however, for a closer look at our data graphs, trend charts and analyses, check out the full EventWatch Annual Report.

Top 5 Supply Chain Events of 2015

A key takeaway from the annual report is the EventWatch Top 5™ supply chain events of 2015. The top 5 events ranking is driven by the estimated aggregate revenue impact from the highest-impact events reported by EventWatch throughout the year. The estimated revenue impact is calculated by leveraging Resilinc’s database of over 80,000 suppliers and approximately 1.5 million parts which are tracked by Resilinc’s cloud supplier intelligence repository.

The top 5 supply chain disruption events are listed below. Included in the annual report are estimates of the top 5 events’ revenue impact, average site time-to-recovery (TTR), and number of sites affected:

  1. Typhoon Soudelor – Taiwan, China, Philippines
  2. Typhoon Dujuan - Taiwan, China, and the Philippines
  3. Chemical explosions at the Port of Tianjin, China
  4. Typhoon Mujigae - China, Vietnam, Philippines
  5. Typhoon Goni - Taiwan, China, Japan, Korea, Philippines.

Key Report Highlights

  • Event Type: For a third year in a row, factory fires/explosions were the most commonly reported supply chain disruption event and represented 17% of total EventWatch bulletins in 2015.
  • Industry: From 2013 to 2015, the automotive industry was the most frequently impacted industry, but a narrow margin over the reported incidents that impacted the high tech and life sciences industries.
  • Geography: In 2015, the majority of supply chain events reported by EventWatch emanated from Asia, followed closely by North America. However, in 2014, North America produced the lion’s share of supply chain events reported by EventWatch.
  • Seasonality: In 2015, the three most impactful months to global supply chains were December, August, and September/March (tied). December was characterized by an unusual increase in factory fires/explosions, the impact of El Nino (which peaks during winter time), and increased merger and acquisition activity toward the end of the calendar year. August had a rare spike in activity due to the devastating Tianjin explosions and their subsequent disruptions.
  • Event Severity: Medium potential for disruption events were most common in 2015 and comprised 52% of all EventWatch bulletins, consistent with current supply chain impact research that suggests smaller, more frequent disruptions can be more costly in aggregate than those caused by high-impact, infrequent events. In 2015, medium and low-impact events represented around 90% of Eventwatch bulletins.

While these are only highlights of the report, please check out the full report for trends charts and analyses, data graphs, and a deeper discussion of supply chain risk in 2015.

About the EventWatch Annual Report

For those unfamiliar, the EventWatch Annual Report aggregates, analyzes, and summarizes supply chain event information generated by the EventWatch service. The EventWatch Annual Report helps supply chain risk practitioners, analysts, and executive stakeholders understand global supply chain risk trends through various lenses, answering 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? What months see the most supply chain disruptions?

Compared to other “Top 10 Supply Chain Event” lists, the Eventwatch Annual Report is uniquely driven by data and focuses on upstream impacts to specific brands, suppliers, sites, and parts, based on calculated value-at-risk. Resilinc’s rapidly expanding supplier repository contains risk information associated with over 80,000 suppliers and 1.5 million parts, and already on-boarded suppliers represent up to 90% of a company’s upstream supply chain. This is in contrast with other publications that provide more qualitative assessments based typically on estimates of damage to public or shared infrastructure, which invariably steers the focus toward downstream/logistics-related disruptions.

Cobalt: The New Looming Brand Risk

January 23, 2016 Posted by Conflict minerals compliance, Supply Chain Risk Management, Supply Chain Visibility 0 thoughts on “Cobalt: The New Looming Brand Risk”

Author: Neil Shenoi

lithium_ion.jpgMedia outlets are abuzz following a joint investigation report released by Amnesty International and African Resource Watch (Afrewatch) on January 18th  titled “This is What We Die For: Human Rights Abuses in the Democratic Republic of Congo Power the Global Trade in Cobalt”. The report investigated human rights violations in the cobalt supply chain and rebuked several big brands, like Apple and Samsung, for failing to ensure that their products do not contain cobalt extracted by children in the DRC. In this post, we discuss the regulation of cobalt (or lack thereof), examine the report’s findings and discuss the potential supply chain brand risks associated with DRC-originated cobalt.

Cobalt: Not Technically a "Conflict Mineral"

Cobalt is utilized in myriad products, particularly consumer electronics, and is an essential element in lithium-ion batteries. High demand for smartphones and the rapidly growing electric automotive industry have also stimulated demand for the metal. However, there is no regulation of the global cobalt market, which has resulted in non-governmental agencies like Amnesty International conducting comprehensive investigations to shed light on child labor in the cobalt supply chain.

Currently, cobalt does not fall under existing “conflict minerals” rules in the USA as stipulated by the Dodd-Frank Act passed by Congress. The rules require that companies disclose the use of “conflict minerals” in their products. These include tantalum, tin, tungsten, and gold – also referred to as “3TG”. The elements are mined in the Democratic Republic of Congo (DRC) and used in a variety of components that go into high-tech products and automobiles. The intent of the Rule is to reduce a significant source of funding for armed groups that are committing human rights abuses, including the exploitation of child labor, and contributing to the conflict in the eastern DRC.

As it is, ongoing litigation concerning key reporting and disclosure requirements has made conflict mineral compliance and 3TG transparency an industry-wide challenge.

So where does cobalt fit into all this?

It is important to note that 50% of the world’s cobalt supply is sourced from the DRC, but since it is not included in conflict minerals legislation, companies have no legal obligation to disclose their use of cobalt from the DRC.

When it comes to sourcing an industrially significant yet now controversial resource like cobalt, child labor and slave labor is a tremendous brand risk, and companies can be unwittingly implicated. Due to complex supply chains and a lack of multi-tier visibility, companies may inadvertently turn a blind eye to conditions in the supply chain until unpleasant realities confront them.

The Report's Findings

In the report, Amnesty International detailed the unregulated, dangerous, and unhealthy conditions at the cobalt mines in the DRC. The investigation found that children as young as 7 would work in “artisanal” mines for up to 24 hours at a time without the most basic of protective equipment, such as gloves, work clothes, or facemasks to shield them from lung or skin disease. According to UNICEF, approximately 40,000 children worked in mines across the southern DRC in 2014, most of whom would work beyond twelve hours a day, carrying heavy loads to earn a pay between one to two dollars a day.

The report explains how traders buy cobalt from areas in the DRC where child labor is prevalent and sell it to Congo Dongfang Mining (CDM), a wholly owned subsidiary of Chinese mineral behemoth Zhejiang Huayou Cobalt Ltd. (Huayou Cobalt). Using investor documents, Amnesty International discovered that Huayou and its subsidiary CDM process the cobalt before selling it to three battery component manufacturers: Ningbo Shanshan and Tianjin Bamo in China, and L&F Materials in South Korea. These three component manufacturers (that bought more than $90 million worth of Cobalt from Huayou Cobalt in 2013) then sell the processed cobalt to battery makers who supposedly supply big name technology and car companies. It’s these three manufacturers that serve as the link between a long litany of consumer brands and child mining in the Democratic Republic of Congo.

Brands Now Tasked to React

Asserting that numerous big brands have failed to do their due diligence and address human rights risks in their supply chain, the report noted 16 consumer brands that are either direct or indirect customers of the three aforementioned battery component manufacturers. Among these listed brands are big names like Apple, LG, Daimler, Microsoft, HP, Samsung, and Lenovo, to name a few.

In efforts to quell the imminent consumer and non-governmental scrutiny generated by the report, most of these brands have already released public statements addressing the allegations of transparency negligence. According to the report, Apple did not confirm or deny whether it receives components from Huayou Cobalt, but said that cobalt is among the materials for which it is conducting due diligence. Microsoft is quoted as stating, “we have not traced the cobalt used in Microsoft products through our supply chain to the smelter level due to the complexity and resources required,” but iterated that “Microsoft is fully committed to the responsible sourcing of raw materials used in [our] products” and “specifically engaged with organizations that are focused on addressing human rights issues in mining.”

A Proactive Approach

Seeing these brands frantically respond to Amnesty International’s report is understandable, and in a way, they’ve been caught in a tricky situation trying to protect their reputations. Since litigation has not required these big names to disclose information regarding their cobalt suppliers, there had yet to be a significant impetus for these companies to look further into their supply chains and verify the conditions at their cobalt suppliers. A lack of supply chain visibility and transparency effectively put them in a reactive position where they’re forced to reckon with the publicity after the fact, rather than take proactive measures to prevent such brand risks.

Given the ubiquity of cobalt in consumer goods, this report can be taken as a wake-up and a possible harbinger for future legislation. It demonstrates how important multi-tier visibility is in identifying potentially harmful cogs throughout their supply chains. Brand risk management should be taken as seriously as general supply chain risk management because, in many regards, reputation is everything in a fiercely competitive global marketplace. Companies shouldn’t have to wait for legislation to inform their corporate social responsibility (CSR) perspective, but rather, should look ahead. Amnesty International’s report not only reminds companies of the importance of up-to-date CSR reporting, but also the importance of developing deeper relationships with their suppliers. Utilizing supply chain network mapping services help companies develop a more transparent and manageable supply chain and avoid potential brand risks.

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