Paul Lucas [00:00:08] Whats up everybody and welcome to the newest version of Insurance coverage Enterprise TV dropped at 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 talk about present provide chain dangers within the wake of the pandemic, which after all, induced unprecedented disruption. He’ll converse to the usage of information analytics and expertise for predictive threat modeling and the significance of partnering with underwriters, brokers and shoppers on efficient threat administration and loss prevention methods. So let’s delve into all issues provide chain, lets, 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, speak to us about how huge an influence the pandemic had on the availability chain and what points it induced.
Eric Newman [00:01:02] Whereas the influence of the pandemic on the availability chain was vital. Nevertheless, earlier than the pandemic hit, , points had been being seen inside the international provide chain that had been attributed to a variety of issues, not the least of which had 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 realize, individuals have associated, , the timing to the pandemic with the right storm situation, which is extraordinarily correct. Previous to the pandemic corporations by and enormous managed their provide chains primarily based 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 earnings and, and what the pandemic when all the pieces shut down. What that did was that induced manufacturing distribution amenities to close down worldwide. After which one thing peculiar occurred with all the pieces shut down. Whether or not it was a typically anticipated to be sort of successful on client demand, it virtually went the opposite method, the introduction of everybody being of their confined into their properties, properties, 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 availability chain and actually resulted in large surge. And in client spending. The opposite fascinating factor is when the when the pandemic occurred, vessels principally minimize down and reduce their capability took benefit of perhaps getting vessels in to have repairs and preventative upkeep. They usually had been behind the curve when the when the this surge within the E-commerce required, , the capability to be at unprecedented ranges. And that is the place we noticed lots 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 due to this fact, we noticed lots of however we noticed lots 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 had been going to China to load items had been crusing with MPC containers. And so what in flip, all these MPC containers had been crammed 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 Seaside 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 lots of these vessels, these extremely massive 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 unbelievable interval after all, however in case you do not thoughts simply quick ahead somewhat bit far as we have largely come out of the pandemic, now, are there any residual dangers remaining for the availability chain?
Eric Newman [00:05:07] Actually residual dangers I imply provide chain disruption remains to be current remains to be we’re nonetheless seeing steam seeing bottlenecks and, and restrictions, the worldwide provide chain is stabilized by and enormous, many corporations are nonetheless struggling to reopen and re employees their operations. There continues to be employee shortages we’re all of us are accustomed to. And there continues to be delays and backlogs albeit not as not as a lot as we noticed within the peak 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 because of understanding how uncovered their provide chains had been. And switching from this simply in time stock administration system to regulate in case handle stock administration system, which implies build up stock ranges, and including provide companions and diversifying your sourcing networks, which has positioned an added, , the chance to corporations that need to do all of this stuff and proceed to construct up inventories, it is growing 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 be contributing to the worth of the elevated values of products being shipped. So it is virtually in response to the pandemic, we’re seeing lots of provide chain exercise Nicely, whereas corporations pivot to attempt to shield themselves from being uncovered, once more, ought to one other occasion just like the pandemic occurred. However it additionally has elevated threat inside 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 threat, after all, all these geopolitical tensions that we’re seeing proper now at a altering manufacturing footprint as effectively. Any points that you simply suppose brokers needs to be notably targeted on for the time being with their shoppers?
Eric Newman [00:06:57] All of these dangers that you simply talked about are we’re seeing they usually it’s critically vital for corporations to deal with these dangers as they give the impression of being 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 threat hazard that we have seen storms taking place and dangerous 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 threat. And that is, that is a significant concern to the worldwide provide chain. And it is smart that that threat will increase as a result of as corporations increase their footprint, their manufacturing and distribution footprint, they’re working with increasingly more service suppliers, which is which requires them to depend on these service suppliers, infrastructure and methods as they share in vital info by which to transact enterprise. This places them at better threat of cyber assaults, and places extra emphasis on the businesses to vet out these corporations to be sure that not solely are their cyber safety methods applicable and ample for the assess threat, however the companions that they are working with globally, or have additionally the identical sort of safety and resiliency in there to restrict their total threat as they increase their operations. I used to be studying, , in making ready for the for the interview, I used to be studying at Deloitte research that that is said again in a survey taken again in 2019, the place 40% of producers that had been surveyed, had been affected by a cyber assault. And I am fairly positive that if we had been to revisit newer research than three years in the past, we discover out that that quantity is greater than doubtless 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 be sure that the suitable options are on the market from a monetary safety or from insurances and people types of issues. geopolitical tensions you talked about, that is a significant concern, clearly, the conflict in Russia and Ukraine continues so as to add in danger and trigger additional disruption to the availability 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 need to do to grow to be extra strong and resilient is the entire thought of shifting manufacturing amenities out of China the place predominantly a lot of the manufacturing is finished and shifting them to different various places reminiscent of Southeast Asia, Mexico and India. And in doing in order that’s putting added threat and added pressure on their provide chain operations as they need to construct up and get located in these different various amenities. So it simply it is including extra merchandise to the availability chain which additionally as we have talked about will increase total threat.
Paul Lucas [00:09:41] Now it wasn’t a shock for me to see you dedicate a lot time in that reply to cyber threat as a result of that is the destructive facet if you need of expertise, however I do know expertise will also be used for good as effectively. Are there any specific developments in that area with tech or day information 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 handbook methods and antiquated software program are actually digital digitization as a option to improve their total operational workflow. In those who’s benefiting from things like AI, the Web of Issues and utilizing monitoring applied sciences and sensors to observe their shipments, and actually sort of benefiting from forecasting, modeling software program platforms that enable corporations to have extra visibility and transparency into their provide chain, which helps them by predictive analytics capabilities permits them to, to establish probably, had been bottlenecks may occur in order that they’ll then pivot and perhaps enact some contingency plans that that at the moment are a brand new deal with corporations as they give the impression of being to do no matter they’ll to reap the benefits of these new technological advances to reduce the chance ought to one other occasion happen, which, , they may in several levels. So I believe we’re seeing lots of the AI expertise that we have all examine and heard about is one main resolution 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 guidelines for threat mitigation within the provide chain you can provide 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 value of dwelling around the globe because of that inflation. The extra cargo that is being put into the availability chains, as corporations re-manage and re-set up their re-establish their manufacturing operations, has put lots of, as I’ve talked about, items in transit, and particularly, particular shortages and steel uncooked supplies which can be utilized in so many the merchandise that we rely upon in the present day from the electronics trade, to the automotive, biotech industries, these are all being focused by skilled legal organizations. And there is a cause that they are doing that not solely due to the worth they convey, however the total international scarcity in a few of these, these steel shipments are permitting them to be incentivized as a result of they’re able to transfer these merchandise fairly simply given the worldwide scarcity and shifting the merchandise by illegitimate signifies 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, reminiscent of prescribed 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 record, we’re seeing steadily growing charges of cargo theft from each warehouses in static retailer conditions to in transit, truck theft and people types of issues. Simply because solely, , one of many greatest issues is absolutely the inflationary circumstances of the worldwide financial system and, once more, the added the quantity of quantity that being entered into the availability chain. And this requires the businesses actually check out that, along with all the pieces else, they’ve to take a look at given all the pieces happening the availability chain, however they actually need to pay specific 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 threat publicity, that is one threat publicity that I am that I am bringing consideration to, to be sure that they perceive that the chance and that the service ranges that they are requiring of the service suppliers is ample to thwart the chance of these kinds of thefts.
Paul Lucas [00:13:39] A improbable tip, in case you do not thoughts, I am simply gonna shoot for another, Eric. So I am positive there’s loads of brokers who’re watching this in the present day. And maybe they’re considering to themselves or Eric’s given me lots of nice info, however what ought to my priorities be? What kind of motion ought to I take? Do you will have any, any steering 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 positively the tendencies that their shoppers are seeing and the tendencies that the trade at massive is confronted with and what steps are being taken to construct resilient and agile provide chains to mitigate threat. I believe it is actually vital for brokers to know their shoppers operations and be capable to present them with insurance coverage resolution choices which can be tailor-made and applicable for these their shoppers particular operations. And meaning partnering with underwriters, that that present related 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 shoppers will want and it will likely be very useful in that and people are threat administration, session companies. These are loss prevention and and threat mitigation methods which can be primarily based on confirmed trade finest practices. And it is also normal provider 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 total service capabilities to be sure that they’re correct for the kind of items which can be being shipped. And underwriters and brokers alike could be a useful asset to corporations as they checked out how you can sort out all of those, all of those new exposures in these dangers that they are trying to pivot to, to be sure that they’re resilient and agile going into 2024 and past.
Paul Lucas [00:15:48] Incredible suggestions. Eric, actually recognize your time. If anyone desires to succeed in 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 need to hold our provide chain of an ideal interviewees coming identical to Eric after all. So be sure to be part of us subsequent time proper right here on Insurance coverage Enterprise TV.