Paul Lucas [00:00:08] Hiya everybody and welcome to the newest version of Insurance coverage Enterprise TV delivered to you in affiliation with Falvey Insurance coverage Group. And this version we will be joined by Eric Newman, Senior Vice President of claims loss prevention and recoveries at Falvey, the place he’ll focus on present provide chain dangers within the wake of the pandemic, which in fact, brought on unprecedented disruption. He’ll communicate to the usage of knowledge analytics and know-how for predictive danger modeling and the significance of partnering with underwriters, brokers and purchasers on efficient danger administration and loss prevention methods. So let’s delve into all issues provide chain, we could, Eric, welcome to Insurance coverage Enterprise TV.
Eric Newman [00:00:50] Paul thanks for having me, it is a pleasure to be right here.
Paul Lucas [00:00:52] Simply to begin by setting the scene for us, in case you do not thoughts, discuss to us about how huge an impression the pandemic had on the provision chain and what points it brought on.
Eric Newman [00:01:02] Whereas the impression of the pandemic on the provision chain was vital. Nevertheless, earlier than the pandemic hit, you understand, points have been being seen throughout the international provide chain that have been attributed to a lot of issues, not the least of which have been commerce points between us in China and different components of the world. However what the pandemic did was uncovered to the sheer fragility of the worldwide provide chain. You understand, individuals have associated, you understand, the timing to the pandemic with the proper storm state of affairs, which is extraordinarily correct. Previous to the pandemic corporations by and huge managed their provide chains based mostly on a simply in time precept, which was actually focused on being lean and environment friendly. And this meant sustaining very, very low stock ranges, and maximizing effectivity efficiencies to yield increased income and, and what the pandemic when every little thing shut down. What that did was that brought on manufacturing distribution services to close down worldwide. After which one thing peculiar occurred with every little thing shut down. Whether or not it was a typically anticipated to be sort of a success on shopper demand, it nearly went the opposite approach, the introduction of everybody being of their confined into their houses, houses, they usually actually put the stress on the E-commerce market. And it actually put the pressure on the on the on the worldwide provide chain, as a result of corporations then needed to, needed to gear up and sort of reply to that demand, which actually put additional pressure on the provision chain and actually resulted in large surge. And in shopper spending. The opposite fascinating factor is when the when the pandemic occurred, vessels principally minimize down and reduce their capability took benefit of possibly getting vessels in to have repairs and preventative upkeep. And so they have been behind the curve when the when the this surge within the E-commerce required, you understand, the capability to be at unprecedented ranges. And that is the place we noticed a variety of the vessel visitors actually being getting these empty containers over to China, proper? Predominantly, to fortify that these calls for and get items coming from Asia again to the to the west. And subsequently, we noticed a variety of however we noticed a variety of demand and transport and with minimized capability. That resulted in minimized the variety of a restricted variety of sea containers as a result of nearly all of the vessels that have been going to China to load items have been crusing with MPC containers. And so what in flip, all these MPC containers have been stuffed up as corporations ramped up their manufacturing, and that led to the disruption within the bottlenecks within the backlog on the ports that we noticed particularly in Lengthy Seashore in LA. And the opposite factor that additionally occurred, it was an fascinating factor, and I do not know the way a lot consideration has been paid to this, I do know that we actually in our area, seen that we noticed a variety of these vessels, these extremely giant container vessels that may carry upwards of 14,[000 containers and more coming from China to the US for losing several containers during rough seas and the North Pacific. One of the things that we attribute that to and in done some research on this as these ultra large container vessels were never really or had not really sailed at full capacity or near full capacity. And now with the surge in demand in the in the requirements for these vessels to be loaded at near capacity. They were basically undergoing sea trials and sea conditions that maybe they had not been trialed before. And I think that has a lot to do with the incidents that we saw. I think in 2020, we lost more than 3[000 containers. But the industry lost more than 3[000 containers at sea. So it really was a perfect storm of all of these factors happening. And really, at the end of the day, it really did expose the industry to the true fragility of the supply chain in which they’re now taking measures to correct
Paul Lucas [00:04:56] Yeah, and so it was an unimaginable interval in fact, however in case you do not thoughts simply quick ahead just a little bit far as we have largely come out of the pandemic, now, are there any residual dangers remaining for the provision chain?
Eric Newman [00:05:07] Actually residual dangers I imply provide chain disruption continues to be current continues to be we’re nonetheless seeing steam seeing bottlenecks and, and restrictions, the worldwide provide chain is stabilized by and huge, many corporations are nonetheless struggling to reopen and re employees their operations. There continues to be employee shortages we’re all of us are acquainted with. And there continues to be delays and backlogs albeit not as not as a lot as we noticed within the top of the pandemic. However we’re nonetheless seeing, we’re nonetheless seeing these backlogs and disruptions within the within the in provide chain properties now on account of understanding how uncovered their provide chains have been. And switching from this simply in time stock administration system to regulate in case handle stock administration system, which implies increase stock ranges, and including provide companions and diversifying your sourcing networks, which has positioned an added, you understand, the chance to corporations that want to do all of this stuff and proceed to construct up inventories, it is rising values of products which can be being shipped. So insurance coverage corporations are seeing increased, increased values, that is the inflation that is going that is taking place can also be contributing to the worth of the elevated values of products being shipped. So it is nearly in response to the pandemic, we’re seeing a variety of provide chain exercise Nicely, whereas corporations pivot to attempt to defend themselves from being uncovered, once more, ought to one other occasion just like the pandemic occurred. However it additionally has elevated danger throughout the provide chain.
Paul Lucas [00:06:38] A number of dangers which have emerged as effectively which can be maybe not wholly associated to the pandemic, we’re speaking about issues like cyber danger, in fact, all these geopolitical tensions that we’re seeing proper now at a altering manufacturing footprint as effectively. Any points that you simply suppose brokers must be notably centered on in the meanwhile with their purchasers?
Eric Newman [00:06:57] All of these dangers that you simply talked about are we’re seeing they usually it’s critically essential for corporations to concentrate on these dangers as they appear to construct extra resiliency and agility into their provide chain. One other issue that that is taking place that we’re seeing that you simply did not point out was the altering climate patterns and local weather change. And that has elevated the pure danger hazard that we have seen storms taking place and unhealthy climate occasions taking place in components of the world that that hadn’t seen that it had no historic tendencies in that nature. However you talked about cyber danger. And that is, that is a serious concern to the worldwide provide chain. And it is smart that that danger will increase as a result of as corporations develop their footprint, their manufacturing and distribution footprint, they’re working with increasingly service suppliers, which is which requires them to depend on these service suppliers, infrastructure and programs as they share in essential data wherein to transact enterprise. This places them at higher danger of cyber assaults, and places extra emphasis on the businesses to vet out these corporations to make it possible for not solely are their cyber safety programs applicable and enough for the assess danger, however the companions that they are working with globally, or have additionally the identical sort of safety and resiliency in there to restrict their general danger as they develop their operations. I used to be studying, you understand, in getting ready for the for the interview, I used to be studying at Deloitte examine that that is said again in a survey taken again in 2019, the place 40% of producers that have been surveyed, had been affected by a cyber assault. And I am fairly certain that if we have been to revisit more moderen research than three years in the past, we discover out that that quantity is greater than possible elevated. So it’s a huge, it is a huge concern. And insurance coverage corporations and brokers clearly are conscious of this. And it has been a problem to make it possible for the suitable options are on the market from a monetary safety or from insurances and people kinds of issues. geopolitical tensions you talked about, that is a serious concern, clearly, the warfare in Russia and Ukraine continues so as to add in danger and trigger additional disruption to the provision chain. And it additionally the opposite factor that is taking place is a few of these disruptions and I discussed sort of the change and manufacturing that corporations want to do to turn into extra sturdy and resilient is the entire concept of shifting manufacturing services out of China the place predominantly many of the manufacturing is finished and shifting them to different various places similar to Southeast Asia, Mexico and India. And in doing in order that’s putting added danger and added pressure on their provide chain operations as they want to construct up and get located in these different various services. So it simply it is including extra merchandise to the provision chain which additionally as we have talked about will increase general danger.
Paul Lucas [00:09:41] Now it wasn’t a shock for me to see you commit a lot time in that reply to cyber danger as a result of that is the unfavourable aspect if you’d like of know-how, however I do know know-how can be used for good as effectively. Are there any explicit developments in that area with tech or day knowledge that may maybe assist mitigate a few of these dangers for insurance coverage?
Eric Newman [00:09:43] Positive is I imply, corporations actually are corporations which have relied on extra guide programs and antiquated software program are actually digital digitization as a approach to improve their general operational workflow. In people who’s profiting from things like AI, the Web of Issues and utilizing monitoring applied sciences and sensors to watch their shipments, and actually sort of profiting from forecasting, modeling software program platforms that permit corporations to have extra visibility and transparency into their provide chain, which helps them via predictive analytics capabilities permits them to, to determine probably, have been bottlenecks would possibly occur in order that they’ll then pivot and possibly enact some contingency plans that that at the moment are a brand new concentrate on corporations as they appear to do no matter they’ll to benefit from these new technological advances to attenuate the chance ought to one other occasion happen, which, you understand, they may in several levels. So I believe we’re seeing a variety of the AI know-how that we have all examine and heard about is one main answer and step ahead within the trade, that is permitting a few of this predictive analytics to assist them handle their respective provide chains.
Paul Lucas [00:11:17] And simply away from the tech developments, or low in any of the information for danger mitigation within the provide chain that you could supply us?
Eric Newman [00:11:26] One of many issues that we’re seeing from our vantage level is that we have talked in regards to the elevated inflation, speaking in regards to the elevated price of residing all over the world on account of that inflation. The extra cargo that is being put into the provision chains, as corporations re-manage and re-set up their re-establish their manufacturing operations, has put a variety of, as I’ve talked about, items in transit, and particularly, particular shortages and metallic uncooked supplies which can be utilized in so many the merchandise that we rely upon right now from the electronics trade, to the automotive, biotech industries, these are all being focused by skilled prison organizations. And there is a motive that they are doing that not solely due to the worth they convey, however the general international scarcity in a few of these, these metallic shipments are permitting them to be incentivized as a result of they can transfer these merchandise fairly simply given the worldwide scarcity and shifting the merchandise via illegitimate implies that that is not simply to say the dear metals in these sort of shipments, it is the products which have all the time been extremely focused in, in our trade, similar to prescription drugs, in excessive tech and meals and beverage and people varieties of merchandise, that are all the time excessive on the on the theft goal checklist, we’re seeing steadily rising charges of cargo theft from each warehouses in static retailer conditions to in transit, truck theft and people kinds of issues. Simply because solely, you understand, one of many largest issues is de facto the inflationary situations of the worldwide economic system and, once more, the added the quantity of quantity that being entered into the provision chain. And this requires the businesses actually check out that, along with every little thing else, they’ve to have a look at given every little thing happening the provision chain, however they actually must pay explicit consideration as to who they’re doing enterprise with. And what corporations what transportation and logistics service suppliers are they utilizing? And are these corporations those which have the companies, the capabilities and the {qualifications} to deal with this, this danger publicity, that is one danger publicity that I am that I am bringing consideration to, to make it possible for they perceive that the chance and that the service ranges that they are requiring of the service suppliers is enough to thwart the chance of these kinds of thefts.
Paul Lucas [00:13:39] A implausible tip, in case you do not thoughts, I am simply gonna shoot for yet another, Eric. So I am certain there’s loads of brokers who’re watching this right now. And maybe they’re considering to themselves or Eric’s given me a variety of nice data, however what ought to my priorities be? What kind of motion ought to I take? Do you’ve gotten any, any steerage for them in that regard any actions that they need to take with the shopper as a as a high precedence?
Eric Newman [00:14:02] I consider it is crucial that brokers are acutely conscious of the present international provide chain atmosphere and definitely the tendencies that their purchasers are seeing and the tendencies that the trade at giant is confronted with and what steps are being taken to construct resilient and agile provide chains to mitigate danger. I believe it is actually essential for brokers to grasp their purchasers operations and be capable of present them with insurance coverage answer choices which can be tailor-made and applicable for these their purchasers particular operations. And meaning partnering with underwriters, that that present comparable companies which can be tailor-made and particular to these varieties of dangers. In doing so, these sort of underwriters have the capability to supply worth added companies that purchasers will want and it is going to be very useful in that and people are danger administration, session companies. These are loss prevention and and danger mitigation methods which can be based mostly on confirmed trade finest practices. And it is also basic service vendor relationships and establishing, as I discussed, the fourth the fifth difficulty, ensuring that they’re working with their underwriters of their brokers to ensure the companions that they are working with not solely simply with their with their technological capabilities and their cyber safety, however their general service capabilities to make it possible for they’re correct for the kind of items which can be being shipped. And underwriters and brokers alike may be a useful asset to corporations as they checked out tips on how to deal with all of those, all of those new exposures in these dangers that they are seeking to pivot to, to make it possible for they’re resilient and agile going into 2024 and past.
Paul Lucas [00:15:48] Incredible suggestions. Eric, actually admire your time. If anyone needs to achieve out to you or to Falvey Insurance coverage Group on the again of this dialog. How can they get in contact?
Eric Newman [00:15:58] Yeah, thanks, Paul. Its [email protected]
Paul Lucas [00:16:05] We wish to preserve our provide chain of a fantastic interviewees coming similar to Eric in fact. So be sure you be a part of us subsequent time proper right here on Insurance coverage Enterprise TV.