The explosions of thousands of Hezbollah’s communication devices across Lebanon two weeks ago has renewed scrutinizing supply chains and added higher costs to global logistics, experts say.
“I think over time, there’s going to be more attention paid to security and supply chains across the board, whether it’s concerns about terrorism or some kind of competition, or a company or intervention that’s trying to disrupt your business, it’s very likely to continue to happen,” Rosemary Coates, executive director of the Reshoring Institute and president of Blue Silk Consulting, told FreightWaves.
“We’ve been telling clients for a long time, you’ve got to control your entire supply chain. You can’t just assume you can place a purchase order over the internet and expect everything to be fine. You have to know who that supplier is. Vet the supplier so you understand your risks.”
The attacks in Lebanon using everyday electronic devices against Hezbollah on Sept. 17 and 18, which first targeted pagers and then walkie-talkies, reportedly killed 42 people and wounded more than 3,000. Hezbollah and the Lebanese government have blamed Israel, which has neither confirmed nor denied involvement.
Hezbollah is an Iranian-backed militant organization based in Lebanon. Tensions between Israel and Hezbollah have steadily escalated since war broke out 11 months ago between Israel and Hamas, another Iran-backed militant group.
With the difficulty in identifying precise supply chain breaches in the recent pager attack, the greater the need to use thorough supplier assessments while asking the right questions, according to management consultant Mark Zetter.
Zetter is a former EMS manufacturing industry operations executive presenting supply chain risk-rewards analysis at ventureoutsource.com and a digital newsletter at markzetter.com
“It’s going to bring visibility for [a company’s] office of compliance, the roles and responsibilities of compliance managers,” Zetter told FreightWaves in an interview. “I see a much greater focus on the chain of command across the supply chain, such as purchasing and procurement, sales and operations planning, which I see some companies already beginning to do. Origin verification of raw materials and material handling in production and distribution will become even more important depending on product and industry, policy-making and laws.”
Zetter said its likely manufacturers will implement stricter record keeping procedures to protect their logistics chain.
“Supply chain executives basically want immutable record keeping. As this recent incident in Lebanon points more focus directed at robustness of manufacturing supply chains, the office of compliance and supply chain management want to know what, where, and when something is introduced into the product manufacturing supply chain,” Zetter said. “They want excruciating detail to include verifying authenticity and identifying raw materials.”
Supply chain mystery surrounds Hezbollah pagers and walkie-talkies
While Israel has been implicated in the Hezbollah attacks, the supply chain around the explosive pager and walkie-talkie remains murky.
Early media reports suggested the AR-924 pagers were branded by Taiwanese wireless communications company Gold Apollo. In an online statement on Sept. 18, the company said it authorized BAC Consulting KFT, to use Gold Apollo’s trademark for the AR-924 pager model to be produced and sold by BAC.
“Our company only provides the brand trademark authorization and is not involved in the design or manufacturing of this product,” Gold Apollo states on its website. “Gold Apollo Co., Ltd. always complies with relevant regulations and maintains transparent and compliant partnerships with our collaborators.”
Although the company’s website has been taken down following the pagers incident, BAC Consulting’s LinkedIn page remains online. There, the company describes itself as having over a decade of consulting experience for the environment, innovation and development and international affairs.
The company’s address provided by Gold Apollo shows what appears on Google Maps to be a residential building. The Independent reported that BAC Consulting’s CEO, Cristiana Barsony-Arcidiacono, denied making the pagers. The Hungarian government has denied the pagers were ever present within the country.
The Times of Israel said that Bulgarian authorities were investigating Norta Global Ltd. after a Hungarian media report said the company was involved in facilitating the sale of the pagers. Newsweek reported on Friday that Norta Global CEO Rinson Jose had gone missing while on a trip to Boston.
How will logistics providers respond?
However, the pagers and walkie-talkies were tampered with, it’s unclear if the attacks will cause companies to shift their supply chains to countries they are aligned with politically and economically.
Manufacturers will continue to seek out the lowest cost providers because price still drives many management decisions. Locations in Asia will continue to play a major role in the global supply chain as the global trend for growing discretionary spend shifts from the West to the East, Zetter said.
“There aren’t as many unicorns in Asia as there are in the West, but that’s changing as innovation and technology and inventions and development for intellectual properties continue to evolve in further developing technologies like e-mobility, electric vehicles, semiconductor manufacturing and communications equipment and networked connected devices,” Zetter said.
A unicorn is a term often used in the venture capital industry to describe a privately held startup that has a valuation of over $1 billion and is not listed on the stock exchanges.
“You have Eurasia where the West is losing influence as global power centers shift,” Zetter said. “Plus there is a large population with a growing amount of discretionary spend the West wants access to. For this reason manufacturers want to place production nearest the point of consumption. Supply chain ecosystem is also important. For example, India still has no private fabless semi manufacturing capability. This is needed to attract a robust ecosystem of electronics industry vendors and suppliers with sophisticated inventory and tracking software for protecting IP. Without technically advanced semiconductor manufacturing capabilities and talent India remains unable to really compete with China in terms of offering a robust manufacturing supply chain ecosystem.”
What the pager and walkie-talkie explosions could change is the amount of money companies spend to safeguard their supply chains.
“Without doubt we’ll see more robust supplier assessment, better inventory management, real-time tracking… which is costly to implement,” Zetter said. “It’s plausible for full track and trace systems or registries… monitoring movement of raw materials and products. While doing some net good this would create costly over head for smaller firms, driving many out of business as they try to prop up their balance sheets to offset rising operating inputs cut and falling margins. I see plenty of opportunity in sales and operations planning that have far-reaching affects on the supply chain. Understanding outcomes of your decision-making helps build a forcefield around your supply chain.”
Coates said the attacks could spur the use of more visibility software across the global supply chain.
“I think where we’re moving into the future, we’re going to see more software. There are companies that can map your supply chain, not just the top-level suppliers, but Tier 2, Tier 3 and so forth, so that you can get a good view of your global supply chain, who all the partners are,” Coates said. “It’s expensive, but for big companies, I think it’s just going to have to be essential. If you’ve got a product that is volatile or has a potential for this kind of scary intervention, you’re going to have to be more diligent about your supply chain and controlling all of the people that are part of it along the way.”
Caleb Revill contributed to this story.
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