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supply chain crisis


While U.S. port congestion and worker shortages have persisted for years, the continued ripple effect of the pandemic’s global supply chain disruption, coupled with the ecommerce boom and lack of retail inventory, has exacerbated the supply chain crunch to crisis levels. Throw in skyrocketing freight costs, container shortages, and the impending International Longshoremen Workers Union contract renewal and the outlook for short-term relief is well out of reach. Indeed, results from a recent benchmark survey from Descartes Datamyne indicate the supply chain crisis will continue well into 2022—tough news for those organizations without solid mitigation strategies in place.

MAJOR CONTRIBUTOR: The stuff economy

Multiple factors are contributing to the global supply chain challenges, but increased consumer demand for “stuff” is a major trigger. The pandemic has changed the economic fundamentals of consumer buying behavior, with Americans shifting away from experience-based spending (e.g., travel, events) towards stuff-based purchases focused on durable (e.g., furniture, exercise equipment) and nondurable (e.g., clothing, groceries) goods—and this buying trend shows no signs of slowing down.

According to U.S. import data, container import volume in November 2021 continued to pummel the supply chain: 34% higher volume than November 2019 and 12% greater than November 2020. In fact, only one other month in the prior two years (October 2020) had a higher container import volume. Transportation industry operators are operating at full capacity and are not expecting a decline in shipping demand from their customers well into 2022.

With TEU volume hovering between 2.4M and 2.6M TEUs monthly for the remainder of 2021 and likely continuing through 2022, capacity will be unable to keep pace with demand. The operational consequences of the global supply chain crisis—containers stacked in Asia, high container “rolling” rates, and unprecedented wait times for vessels at U.S. West Coast ports—are not going away any time soon.


For many retailers, stock levels are precariously low as supply chain woes continue. While manufacturing and distribution capacity declined, particularly in the Asia-Pacific region, consumer demand in the U.S. grew and retailers have been unable to replenish their shrinking inventory of finished goods. In fact, the inventory to sales ratio decreased by more than 30% since 2019, according to the U.S. Census Bureau.

Going forward, many retailers are deciding to hold more inventory as a hedge against greater supply chain uncertainty. As a result, retailers will be buying more than what they need in the short-term to build their stocks to larger acceptable levels. This strategy will continue to put more pressure on supply chains and logistics operations, even after the peak holiday season ends this year.

Like retailers, manufacturers are facing similar inventory challenges, from semiconductor chips for auto manufacturing to lithium-ion batteries for electric vehicles. In a recent fireside chat with investors, Hau Thai-Tang, the Chief Operations & Product Platform Officer at Ford Motor Co., noted that “what’s different about today versus prior years is that there’s no float or buffer in the inventory.” The pandemic-driven supply chain issues have “fundamentally changed the way we’re thinking about procurement and design,” shining a light on the shortcomings of the just-in-time inventory model for capital-intensive systems with long lead times and interdependencies on other industries, Thai-Tang said.

supply chain RESILIENCY: technology & data lead the way

Forward-thinking companies have recognized that the global supply chain crisis is more than a short-term problem, with the majority believing that bottlenecks could get worse over the next few years. So how are businesses coping with the supply chain crunch? Descartes’ benchmark survey examined the supply chain resiliency strategies of carriers, logistics providers, importers, and shippers from around the world to uncover how organizations are responding to the supply chain challenges.

The survey revealed that top-performing companies—logistics providers and importers alike—have pinpointed ways to navigate the chaos. Investment in technology is their primary strategy to keep the business moving forward in the face of ongoing and severe supply chain disruptions. Specifically, top performers favored global trade intelligence solutions to help them rapidly identify new suppliers, markets, customers, and trade lanes to optimize their existing supply chains.

The survey found that high-performing companies were investing in HTS and HS classification and landed cost calculation software to analyze the financial viability of new trade networks. It also found these companies were relying on denied party screening solutions to vet new trade chain partners, from suppliers and customers to logistics companies.

Investment in global trade data solutions enables international businesses to re-evaluate their supply chains rapidly and constantly, a process critical to minimizing delays and boosting resilience. In the current supply chain crisis, organizations that fail to adopt this strategy as best practice risk losing market share to more agile competitors.

looking ahead

The forward outlook is a good news/bad news story of economic and employment growth driving increased pressure on global supply chains. While the most recent employment numbers were shy of the Federal Reserve’s robust autumn predictions, the continued opening up of business will drive job growth and consumer spending, which will continue to exert pressure on global supply chains.

With the latest forecasts pointing to current supply chain bottlenecks persisting through 2022, companies involved in international trade must find ways to build supply chain resilience. One of the most effective strategies for retailers and other importers is to leverage global trade intelligence solutions. By expediting trade data analysis to determine the most expedient and cost-effective routes and modes of transport, global trade data solutions can help companies optimize global supply chains to build market differentiation, bolster customer satisfaction, and come out the other side of this crisis in good shape.

ever given

Lessons from the Ever Given for an Increasingly Turbulent Global Supply Chain

The Ever Given’s blockage of the Suez Canal, which accommodates 30% of the word’s daily container freight shipments, has been yet another reminder of how unforeseeable and remote events can dramatically disrupt one’s business. Although the canal’s blockage lasted only a few days, its effect on supply chains was global. The traffic jam it caused worsened Asia’s shipping container shortage, further delaying the export of consumer goods; spoiled countless goods sitting in transit; and temporarily exacerbated a global semiconductor shortage affecting countless manufacturing industries. Unsurprisingly, because the Suez Canal is a critical route between Europe and Asia, the hardest-hit businesses were those whose supply chains terminate in or pass through Europe.

Coming off the heels of a global pandemic, this latest disruption has many wondering how to shore up their supply chains to protect against the next unexpected event. Doing so, however, is an exhausting prospect—particularly as industries globalize, supply chains become more far-flung, and markets become more interconnected. Counterintuitively, the best way to bolster against unforeseen exterior events is not to plan for every event, but instead to take stock of what your business needs to survive. In the end, those plans that reflect and harmonize with a business’s needs are those most likely to offer protection during uncertain times.

I. Spend energy creating stability rather than predicting catastrophe.

Globalization-induced regional production specialization (for example, raw materials for semiconductors coming from Japan and Mexico and chips being made in the US and China) has increased the number of links in businesses’ supply chains, thereby increasing the likelihood of a weak link. It is easy to imagine any number of events that may cripple one’s supply chain, and recent history is filled with novel examples: a low yield potato crop creates a potato shortage, a clothing strike decreases the availability of certain clotheslines, a power grid failure halts the production of semiconductors, and a culinary demand for a local grain makes the grain unsuitable for livestock feed, just to name a few.

In one sense, recognizing the risk of the unforeseeable has had its benefits. For example, businesses have begun to hold the ostensibly pro forma provisions found in their contracts—like force majeure provisions in sales contracts and virus exclusions in insurance policies—in greater regard.  Unfortunately, however, as we have become more fearful of novel risks, these risks tend to dominate risk management deliberations more than they perhaps should. As the Suez Canal incident, COVID-19, and any number of freak incidents have taught us, the events that cause the most disruptions are ultimately those that are hardest to predict (and therefore prepare for). Thus, while companies must always prepare for the worst, management should not overly focus on what might go wrong at the expense of ensuring what must occur to survive.

II. Know yourself; know your tools.

An “I’ll have what she’s having” approach to protecting your supply chain is a recipe for failure. It ignores differences that create competitive advantages and it offers little protection in times of industry-wide disruption, in which industry norms are per se insufficient. The best risk management programs are born from a profound understanding of one’s business, including the central pillars of its operations and its competitive success. When it comes to supply chains, profiling risk requires more than merely asking where your widgets come from, although it certainly includes that. A prudent risk profile should conceive of all critical ingredients necessary to ensure your business’s continued success. For example, in the context of a dine-in restaurant chain, one should consider all that is needed to provide the desired customer experience, like air conditioning for those restaurants in warm climates.

There are any number of tools available to protect one’s business against risk. Staples include prophylactic due diligence, contract terms and conditions, insurance, and, where necessary, litigation. These tools are quite versatile, but it is important to avoid putting the cart in front of the horse. They are a means to an end and should be evaluated in light of your business’s specific and tangible needs rather than as a blanket of hypothetical protection.

A. Due diligence

As Ben Franklin famously observed, “an ounce of prevention is worth a pound of cure.” In that regard, due diligence is the keystone of any risk management plan. Due diligence is not so much a solution to risk, but rather a diagnostic tool to help determine the best risk mitigation strategy. For example, due diligence gives one the insight needed to restructure one’s supply lines to avoid chokepoints, tailor one’s insurance coverage to target serious risks or decide whether a risk is best left unmitigated (which it sometimes is). When performing due diligence analysis, not only should a business’s specific needs direct the investigation, they should also dictate the solution.

Take, for example, a car manufacturer’s need for airbags. One could attempt to mitigate the risk of a supply shortage by keeping a stash of extra airbags on hand. But as increasingly common “just-in-time” auto manufacturing practices suggest, doing so brings with it increased overhead costs from procuring and managing excess inventory. One may instead consider insuring one’s airbag supply (a practice discussed below) but at the cost of a premium. Likewise, one may consider diversifying suppliers to ensure any one supplier’s failure will not stop production, understanding that this would do nothing to protect against an industry-wide shortage. The correct solution for any given auto manufacturer depends upon countless variables, some of which are common among manufacturers, and some of which are unique to each specific manufacture’s needs and goals. All variables, however, flow from a first principle—one needs airbags to make cars. In that sense, due diligence can be described as the final step in understanding how your business works.

B. Insurance—Contingent business interruption

Among the armamentarium of insurance products available to protect one’s business, in the supply chain context, contingent business interruption insurance (CBII) is king. Whereas traditional business interruption coverage only covers interruptions due to physical losses occurring on the insured’s premises, CBII policies protect supply chains, often covering disruptions caused by distant natural disasters, industrial accidents, labor disputes, public health emergencies, damage to infrastructure, and sometimes even disruptions cases by upstream production errors or supplier insolvency.

When disruptions occur, CBII policies typically provide coverage for lost income, extra expenses (costs to end the interruption), and additional funds expended to mitigate the risk of further losses. CBII policies, however, are not a silver bullet against supply chain losses. CBII policies frequently limit the extent and duration of coverage—for example, only covering losses incurred after 72 hours of interruption, only covering 6 months of losses, or limiting coverage for losses in any given month to 25% of the policy’s aggregate limits. They also often require an exhaustive list of those suppliers to which the insurance will apply—the composition of which the insured should give the utmost thought.

When securing coverage for your business, it is important to have done the homework required to ensure your policy’s terms accurately reflect the type, source, and duration of the disruptions your business may endure. Carriers frequently dispute whether interruptions in fact took place. For example, a burger chain that could not make French fries due to a potato shortage would reasonably argue that without its quintessential side item, it is essentially unable to conduct business. A carrier, on the other hand, would argue that the loss of one menu item does not constitute a business interruption. Therefore, it would behoove the burger chain to obtain CBII coverage that specifically covers the loss of key menu items. Carriers also frequently argue over the propriety of replacement products (or cover) obtained to resume operations. Businesses should therefore consider the availability of certain types of cover when procuring CBII coverage to ensure whatever replacement the business is forced to buy falls under extra expense coverage.

Despite the comfort of having an insurance product specifically designed to prevent supply chain disruptions, it is also important not to think of insurance as easy money. Securing insurance and making claims are ordeals unto themselves. The first hurdle to securing coverage following a loss is to properly document one’s loss.  In anticipation of filing a proof of claim, it is imperative that insureds document any delays in the arrival or departure of goods, fluctuations in the purchase price or availability of essential goods, and/or fluctuations in sales prices and volume. Keeping such records is important due to the aforementioned time limits common within CBII coverage.  Should coverage litigation arise, these contemporaneous records will also prove to be invaluable evidence at trial.  In particularly complex cases, or where coverage is not entirely clear, it may also be worthwhile for insureds with sizeable losses to retain coverage counsel to assess the scope of available coverage and pursue their claim.

C. Contact terms—The specific and the general

Regardless of what provisions the parties may ordain to include, given the intricacies of modern supply chains, all supply contracts should carefully contemplate responsibility for distant supply chain disruptions. There are two ways to achieve this: drafting specific provisions in hopes of better elucidating the contract’s purposes and including general provisions to serve as a safety net.

Drafting targeted provisions to address disruptions ultimately benefits all parties by making the implicit explicit. For example, there has been significant litigation in the past year regarding whether the COVID-19 pandemic constitutes a “force majeure” under supply contracts. For the uninitiated, force majeure provisions are meaningless boilerplate. But too frequently they are invoked during unforeseen events in an attempt to excuse performance. The solution to their misuse is simple: don’t assume the strength of your covenants. If you desire an unqualified promise to deliver goods, your contract should say just that. Doing so ensures the parties are on the same page from the beginning. It also has the added benefit of encouraging greater due diligence, decreasing the likelihood of disruption.

In addition to including targeted provisions that make the obligations under your contracts clear, one should consider safety net provisions to increase your contract’s resiliency. One of the most common safety nets found in contracts are indemnities protecting against losses stemming from breaches. Indemnities, however, are far from infallible. For example, they do nothing to protect against an indemnitor’s insolvency. For that reason, it may be wise also to include a covenant to procure and maintain specific levels of insurance coverage—including contractual liability coverage—under policies expressly designating your company as an “insured” and likewise identifying specific contracts subject to the policies’ coverage.


If the Suez Canal incident has taught us anything, it is that anything can happen to disrupt a supply chain. The greatest source of strength for a business is its understanding of its unique requirements. As a business owner or risk manager, the responsibility falls on you to learn your business’s needs and to take nothing for granted. Only once you have attained a nuanced understanding of what your business needs to succeed can you make the best decisions about how to bolster your supply chains against risks, foreseeable and otherwise, using the tools available to you.


Andrew Van Osselaer, associate in the Austin office of Haynes and Boone, LLP, focuses his practice on the resolution of complex commercial disputes and regulatory investigations arising from clients’ commercial and industrial operations.

Wes Dutton is an associate in the Litigation Practice Group in the Dallas office of Haynes and Boone, LLP.


COVID-19 Poised to Cause Severe Disruption to Indian Business Conditions

As in so many other countries in the world, turbulent skies lie ahead for India’s economy as a result of the widespread upheaval COVID-19 is leaving in its wake.

Analysts from trade credit insurer Atradius expect that the repercussions of the pandemic will be widespread in India, having dire consequences for trade and causing GDP to contract 3% and business insolvencies to increase more than 30% year-on-year in 2020. This negative outlook tracks with the scenario for the rest of the southeast Asian region, which overall is expected to see a 25% increase in insolvencies this year.

Trouble Brewing For India Ahead of COVID-19

The business environment in India ahead of the global crisis was already on the shaky side. Last year, India’s economy saw weak economic performance, growing only 5.3%, the lowest increase in more than six years. The government – led by Prime Minister Narendra Modi’s reform-minded Bharatiya Janata Party – was focused on solving some of these economic issues, including resolving the banking sector’s bad debt and liberalizing foreign investment restrictions in key sectors. However, it remains to be seen whether those steps will make any difference when the coming wave of business and trade problems hit.

Although the lockdowns imposed to stop the spread of the coronavirus have put an end to clashes for now, an economic downturn that plunges many Indians into poverty could renew and increase social tensions.

Indian Firms Face Significant Headwinds

The comprehensive lockdowns in India that began in late March have caused a drop in domestic demand and a sharp increase in unemployment. Investment and industrial production will likely contract, as well, leading to a 10% or more decline in exports this year. Lockdown measures have especially impacted the millions of daily wage earners and migrant workers employed in India’s informal sector.

Supply disruptions from China, where many manufacturing facilities stood idle for weeks, have caused issues for import-reliant industries, such as pharmaceuticals, consumer durables and electronic manufacturing. Although Chinese plants are largely up and running, supply chain problems could continue should a second spike in COVID-19 cases occur.

Finally, external demand for Indian products has plummeted as key export markets such as the U.S. and China are facing recessions. Although there is no clarity for how long recessions will linger, it is safe to say that export-dependent sectors are in for a tough ride.

All this means most of India’s key sectors are poised to see a deterioration of performance and rise in insolvencies. Specifically, the outlook is poor for India’s automotive and transport, construction and construction materials, consumer durables, electronics and ICT, machines, metals, paper, services, steel and textiles industries. As of this writing, the only major sector with a positive outlook is food.

SMEs, which do not have the financial resilience as larger firms, will likely bear the brunt of the insolvency growth. Even though the Indian government has put forth a sizable stimulus package worth USD 266 billion that includes tax breaks for SMEs and domestic manufacturing incentives, the fundamental weaknesses of the economy represents a severe limit on how much protection the government is ultimately able to provide. In comparison to India’s stimulus package, which Citi analysts peg at around 4% of GDP, Singapore, one of the most stable economies in the region, passed stimulus measures worth more than 10% of GDP.

A Rapid Rebound in India Not Likely

 High corporate debt and the problems plaguing India’s financial sector pre-pandemic will likely get in the way of a quick rebound of the economy. In late 2018, the default of IL&FS, India’s large infrastructure financing and construction company, led to concerns about the financial standing of other non-bank lenders and straining corporate and consumer debt markets. In addition, India’s banks carry a high amount of bad debt – non-performing loans accounted for approximately 9% of bank lending last year.

At the same time, the rupee is seeing depreciation pressure and is at risk of volatility in coming months – a scenario caused in part by the withdrawal of global investments in emerging markets in Q1 as financial markets have become more risk averse since the beginning of the coronavirus outbreak. For Indian firms, this adds to already significant cashflow issues, especially those with high loans in foreign currencies.

The extent and duration of the economic impact of the COVID-19 pandemic remains uncertain, but Indian firms face a variety of significant headwinds. Many won’t survive. For businesses trading with Indian companies, it’s imperative that they closely monitor the financial health of trade partners and mitigate credit risk to protect cash flow.


Gordon Cessford is the President and Regional Director of North America for Atradius Trade Credit Insurance, Inc.

risk management

Strategic Risk Management Means Preparing for the Worst but Hoping for the Best

Trading globally comes with risks. You’re operating in a foreign market with different rules, regulations and business practices, not to mention the lack of geographic proximity makes it difficult to keep tabs on your trading partner and ensure the relationship is strong and payments will be made promptly. That said, those risks can be minimized with a smart risk management strategy that tips the risk/reward balance in your company’s favor.

A smart risk management strategy begins with a solid foundation in research that takes a macro look at the market and a micro look at your trading partner and their sector. For the former, the World Bank’s ease of doing business index can provide valuable information on business regulations in nearly 200 economies. Trade credit insurers can also help you keep tabs on specific markets and sectors.

To better understand your trading partner, start by researching the cultural elements of doing business in that market. Making a mistake can negatively affect or even end your relationship with your trading partner. Ask colleagues about any business culture etiquette you should be aware of, and review your notes before making the initial introduction. Getting this part correct will help you forge a strong relationship moving forward.

Next, take your time before signing any contracts. It may be tempting to quickly jump into a new opportunity, but if you rush through the documentation process, neglect to have a lawyer review the terms of your agreement or fail to validate your trading partner’s sound financial standing, you could end up with major headaches in the future.

Once you have an agreement in place, figure out how to maintain a close relationship with your trading partner. You don’t want to find out too late that your trading partner is in distress – you want to be aware of the first signs of trouble so you can take steps to protect yourself against late payment or nonpayment. Some of the classic signs of a company headed for insolvency include sudden late payments, pushing back for discounts or a drop-off in communication.

If your customer is overseas, don’t assume email and phone calls will be enough. A local presence is advised, as this is the only real way to understand the subtle shifts occurring in the local market and with your trading partner. How you establish the local presence will depend on the size of your opportunity. Large business deals may require establishing a foreign office, while appointing a local agent or having an employee visit frequently may suffice for smaller opportunities.

Finally, have contingency plans in place to cover any and all likely scenarios, including disruptions to trade via major events (such as the coronavirus shutting down production facilities in China or the trade wars suddenly making input materials more expensive) or delinquent customers. For the former scenario, you’ll want to understand how political or economic developments will impact your costs and know how you’ll pivot, if needed.

For delinquent customers, your first step should be establishing the facts and uncovering what’s actually going on. If the customer proves slippery and evasive, consider engaging a third-party expert to mediate. Review your contract terms to make a list of options available to you – can you recover your goods? Or is it time to start the legal collection process?

Strategic risk management is really about preparing for the worst but hoping for the best. A thorough understanding of the market, the sector and your trading partners, paired with detailed plans for how to react to any likely scenarios will minimize the risks to your business and help you feel confident conquering new markets.


Gordon Cessford is the president and regional director of North America for Atradius Trade Credit Insurance, Inc.


The Human Factor of the Novel Coronavirus (COVID-19) and Corruption

With the explosive spread of Coronavirus (COVID-19) hospitals, healthcare providers and all citizens are finding a shortage of goods and services and employees are under increased pressure to preserve and excel in their current roles.

Unfortunately, in this time of crisis corruption is thriving and some aim to profit from others’ misfortune and push companies to the brink to maintain profits.

Around the world, countries are reporting shortages in both medicines and medical supplies due to COVID-19. All of these factors put additional strain on already fragile procurement processes and increases the risk that suppliers, knowing that government and individuals have little choice but to pay, demand higher prices.

In these challenging times having open and transparent contracting processes in place helps mitigate these risks. With nowhere to hide, corrupt actors are unable to practice price gouging and must charge governments and individuals reasonable prices.

The stockpiling of supplies such as masks, gloves, and hand sanitizers are also contributing to shortages in medical supplies. In attempts to profit from public panic, some traders have been inflating prices for ordinary consumers.

After pressure from the Department of Justice, Amazon has implemented an effort to remove tens of thousands of deals from merchants that it said attempted to price-gouge customers. The world’s largest online retailer has faced scrutiny over the health-related offers on its platform, and earlier this week, Italy launched a probe into surging prices around the internet for sanitizing gels and hygiene masks. At the same time, Italy battles the biggest outbreak in Europe.

There are lessons to be learned in health-sector Corruption elsewhere from prior epidemics such as Ebola and SARS where procurement and contracting wrongdoing led to deadly consequences. In prior epidemics, Corruption compromised containment efforts, when corrupt actors used petty bribes and other favors to avoid quarantines, roadblocks, and safe body collection procedures. Even ventilators and other medical oxygen-related equipment have been the subject of bribes and kickbacks, sometimes leading to the tragic deaths of patients. These examples demonstrate the worst case of what can happen without resilient anti-corruption policies.

In the first federal action against fraud involving the coronavirus outbreak, the DOJ obtained a temporary restraining order against a website selling a bogus vaccine.

The DOJ said Sunday, March 21st, that operators of the website “” were engaging in an alleged wire fraud scheme to profit from the confusion and fear surrounding COVID-19.

The website claimed to offer customers access to the World Health Organization (WHO) vaccine kits in exchange for a shipping charge of $4.95. There are currently no legitimate COVID-19 vaccines, and the WHO is not distributing any such vaccine.

Besides compliance issues with third party business practices with goods and services, companies are experiencing enormous business pressure. Many companies have salespeople who cannot travel due to precautions taken, canceled flights, or, worse, quarantines. They cannot visit customers or partners, leading to slower sales. Global supply chains are disrupted, with shortages of parts and products. Company events and conferences are being canceled, resulting in fewer opportunities to build relationships with customers and market products. Customer demand for company products may be falling, and companies may be declining to make revenue projections during this time of uncertainty about the spread and effects of the coronavirus.

These disruptions can increase the pressure on salespeople to meet their sales targets. Salespeople may feel additional pressure now, when sales may be sluggish, and again when business gets back to normal, and they want to make up for the time lost. That pressure can lead some people to make the wrong choices—to engage in bribery or other misconduct—to generate business. Besides, the heightened emphasis on business priorities due to the losses from the coronavirus can push anti-corruption compliance further down on the priority list.

If/when the DOJ and SEC discover bribery or Corruption, they assuredly will not be accepting a “coronavirus defense” from companies. Compliance officers should be aware of situations like the coronavirus that could raise corruption risks and try to guard against them. Compliance officers should refer explicitly to the disruption caused by the coronavirus and emphasize that the company is committed to complying with anti-corruption laws. The communications must be to the employees who need to see them, such as salespeople who interact with customers, or “gatekeeper” functions like finance who review financial transactions.

Most importantly, senior executives and the board, if appropriate, need to make sure that the business pressures resulting from the coronavirus do not overshadow the company’s commitment to compliance and that values and ethics are maintained.


For more information or questions, please contact Frank Orlowski at or +1917-821-2147 and please visit our website at