Translucence

2 0 2 1 SU P P LY C H A I N R I S K R E P O RT
 Introduction
Supply chain is having a moment. If this was high
school and we were giving out 2021 superlatives,
Most Popular or Most Likely to Change the World
would be applicable.
From the subject of countless memes and social media fodder, to being blamed for bare shelves
(and even breakups!), the supply chain was trending in 2021. Sorry, the Global Supply Chain Ate My
Homework headline in The Wall Street Journal was one of our favorites this past year. The article
takes a humorous look at how the supply chain has become a “catchall excuse as supply chain
disruptions, freight bottlenecks and container shipping backlogs have become part of the shared
experience during the pandemic.”
This past year also put supply chain practitioners under the mainstream microscope; perhaps
even more so than 2020, because everyone - from Wall Street to main street to Sesame Street to
our President and members of Congress - was talking about supply chain problems. (For those of
us who work in supply chain, if our families didn’t know what we did before, they sure do now!).
come from. In the case of the semiconductor shortage, carmakers’ inability to get a $5 chip from
a tier three supplier derailed the entire automotive industry. In a similar misstep, many supply
chain managers failed to adequately monitor polymer suppliers because those materials go into
low-cost items like adhesives and resins. While they’re widely used across many products, their
low cost meant they were not top of mind at many companies. That said, the plastics made from
these chemicals are used in every kind of product imaginable — from food packaging, appliances,
smartphones, and car parts to exercise equipment and roller skates.
To build a more resilient supply chain, it’s vital to look at even the most inexpensive parts and
materials when they are critical to products and revenues and not just expensive, sophisticated, or
specialty items. This has led many companies to start paying attention to the suppliers supplying
their low-cost items.
Best-in-class companies take time to identify the suppliers’ suppliers that are critical to the
continuing production of their top revenue generators and proactively map, monitor, and
protect those entire supply lines. Companies should also have experts across different
commodity categories using the systems to pick up early warnings and prepare early
on for potential constraints.
We established Resilinc as the gold standard for supply chain risk and today we are harnessing
advanced AI technologies to bring predictive solutions to market, to help you achieve your
resiliency objectives. In 2021, we were pleased to launch the following key product innovations:

• CommodityWatchAI
As supply chain failures affected lives and livelihoods, our work became our mission. In
• WeatherWatchAI
service of our customers, suppliers, partners, community, and stakeholders, the Resilinc team
led with purpose. Together, we rallied to strengthen the supply chains that power our lives. With
Looking forward, it could take deep into 2022 or even 2023 before global supply chains regain
our solutions, expertise, services, and technology, we have created a place where suppliers can
some semblance of normalcy. If demand for products stays strong, disruptions will continue: we
collaborate securely with their customers, with transparency and trust as the foundation, to deliver
anticipate shortages, constraints, and higher pricing through 2023 unless spending snaps sharply
more resilient, sustainable and fair and secure supply chains.
back to services or inflation leads people to stop buying so much. The outlook is murky.
We worked side by side with our customers helping them navigate the worst disruptions, by
Accordingly, we’ve named the 2021 Annual Report Translucence in reference to this semi-
being their eyes and ears: our early warning system alerting them, helping them anticipate and
transparent, murky state we find the global supply chain in.
predict the next problem; our platform enabling them to collaborate closely with their suppliers;
our insights giving some options on what actions to take. We provided historical data-backed
predictions on upcoming trends and supply-shortage scenarios for the raw materials and
commodities markets. " We can see the filtered light through the trees;
We also rose to the occasion on a broader scale: in 2021 our thought leadership was prominently
the fog is slowly lifting. But there is still a ways to
featured. From key industry publications to news and supply chain events, Resilinc’s leadership go before we hit a clearing.
provided insights on supply chain trends and best practices. Several forward-looking pieces were
published in the Harvard Business Review, ranging from an early analysis of the semiconductor
shortage, the upcoming plastics shortage, and in particular, our industry leading article The Case Companies that invest in robust supply chain
for a Pan American Manufacturing Ecosystem.
monitoring, mapping, and risk management
Much of our market analysis and insight was focused on raw material and commodity shortages. capabilities will hit the clearing first."
In 2021 supply shortages - which our data shows were up 452% year-over-year - went beyond
From where I stand, there has never been a more exciting time to be in supply chain management.
toilet paper. Practically every industry and every person saw the first-hand impacts of a snarled
Thank you for reading Resilinc’s 2021 Annual Report.
supply chain: from cars to coffee; roller skates to refrigerators; bikes to bottles of champagne -
supply couldn’t keep up with the demand.

Our EventWatchAI platform also saw an 88% increase in overall supply chain disruptions reported;
the inability to secure small, inexpensive parts, raw materials, or commodities played a big role. A Bindiya Vakil, CEO
wide range of materials go into a single product, and it’s important to know where those materials
1 2021 EventWatchAI Data
8 Resilinc Insights: EventWatchAI Data

2 Commodities
16 Materials and commodities markets face another year of
turmoil: Q&A with Shahzaib Khan, Senior Director at Resilinc
and CommodityWatchAI lead
18 Silicon and aluminum shortages causing price volatility
20 Semiconductor shortage hits supply chains

3 Resilinc Viewpoints
24 ESG risk monitoring must go beyond tier-one
26 Reshoring and nearshoring (still) in the spotlight
28 Supply chain hacks are the next big cause for concern

4 Customer Stories
32 How GSK leverages supply chain intel for strategic goals
34 What’s next for the healthcare supply chain? It’s a mixed
(doctor’s) bag say experts
 2021 EventWatchAI Data
The only thing NOT in short supply in 2021 was supply
shortages. That, and mentions of “supply chain” on
Twitter (2.2 million in Q4 alone!). Supply chain humor
aside, disruptions due to supply shortages increased
452% year-over-year, the largest increase across all
the event types Resilinc monitors for.

In 2021 Resilinc sent out 491 alerts regarding supply

shortages (short supply of semiconductor chips,
plastics, paper, and raw materials are all examples).
Shortages are driving consolidations, mergers, and
business sales as companies look to give a quick cash
boost to the core business or optimize the supply
chain to best serve the customer base.

Even with a 452% year-over-year increase, supply

shortages ranked 6th in terms of most reported

452%
supply chain disruption. Factory Fires, Mergers &
Acquisitions, Business Sales, Factory Disruptions, and
Leadership Transitions ranked as the top 5 supply
chain disruptions in 2021 as revealed by Resilinc’s

increase
EventWatchAI monitoring platform.

As we emerge from another year of historic supply

in supply shortages chain disruptions, let’s take a closer look at the 2021
EventWatchAI data and what it tells us about the

year-over-year
events that have caused the most disruptions to
supply chains - and had the greatest negative impacts
on companies’ revenue and profitability.
Source: eR silinc v
E entWatch AI
Insights
 Resilinc insights:
EventWatchAI Data

Resilinc’s Supply Chain Intelligence Network is the creation was up 105% year-over-year due
mostly to pandemic, labor, and supply shortage
largest, most detailed and comprehensive database on disruptions pushing supply chain teams to

supply chains in the world. develop contingency plans, including finding

alternate suppliers.

As of January 2022, the Network incorporated more Human-caused events

than 500,000 unique suppliers, making up 750,000 dominate, per usual
sites and over 4 million parts. For the industries Resilinc Given the labor shortages that plagued the
focuses on, we have over 95% of the global supply 2021 supply chain, it shouldn’t be a surprise that
most disruptive events in 2021 were human-
chain mapped, down multiple tiers. caused; ninety percent were in fact. Disruptions
ranged from factory fires, leadership transitions,
factory disruptions, and port disruptions.

EventWatchAI: 24/7 monitoring of risks 2021 saw the most factory fires ever recorded
EventWatch is Resilinc’s global event monitoring, alert, and analysis system. It contextualizes and
AI in a single year. Resilinc sent out 1,946 Factory
analyzes more than 1.7 billion news feeds about potential and existing supply chain disruptions Fire alerts, an increase of 129% year-over-year.
from approximately 4.7 million sources in 108 languages, including daily news, government The uptick was due mostly to gaps in regulatory
regulatory reports, and social media. A combination of artificial and human intelligence is applied and process execution as well as a shortage of
to filter the information and provide customers only with alerts that are relevant to their supply skilled labor in warehouses. Consider this: if no
chains. one is checking to ensure the smoke detectors
or fire sprinklers work, or if there are flammable
Resilinc’s business grew significantly in 2021, accordingly, so did the number of suppliers and materials - like cardboard - left on the floor, this
supplier sites that EventWatchAI monitored. We also increased the number of news sources by can spell trouble.
20% and added monitoring across more languages and verticals. In October 2021 we launched
WeatherWatchAI to monitor and send alerts about local weather phenomena. So, it’s important Factory fires contributed to record-breaking
to point out that the year-to-year changes in the EventWatchAI data analyzed here resulted from supply shortages in 2021: if a warehouse goes
growth in the datasets and enhancements to EventWatchAI as well as from trends in actual supply down for a month due to a factory fire, the
chain events. trickle-down effect is disastrous. For example,
after a March 2021 fire shut down a Renesas
In total in 2021, Resilinc sent out 11,642 alerts about potential supply chain disruptions to its Electronics semiconductor fab in northeast
customers - which include today’s largest multinational organizations: that’s an 88% increase Japan, it took four months to renovate the lab
over 2020. Of these potential disruptions 7,025, or 60%, were impactful enough to trigger the sufficiently to resume pre-shipment levels.
creation of a WarRoom—virtual platforms in the Resilinc dashboard where customers and their The fire worsened the already tight global auto
suppliers communicate and collaborate to assess and resolve disruptions. In 2021, WarRoom chip supply.

8 RESILINC · 2021 ANNUAL REPORT RESILINC · 2021 ANNUAL REPORT 9

Factory disruptions multiplied EventWatchAI News (By Type)
Along with Factory Fires, other types of Factory Disruptions are a frequent cause of supply chain delays and shortages. EventWatch , Resilinc's AI-powered monitoring service, alerted customers to 11,642
AI

Factory Disruptions increased by more than 50% year-over-year in both 2020 and 2021. And of the 767 EventWatchAI potential disruptions in 2021; up 88% year over year.
Factory Disruption alerts sent in 2021, 213 were serious enough for Resilinc customers to trigger WarRooms.

Driving many Factory Disruptions in 2021 were shortages of components, parts, and materials that led to production
cuts and even shutting down of production lines or entire factories. The semiconductor shortage in particular led to
“clear-to-build” problems that factories simply had no solution for other than to delay or stop production.

Of course, COVID-19 related lockdowns, quarantines, and social distancing measures impacted many factories. And
even when government policies allowed full plant floors, many workers stayed away either because they were sick
or feared contracting COVID-19. In the U.S. and other developed countries, shortages of factory labor held back
production and kept many factories from meeting orders from existing customers let alone expand to meet new
demand arising from the shift in consumer habits occasioned by the pandemic.

While Human Health disruptions - which include COVID-19 related lockdowns and restrictions - fell 68% year-over-year,
Resilinc has continued to designate the event as “severe.” It’s the first time in the company’s history ranking an event at
that level of impact.

Port and logistics disruptions continue

Throughout 2021, the extraordinary congestion and delays in shipping and logistics continued. EventWatchAI
reported 81% increase in port disruptions year-over-year from 2020 through 2021. While there are signs - such as
declines in the Baltic Dry Index which measures bulk cargo rates - that shipping and logistics congestion is easing,
many of the challenges will continue through 2022 and beyond. Source: Resilinc EventWatchAI Insights

The truck driver shortage in the U.S. is particularly vexing. According to the American Trucking Association (ATA),
the industry is already short more than 80,000 drivers, and ATA estimates the industry will have to recruit 1 million
new drivers to replace retirees and drivers leaving the trade for other reasons. The driver shortages have put new
impetus behind the trend toward automation. In July, a milestone was achieved by TuSimple: delivering a load of WarRooms (By Type)
watermelons Oklahoma from Arizona in a partially autonomous truck 10 hours faster than a human driver could have. WarRooms are virtual platforms in the Resilinc dashboard where customers and their suppliers
But autonomous trucking is still in experimental stages, and for many years—perhaps decades—most truck driving will communicate and collaborate to assess and resolve disruptions.
depend on human skill.

Source: Resilinc EventWatchAI Insights Source: Resilinc EventWatchAI Insights

10 RESILINC · 2021 ANNUAL YEAR REPORT RESILINC · 2021 ANNUAL YEAR REPORT 11
 Port automation is also picking up speed. In the world’s largest port, Yangshan, near Shanghai,
a fully automated two-square freight terminal began operating in December 2018. In 2020, it
handled about 5 million TEUs (20-foot equivalent unit) and Shanghai port authorities expect
automated operations to handle 30 million TEUs by 2026.

Rail capacity is increasing to take some pressure off ocean shipping: once unusual, long-haul train
freight shipments between China and Europe have become much more common as companies
that need to move goods between the huge economies look for alternatives to snarled and
expensive air and sea routes.

Often called The New Silk Road, a freight rail network between France and China is growing
dramatically. A new Xian-Paris freight line was initiated in 2021 with more expansions of China-
Europe rail linkages anticipated for 2022 and beyond. A spokesperson for France’s national rail
operator SCNF reported that five years ago, eight freight trains from China arrived at the Valenton
hub daily; that number has increased to 18 to 20 today.

Categories deepen risk insights

To help customers refine their risk scores for suppliers, Resilinc in 2021 began classifying
potentially disruptive supply chain events into 12 categories. By including historical data from
more than 10 years of supplier performance history in Resilinc’s database, the Risk Category data
allows customers to build a more nuanced and detailed understanding of risks associated with
certain suppliers or links in their supply chains, and then to take action to mitigate those risks.

Source: Resilinc EventWatch
In 2021, two of the largest and fastest growing risk categories were Financial Risk and Information
Security Risk; both grew by more than 140%. Financial Risk includes bankruptcies, profit warnings,
business sales, and other types of events. Given the economic stress of the last few years, the
reasons for growth in this category are obvious: the demand destruction and supply chain chaos
stemming from the pandemic pushed
many companies out of business.
If the last two years have taught
Information Security risk is measured us anything, it’s that there is no
such thing as a risk-free supply
by cyberattacks. The shift to remote
work opened new vulnerabilities
for corporate IT systems and chain and that often the inability to
cyberattacks increased in frequency,
scope, and costs. Additionally,
secure the most inexpensive (and
many companies relied more insignificant) parts and materials
heavily on automation software in can wreak havoc (a $5 chip; a $0.26
the face of skilled labor shortages,
providing additional surface area for
cardboard box; plastic packaging
cybercriminals to attack. or paper labels). We saw this in
the healthcare and automotive
Shipping and logistics providers were
also targeted by hackers, notably an industries in 2020 and continued to
attack on South Africa’s rail and port see the impact in 2021 across other
system. Attacks on fuel suppliers,
essential suppliers for transportation
sectors, like the food supply chain.
and logistics, included the Colonial
Pipeline hack in May which disrupted Knowing 1) when disruptions
happen, 2) which suppliers they will
fuel supplies on the East Coast for
several days. Less well known was the
summer hack of an important bunker impact, and 3) how to react quickly
fuel terminal on the Canary Islands
operated by Prologos Canarias. ·
to those disruptions is crucial to a
AI
Insights
resilient supply chain.

12 RESILINC · 2021 ANNUAL REPORT RESILINC · 2021 ANNUAL REPORT 13

 Commodities
400% Resilinc’s CommodityWatchAI is an Artificial
Intelligence-powered tool that forecasts
supply and pricing fluctuations for

rise in costs of
29 commodities that are critical to a wide
range of industries.

solar-grade Launched in 2021, CommodityWatchAI monitors

over four million data sources and analyzes

polysilicon from
historical data to identify relevant trends. The tool
empowers Resilinc customers with market intel to
make strategic purchasing decisions, negotiate

2020 to 2021 favorable contracts, and protect their supply

continuity.

atchesilnComdyW:RSur AI
Insight
 That was followed by indicators that prices would go
down due to the pandemic-induced destruction of
demand for many products. And prices did indeed retreat
at that point. Then in the second and third quarters
of 2020, CommodityWatchAI forecast price increases
over plastic waste. And like many industries, the paper
industry has been hit by Shipping/Cargo Disruptions
and Higher Operational Costs, especially for electricity
and natural gas. Many paper companies have filed
bankruptcies.

Materials and commodities

because demand for vehicles and other products
was rebounding, and cobalt processors were taking Frankly, these pressures will only get worse in 2022 unless
aggressive positions to consolidate raw materials. As there’s an unexpected return to normalcy in logistics,

markets face another

forecast, by the third quarter, cobalt prices energy costs, and lumber demand. There have also
started soaring. been regulatory changes in Canada that have negatively
impacted paper producers. ·
Resilinc: More recently, you’ve done a deep dive on

year of turmoil what happened with aluminum in 2021. Tell us about

that and what you’re expecting for 2022.

Khan: The year 2021 started with strong aluminum

demand, and from early January CommodityWatchAI was Top 10 Contributing Factors
signaling supply constraints and rising prices around To Commodity Volatility
the world. There were a few opportunity signals, such as
Q&A with Shahzaib Khan the Biden Administration exempting Australia, Canada,
Mexico, and other countries from aluminum tariffs. But
Senior Director at Resilinc, CommodityWatchAI lead
Higher Consumption and other variables soon trumped
this factor.

Resilinc: What were some of the key trends affecting
the pricing and supply of commodities in 2021?
Khan: After the pandemic was declared March 11, 2020,
consumer demand plummeted for a vast range of
products. Within months, however, demand rebounded
in patterns that defied historical demand forecasting
models. This unprecedented demand spike led to supply
constraints for commodities ranging from aluminum to
paper, and that’s why Higher Consumption was by far the
top moving factor for CommodityWatchAI in 2021.
The second most common moving factor was Market
Uncertainty/Fear which represents buyers’ concerns over
things like omicron outbreaks, changes in central bank
interest rates, inflation, and geopolitical conflict. Gold for
example is highly sensitive to uncertainty. When investors
perceive heightened risks for returns on traditional
securities like stocks, they shift their portfolios toward
gold. There was a lot of that in 2021, so we saw gold
prices increase significantly through most of the year.
Of course, all these factors work together to influence
commodity price and supply trends, and that’s why we
monitor more than 35 moving factors.
Resilinc: How does this data translate into
opportunities for commodities buyers?
Khan: Before launching CommodityWatchAI, we
trained our AI engine to recognize and understand the
variables—which we call moving factors—that have
historically influenced each commodity’s supply, demand,
and pricing. Each moving factor has a unique way of
impacting each material. Based on what’s happening in
real time with each commodity and each moving factor,
the AI engine makes predictions about market trends,
including how quickly these trends will materialize and
how long they will last, from one to 90 days.
It’s important to add that CommodityWatchAI also tracks
positive moving factors such as Lower Consumption and
added Sourcing Options that signal opportunities for
buyers to procure commodities at lower prices or more
favorable terms. As you might imagine, the disruptive
moving factors that forecast tighter supplies and rising
prices predominated in 2021.
This intelligence gives users proactive insights to make
more informed data-driven choices in price and contract
negotiations and renegotiations as well as choosing when
to buy and when to sell, estimating future costs and other
important decisions.
Resilinc: You and your team conducted a
retrospective analysis on cobalt, a critical mineral
for batteries and other products, to test and validate
CommodityWatchAI’s performance. How did that go?
Khan: Cobalt was one of the first commodities we
started monitoring at the beginning of 2020, so by
the end of the year, we had 12 months of performance
history to evaluate. We looked back to compare the
indicators of trends for cobalt that CommodityWatchAI
provided to customers with the actual market prices
that later manifested. The analysis showed that when
CommodityWatchAI forecast price increases early in the
year because of the pandemic lockdowns in China, policy
changes in the top cobalt-mining country, the Republic of
Congo, and other factors, prices indeed increased.
Geopolitical tension between Australia and China, the
world’s largest aluminum producer, led to reduced
Chinese imports of Australian bauxite and alumina.
Meanwhile, Higher Consumption continued. Then came
what I call the “monster event” for aluminum: energy
shortages and rationing in China, and rising natural gas
prices worldwide. By October 2021, aluminum smelters
in Europe had cut back production in response to energy
costs, as well as the rising costs of carbon allowances,
which had reached €60 per metric ton.
Looking ahead, the Russia-Ukraine War will dictate
many of the trends for aluminum. The war along the
border, which supplies about 40% of Europe’s gas, has
already driven up gas prices. We’re also already seeing
severe impacts on energy-intensive industries in Europe,
including aluminum smelting.
Resilinc: How about paper, another commodity you
and your team have examined in depth?
Khan: As you know, by spring 2021, there was a surge
in home improvement and renovations in the U.S. which
drove up lumber prices dramatically. These higher raw
material prices—which CommodityWatchAI tracks as Raw
Material Disruption—seriously impacted paper companies
throughout the year. A lesser-known impact was the
decline in supplies of recycled paper. Recycling programs
run by schools and businesses were curtailed with the
shift to home-based work and education. Source: Resilinc CommodityWatch
AI
Insights
Also contributing to the Higher Consumption was
another moving factor: new demand from manufacturers
of paper bags, paper straws and other paper products
that are being substituted for plastic because of concerns

16 RESILINC · 2021 ANNUAL REPORT RESILINC · 2021 ANNUAL REPORT 17

 Silicon and aluminum shortages
causing price volatility
Silicon: a continuing constraint
At 9:55 PM Eastern Time on Tuesday January 5, 2021,
Resilinc’s CommodityWatchAI alerted customers that
demand for silicon raw materials was increasing, and
prices were rising. That was the beginning of a cascade
of indicators and alerts from CommodityWatchAI and
Resilinc’s EventWatchAI of tightening supply and rising
prices. The number one factor was rising demand for
products using silicon, but there were also new tariff
duties and geopolitical sanctions on some Asian silicon
exports, as well as fires and explosion at factories in the
silicon value chain.
By summer, shortages of coal in China—the world’s
largest silicon producer and supplier—led to energy
shortages and rationing in much of the country. While
energy-intensive industries such as steel, aluminum,
and cement were most significantly affected, silicon
wasn’t immune and producers in Yunnan, Sichuan and
elsewhere cut production by as much as 90%. By late
October, the supply-demand imbalance in silicon supply
chains had resulted in price increases of 300% in just
two months.
Silicon metals whose prices had ranged between $1,200
and $2,600 per ton for most of the 21st Century shot up
to as high as $10,000.
Solar power industry
in the spotlight
Silicon supply issues have exacerbated semiconductor
shortages to some extent. In January 2022, Intel reported
that foundry silicon shortages (as well as component
and substrate shortages) would continue to limit its
OEM, ODM (original design manufacturer) and cloud
18 RESILINC · 2021 ANNUAL REPORT
service customers’ ability to ship finished products. But
more significant impacts will likely be felt in the solar
photovoltaic (PV) industry.
Polycrystalline silicon, or polysilicon, is the main feedstock
material used to manufacture PV panels. Demand for
solar PV panels is surging worldwide as nations race to
replace coal and gas power plants with new emissions-
free generating capacity. China’s domestic PV markets
outpaced every other nation over the last five years; and
based on announcements from President Xi Jinping—the
country’s solar buildout will continue to accelerate. With
this blazing demand and the supply issues associated
with energy rationing in China, costs for solar-grade
polysilicon rose 400% from Q2 2020 to Q3 2021.
China is also the dominant producer of polysilicon, with
most of it coming from Xinjiang, the Uyghur region that is
the focus of global concern over forced labor and human
rights. In June 2021, the U.S. imposed a ban on imports
of polysilicon from five companies based in Xinjiang, and
analysts consider the PV industry’s reliance on polysilicon
from Xinjiang a serious strategic vulnerability.
Aluminum capacitor supply
challenges continue
Disruptions to supply chains for aluminum electrolytic
capacitors impacted automotive, consumer electronics,
medical devices, and other industries in 2021.
Capacitors—which store a small electric charge—are
essential components for smartphones, touchscreen
displays, battery chargers and other products.
The shortfall in aluminum capacitors was caused by the
same dynamics behind the semiconductor shortage: a
collision between rebounding demand for products that grew apace, reaching 2.65 million units by the end of
require these components and limitations on the capacity H1 2021, according to McKinsey. From 2022 onward,
of suppliers. Additionally, factory shutdowns stemming BEV market growth will likely be highly differentiated
from COVID-19 outbreaks disrupted supplies, especially in by country and region, with China and Europe—where
Malaysia and Indonesia. the most aggressive incentives and policies have been
enacted to support BEV adoption—growing significantly
The shortages increased lead times for shipments from faster than the United States.
20 weeks to 40 to 52 weeks depending on the type of
capacitor. By the end of Q3 2021, the supply of aluminum Resilinc expects supplies of aluminum capacitors to
electrolytic capacitors had fallen short of demand by 15% remain short of demand through the first half of 2022.
to 20%. Trends for aluminum commodities generally will depend
a great deal on what happens in the Ukraine.Tensions on
Exacerbating the shortages of aluminum capacitors: the border between Ukraine and Russia—which supplies
turmoil in aluminum commodity markets that led to rising about 40% of Europe’s gas—have already driven up gas
costs for formed and etched aluminum foil used in the prices. A serious armed conflict would mean severe
devices. (See the Q&A with Resilinc’s Shahzaib Khan in financial impacts on energy-intensive industries in
this report for more on aluminum supply, demand and Europe, including aluminum smelting. ·
pricing trends and forecasts.)
Electric vehicle industry
in the spotlight
Along with multilayer ceramic capacitors (MLCCs),
aluminum capacitors are used widely in battery electric
vehicles (BEVs). The growth of the BEV market will put
additional pressure on supply chains for aluminum
capacitors, although forecasts for BEV markets are highly
uncertain. Before the pandemic, global sales of BEVs
came to 2.3 million units in 2019, about 2.5% of total
global sales of light-duty vehicles of 90 million units,
according to McKinsey & Company reports.
Demand for BEVs was destroyed along with all types of
light-duty vehicles in the first months of the pandemic.
But as the automotive market recovered—albeit with the
overhang of the semiconductor shortage—BEV sales
RESILINC · 2021 ANNUAL REPORT 19
 Semiconductor shortage
hits supply chains
At the beginning of 2021, vaccinations against COVID-19 While chip makers such as TSMC and Intel are
had begun and it seemed like we could see the light at investing in new capacity, it takes several years to build
the end of the pandemic tunnel. But for manufacturers a new fab. However, fab equipment spending has
of products ranging from automobiles to exercise increased for the third year in a row, with $200 billion
equipment, that light turned out to be a freight train of
disruptions coming to derail their supply chains.
spent globally on new line construction. The majority
of new lines planned to start construction in 2022 are
Timeline of the Semiconductor Supply Chain Shortage
in China, Taiwan and Japan, but multiple companies
In the first two quarters, OEMs, wholesalers, and are investing in new fabs in the United States in the
retailers have had to adapt to shortages of raw materials hopes of lessening reliance on Asian manufacturing. Endemic Characteristics of the Semiconductor Supply Chain
including plastic polymers, rubber, metals, lumber, and
Growing reliance on Cost ($Bs) and 95%+ wafer fab Small number of Moore’s Law – next
petrochemicals, as well as the parts and components The semiconductor shortage is expect to last at least semiconductors in delay (2-3yrs) to capacity utilization, players in the wafer gen manufacturing
made from these materials. through the end of 2022, with continued high levels of many applications add capacity little upside flexibility fab & equipment every 3 years
demand while manufacturers attempt to catch up with supply chain
The semiconductor shortage—caused by a fatal an increased number of fabs. Additionally, as tensions
combination of increasing sanctions, work-from-home rise in Russia and Ukraine and energy prices skyrocket,
related demand spikes, and fires at vital factories—has there is a high possibility of continued disruptions
hit the automotive industry particularly hard. With prolonging recovery even further.
driver assistance systems and other electronic features 2017-2021 1H 2021 2H 2021
Further compounded
multiplying with every new model year, modern vehicles Additionally, as the Russia-Ukraine conflict plays out Tariff & sanctions COVID-19 demand Record hurricane by supply side
require an increasing number of semiconductors. When and energy prices skyrocket, there is a high possibility activity supply shifts season & California disruptions
the shortages occurred, automakers had to delay and of continued disruptions prolonging recovery even fires
even halt production of many models. And despite their further. For example, prolonged disruptions due to
vast purchasing power and extensive supplier networks, military action will severely impact semiconductor
automakers continue to have difficulty procuring production. What’s more, Russia and Ukraine are critical
adequate supplies of semiconductors. for neon gas and palladium supplies for semiconductor 2021 Demand Shifts
production: Russia produced 40% of global palladium Global work from Hoarding behavior Companies ditching Resurgence of Acceleration
Intense competition from IT and electronics in 2021. Additionally, 90% of neon - which is essential home policies from sanctioned JIT policies due demand frompaused of electric
manufacturers whose semiconductor supply chains are for chip lithography - originates in Russia and is purified entities to COVID-19 orders in 1H vehicle timelines
more robust due to their high demand and long history by a company based in Ukraine.
with semiconductor suppliers left automakers
with few solutions. It’s likely the trickle down effect of global geopolitics
and infrastructure damage triggered by the Ukraine
invasion will cause long-term supply chain shifts. ·

12-Months of Disruptions Affecting Semiconductor Supply Chain

June 2021 August 2021 October 2021 December 2021

AUGUST & SEPTEMBER 2020 OCTOBER 2020 JANUARY 2021 FEBRUARY 2021 MARCH 2021 APRIL 2021 MAY 2021
Huawei & SMIC sanctions Asahi Kasei & Unimicron fires Container shortage Taiwan drought Renesas fire US & MX droughts Factory Shutdowns Production Cuts Factory Shutdowns Profit Warnings Production Cuts

20 RESILINC · 2021 ANNUAL REPORT RESILINC · 2021 ANNUAL REPORT 21

Lorem ipsum dolor sit amet, consectetur
adipiscing elit. Pellentesque sagittis elit
velit, eu sagittis dolor viverra a. Quisque vel
nibh posuere, sollicitudin leo eget, aliquam
libero. Maecenas vel lacus id quam tincidunt
consectetur ut eu risus. Donec ac ex quis quam
eleifend euismod sed id lorem. Morbi nec felis
sit amet leo consectetur tempor at ac massa.

Resilinc Viewpoints
24 ESG risk monitoring must go beyond tier-one
26 Reshoring and nearshoring (still) in the spotlight
28 Supply chain hacks are the next big cause for concern

RESILINC VIEWPOINT
ESG risk monitoring must
go beyond tier-one
By Bindiya Vakil, Resilinc CEO
Originally published in SupplyChainBrain
From labor and safety issues to unethical sourcing and
pollution violations, inadequate monitoring of CSR, ESG,
and sustainability risks within the supply chain can lead
to brand and legal troubles for companies. What’s more,
a violation or compliance issue at a supplier can lead to
serious supply disruptions including factory shutdowns or
materials being held up at customs points.
While supply chains overall are a force for good - they
create employment opportunities and lift millions of
people out of poverty - they also have a dark side. They
are often exploitative and unsustainable, particularly
to the poor or desperate. Take the fashion industry for
example: well-known brands will claim to be sustainable,
when in fact, the working conditions in factories are
unethical. Luckily the prevalence of cell phone footage,
social media whistleblowers, and NGOs, has brought
this hidden side to the forefront. Accordingly, the days of
plausible deniability of the past are over.
As supply chain and procurement experts, we need to
make sure our supply chains are clean and clear; that
there are no violations that could negatively impact the
brand or result in business licenses or export or import
licenses getting revoked. Supply chain compliance for
ESG in particular is gaining steam and more regulation
and requirements around it are anticipated for
organizations (example: companies will be required to
conduct due diligence at their own factories as well as
those of their suppliers).
This is why the ability to assess, monitor and accurately
report on supply chain sustainability and ethicality has
become a sought-after capability, and why screening and
tracking suppliers for sustainable and ethical business
practices should be part of a company’s CSR and/or
24 RESILINC · 2021 ANNUAL REPORT
ESG program. To be effective however, the assessing,
screening and monitoring must go beyond high-
volume, tier-one suppliers. Considering 80% of supply
chain issues originate with sub-tier suppliers, supply
chain sustainability, CSR, and ESG risk is a visibility and
knowledge problem.
So, how do you solve this knowledge and visibility gap?
The journey to supply chain visibility and deep
knowledge, begins with multi-tier supply chain mapping
(ideally down to third-tier suppliers). This type of multi-tier
visibility provides a complete picture of the entire supply
chain, including what countries and factories you source
commodities, parts, and materials from.
Let’s take shea butter as an example: long before it gets
to a retail shelf, the raw material used to make it (shea
nuts) is harvested in Ghana by individual or co-operative
collectors. From this first touch point, there are likely
three to four additional touch points (processing plant,
packaging facility, distributor, etc) prior to the product
hitting the store shelf and ultimately consumer hands.
Knowing about how all these suppliers are connected,
across tiers, and what is happening at each of these
touch points, is important from a sustainable sourcing
and risk management perspective.
The visibility supply chain mapping provides is the
foundation to mitigating sustainability, CSR, and ESG
risks. However, knowledge about what is happening,
and where, across your supplier network allows a
deeper understanding of potential issues and the
ability to offset any brand, legal, or logistical trouble.
Resilinc’s EventWatchAI supply chain monitoring system,
for example, issues alerts almost every day about
Environmental Hazards, FDA/EMA/OSHA Actions, and
Labor Violations at suppliers around the world. In 2021, we
saw a 10x increase in Labor Violations alerts compared to
2020.
Many of these caused mild to severe supply chain
disruptions in the form of production halts, investigations,
lawsuits, and regulatory action.
Take what happened to global producer of latex gloves,
Top Glove. After finding evidence that the company
used forced labor in the production of disposable gloves,
U.S. Customs and Border Patrol instituted a ban on Top
Glove products and seized shipments of the company’s
products in July. This resulted in Top Glove having to
delay its planned June IPO in Hong Kong.
Another example is Nestle: in Spring of 2021 an article
in the Guardian article reported that the company drew
about 58 million gallons of water in a single year, far
more than the permitted 2.3 million gallons in the state
of California (which is experiencing record droughts).
The company was eventually sent a cease-and-desist.
And this was not Nestle’s only water violation. Similar
accusations follow Nestle in Oregon, Pennsylvania,
Maine, and Michigan. All of the accusations getting
picked up in news alerts by supply chain monitoring
companies like Resilinc.
When it comes to screening for supply chain risks
related to sustainability, CSR, and ESG, some
common principles and best practices should
be applied:
Monitor: Be sure you are monitoring your suppliers
across key risk areas. Some examples include health
and safety issues; unpaid wages; under-age labor; illegal
overtime; pollution violations; bans; warnings; and
investigations.
Quantify: Once monitoring is underway, highlight or note
which suppliers have more robust CSR, sustainability,
and ESG policies and practices. This way you can single
out those suppliers that may be more vulnerable and
potentially cause legal, brand, or supply issues.
Mitigate: work with the at-risk suppliers to develop joint
plans to close gaps and ensure limited exposure to any
trouble. If the risk is too great, it may make sense to
terminate the relationship and find a new supplier.
Track: be sure to maintain active tracking of and
report on whatever mitigation plans you have in
place to close gaps.
Launching an ongoing supplier risk assessment (survey)
program specific to CSR, sustainability, and ESG
practices, is another recommended best practice. This
is where working with an SCRM solution provider, that
has the assessments built and years of supplier risk
intelligence data available, can really help.
By going this route you’ll:
• Immediately increase the number of suppliers
assessed: an established SCRM provider will already
have the majority of your suppliers and sites logged
into its network. It may also already have supplier risk
scores and reporting available.
• Save hundreds of hours or staff time: by using a
pre-built survey and technology platform to assess
sustainability, CSR, and ESG risk, the time requirement
drops significantly.
Gain access to verified risk surveys: No need to start
your sustainability survey from scratch! When working
with a provider, you’ll be able to leverage an assessment,
based on industry standards. The surveys should also be
translatable to accommodate global supply chains.
According to Gartner, supply chain professionals
“increasingly see a financial benefit in sustainability,
and a majority plan to invest in waste reduction, ethical
sourcing, water-efficiency improvements and carbon
emission reduction over the next 18 months.” What’s
more, EY research shows that sustainable supply chains’
investments can add 12% to 23% to value chain revenue.
But to achieve monetary, reputational, and competitive
advantages, supply chain and procurement practitioners
must go beyond touting organic cotton and shoes made
from recycled plastic. We must prioritize visibility and
transparency into our full supply chains. ·
" To achieve monetary,
reputational,
and competitive
advantages, supply
chain and procurement
practitioners must go
beyond touting organic
cotton and shoes made
from recycled plastic.
We must prioritize
visibility and
transparency into our
full supply chains."
RESILINC · 2021 ANNUAL REPORT 25
 RESILINC VIEWPOINT
Reshoring and nearshoring
(still) in the spotlight
As supply chain managers
consider strategies for
increased resilience, many
are continuing to weigh their
options for reshoring
—bringing production and
supply chains back from foreign
countries—and nearshoring—
bringing production and supply
chains closer to home or
to major markets.
Early in the pandemic, shortages of PPE and medical
supplies from China drove an urgent conversation
about re/nearshoring to lessen dependence on Chinese
imports. The semiconductor shortage broadened this
concern beyond China (which is not yet a central player
in semiconductors), leading to new U.S. and European
incentives for domestic chip production. Then in June
2021, the Biden Administration’s supply chain review
highlighted national security risks in the United States’
dependence on China for high-capacity batteries, critical
minerals and materials, and pharmaceuticals/APIs. The
report also warned that China was investing hundreds of
billions annually in semiconductor production
and expected to more than double its number
of fabs by 2023.
While Resilinc applauds the heightened scrutiny of
vulnerabilities in global supply chains, there are real
limits on the extent to which OEMs can or should re/
nearshore. In the case of semiconductors, the shortages
will continue into 2023 and beyond, given the years-long
26 RESILINC · 2021 ANNUAL REPORT
lead times to develop new fabs. The semiconductor value
chain—which includes many specialties from chip design
and equipment manufacturing to fabrication, testing
and assembly—is characterized by deep integration and
interdependencies between the U.S., Taiwan, South Korea,
Japan, Europe, and China.
“No region has the entire production stack in its own
territory,” wrote researchers for the German think tank
SNV in their October 2020 study.
This highly interdependent value chain will make
government quests for “strategic autonomy” and
“technological sovereignty,” difficult if not impossible.
Instead, SNV recommends governments seek to ensure
access to foreign technology through trade and foreign
policy in order to foster more resilient supply chains.
Looking beyond semiconductors, there are broad and
compelling reasons that China and other Asian countries
dominate global supply chains—and those reasons
are no longer limited to the labor cost advantages that
originally drew manufacturers to Asia. China in particular
offers world-class expertise in advanced industries, a
vast skilled workforce, unmatched logistics and other
competitive advantages. Even when final production or
assembly is procured elsewhere, non-Chinese suppliers
are still dependent on Chinese parts such as smartphone
components and materials like textiles.
Early in the pandemic, surveys showed a spike in interest
by corporate leaders to re/nearshore their supply chains.
More recently, corporate thinking has shifted away
from re/nearshoring and more toward a broader mix of
strategies: increasing inventory; dual sourcing critical
parts and materials; entering into longer term contracts
with suppliers; and investing in technology like that
offered by Resilinc to map, monitor and mitigate risks
in supply chains down through the tiers of direct and
indirect suppliers.
“Companies are not entirely abandoning existing supply
chain policies, but they are revamping them to build
For firms that have yet to take these steps, Resilinc
hopes that the disruptions caused by COVID-19 have
additional resilience,” wrote the Financial Times in provided the necessary motivation. Thanks to the rapid
December 2021. development of technology and software over the last
decade, firms like Resilinc can make supply network
Of course, strategies must vary by industry based on the mapping and monitoring less expensive and time-
capital-intensity of production, technical requirements consuming.
for suppliers and other factors. There are also different
levels of motivation in different industries. As McKinsey & Having visibility into your supply chains is no longer
Company reported in November, the healthcare industry, optional for large OEMs. Mapping provides that visibility
which was deeply shocked by PPE and medical product and it is the first step in protecting supply chains, the
shortages, has been most active in regionalizing supply starting points for building risk profiles of suppliers and
chains and moving production closer to end markets. taking proactive measures to mitigate those risks.
Modern global supply chains cannot be re-engineered
quickly or inexpensively. For many products using
advanced technology, new potential suppliers must be
Mapping enables nimble and efficient responses to
unfolding disruptions such as natural disasters and
qualified with production quality analyses, IP agreements, factory fires. Mapping is the beginning of a journey to
engineering assessments, and other due diligence before robust supply chain risk management that can generate
contracts are signed. Unwinding those relationships to significant return on investment. ·
move production to another country requires repeating
all those steps—after a suitable supplier with excess
capacity is found.
And in many cases supply chains are so complex and
opaque that OEMs are not aware of where their parts and
materials are produced. Even a supply chain that is re-
engineered to bring production back to the U.S.
could well remain China-dependent because so many
U.S. manufacturers utilize Chinese parts, components,
and materials.
The importance of deep supply chain mapping is not
a new idea to anyone in the supply chain profession.
Earlier supply chain crises like those caused by two major
natural disasters in 2011—Japan’s earthquake and tsunami,
and Thailand’s floods—heightened interest in multi-tier
mapping and helped drive firms like Toyota to invest
in mapping and visibility tools that enable superior risk
management.
RESILINC · 2021 ANNUAL REPORT 27
 RESILINC VIEWPOINT
Supply chain hacks are the
next big cause for concern
by Sumit Vakil, Chief Product Officer and Judy Chow, VP of Product
Resilinc’s IT and cybersecurity
leaders warn that the rapid
transition to IoT systems
increases vulnerabilities for
OEMs as well as their suppliers.
Securing supply chains against cyber attacks should
be a much higher priority than what we’re currently
seeing across industries. It’s blunt but the data doesn’t
lie. Our 2021 EventWatch data reveals that supply chain
disruptions due to Cyber Attacks were up 116% year-
over-year and ranked 11 in terms of top disruption events.
Moving forward, it’s likely cyber attacks could well create
disruptions that exceed even the pandemic in terms of
damage to revenues, profits, and reputations.
With the rapid digitalization of operational technology in
every industry, the Internet of Things (IoT) presents vast
new opportunities for hackers. As The New York Times
cybersecurity and digital espionage reporter Nicole
Perlroth states in her book: This Is How They Tell Me the
World Ends, “the tsunami known as the Internet of Things
… [is] creating the world’s largest attack surface.
No longer are hackers’ targets limited to IT networks; they
now have vast and expanding networks of operational
technology (OT) to exploit as they seek to steal secrets,
destroy data, demand ransom, shut down systems and
wreak other manner of costly havoc."
Supply chains further expand the surface area that
hackers can attack. When a tier-two or two supplier is
hacked, the breach can disrupt its customers’ supplies
of materials, parts, and products, as well as vital services
28 RESILINC · 2021 ANNUAL REPORT
such as contract manufacturing, assembly, and testing.
And for many materials and components, the lower the
tier that a supplier occupies, the greater the number of
end-use OEM customers that can be affected by a breach
of cybersecurity.
Supply chain cyber attacks are a threat that many
OEMs have not prepared adequately for. While many
leading companies have robust programs to monitor
and mitigate cyber risks in their supply chains, many
companies of all sizes are not well prepared for supply
chain cyber attacks. A common problem is that corporate
cybersecurity managers—focused on maintaining
their own organization’s security—haven’t adequately
engaged in supply chain cybersecurity. And supply
chain executives—even those who are aware of growing
cybersecurity risks in their supply chains—often lack
the expertise and capacity to evaluate suppliers’ IT
and OT security.
Shipping and logistics providers are also increasingly
vulnerable to cyber attacks. In July, South Africa’s port
and rail operator Transnet declared force majeure after a
cyberattack crippled its ability to operate four container
ports and the nation’s freight rail system. Later that
summer bunker fuel terminal was hacked by LockBit—a
ransomware outfit that had earlier attacked Accenture,
Bangkok Airways and others. As in other industries,
digitalization and the IoT are making shipping and
logistics firms more vulnerable.
Cyber Attacks ranked
as top risk for 2022
As the pandemic initiated a major shift to remote work,
cybersecurity weakened, vulnerabilities multiplied,
and 2021 saw a dramatic increase in cyber attacks.
Checkpoint, a leading provider of cybersecurity solutions, Another best
reported a 50 percent increase in overall attacks per practice for
week on corporate networks compared to 2020. And supply chain
in its survey of more than 2600 respondents in 89 cybersecurity is to
Insights
countries and 22 industries, Allianz Global’s reports ensure that direct
that cybersecurity is the top risk worrying corporate suppliers insist
Source: Resilinc EventWatch
AI
executives and managers for 2022. that their suppliers
verify that they
While these trends are alarming, one upside is that are adequately
heightened awareness of cyber risks will lead to greater
investment in IT and OT security and greater vigilance
protecting their IT
and OT networks.
against threats—including those threats lurking in Time and
supply chains. again, the most
destructive disruptions in supply chains occur at second-
Best Practices or third- or even fourth-tier suppliers—even those that are
supplying inexpensive commodity materials or parts.
By now it’s a widespread practice for supply chain
managers to perform due diligence on new suppliers’
For companies that have thousands or tens of thousands
cybersecurity practices. These reviews shouldn’t be
of suppliers, this level of diligence regarding cyber risks
limited to the supplier’s security policies and anti-hacking
can be resource intensive. Firms such as Resilinc can
software, but also include how employees are trained to
assist with automated outreach to suppliers. At Resilinc
maintain security and how compliance with corporate
we have a library of risk surveys that our customers use to
practices is monitored. Many cybersecurity breaches
evaluate cyber and other risks in supply chains. And our
are caused by human errors such as misconfiguring a
Supplier Intelligence Network streamlines the process for
network setting or clicking a link on a phishing email.
supplier firms who can respond to one survey and share
This due diligence must also include threats to
it with all the customers who are in our network—rather
operational technology by requiring the supplier to report
than filling out a survey for every one of their customers.
on the connected devices and equipment that your parts
and components will depend on. OT security is often a
Cyber incidents will continue to increase. From
blind spot for companies, even though the IoT has been
independent criminals to state-sponsored cyberwarfare
growing for many years.
units, hackers are rapidly scaling up their skills and
ambitions. To secure a supply chain, corporate supply
Reviews of suppliers’ cybersecurity practices should
chain organizations must keep pace. ·
be updated regularly - ideally every six months. A
firm’s cybersecurity practices may have been robust
and mature when it responded to an initial inquiry, but
over time cyber practices often degrade. Ongoing
engagement is required to protect a supply chain against
emerging threats.
RESILINC · 2021 ANNUAL REPORT 29
Customer Viewpoints
32 How GSK leverages supply chain inte
for strategic goals
34 What’s next for the healthcare supply chain?
It’s a mixed (doctor’s) bag say experts
 CUSTOMER VIEWPOINT

How GSK leverages supply

chain intel for strategic goals
Ellipta inhaler production line - Ware, UK

Ashish Gupta, VP of Specialty Pharma Supply Chain and Strategy, discusses An early pilot test of proactive supply chain risk management (SCRM) using Resilinc’s platform
the biopharma company’s journey in supply chain risk management helped validate the broader value proposition. “We were launching new specialty medicines, so
we were bringing on high-risk suppliers and creating complex supply chains,” said Gupta. “We
did a proof of concept with one supply chain, and we had a quick success, and then we started
replicating [that approach] elsewhere.”
Pharmaceutical company GSK has a complex global
supply chain that must function smoothly - lives Another big insight arose as the company mapped its supply chain down through the tiers. This
revealed that in some cases, one small company several tiers down from direct suppliers could be
depend on it. a vital supplier to many direct suppliers.

“Patients are at the end of our supply chains,” said This deeper supply chain intel has enabled the company to collaborate with suppliers to improve
their resilience, and it has informed “make-or-buy” decisions on whether to invest in new
Ashish Gupta, VP of Specialty Pharma Supply Chain manufacturing capacity or increase procurement when manufacturing new products, according
and Strategy. “Every vial we produce and distribute to Gupta.

could save a life.” Single-use systems: biopharma’s “microchip issue”

To research, develop, produce, and distribute its pharmaceuticals, vaccines, and consumer A growing challenge for pharmaceutical companies developing biologics is the sourcing of
healthcare products, GSK has what Gupta calls “a massive global footprint, sourcing ingredients what are known as “single-use systems”—disposable, pre-sterilized manufacturing equipment
and commodities from all over the world.” According to GSK’s 2020 annual report, the company that is often used instead of stainless steel equipment for pre-commercial and even commercial
works directly with 36,000 suppliers. biopharmaceutical manufacturing.

Like other pharma companies, GSK must ensure that suppliers meet the company’s quality “Single-use systems for biologics are the microchip issue for pharma right now,” said Gupta.
standards as well as the requirements of healthcare regulators such as the FDA. Building resiliency “There are just very few providers,” and regulatory requirements make switching providers difficult
in this context often means “having backup sites properly approved by regulators … from multiple and time consuming. “You have to do validation trials and make sure the regulators [approve a
countries that have different requirements for transparency and data sharing,” said Gupta. new provider]. It takes multiple months or more than a year to get that approval.”

From reactive issue management to proactive strategy
GSK’s approach to supply chain risk management has evolved substantially over the last several
years, inspired and enabled by Resilinc. When Gupta and his team first spoke with Resilinc’s
leaders about four years ago, they initially sought capabilities to better manage “day-to-day risks in
our global supply chain and have some capabilities to gain early mover advantages,” in response
to disruptive events.
“Since then, our thinking has evolved … and we’re now using our [supply chain] risk management
as a lever in our strategy,” said Gupta.
Gupta considers the pandemic an “enabler” for supply chain resilience. The global disruption
has encouraged many large companies to “go from reactive to proactive, from issue-based
management to data-driven methodologies, from bouncing between suppliers to collaborating
with suppliers.”
Gupta says his group at GSK is in year two or three of its journey to robust supply chain resilience.
“There’s a lot more to do,” he said, adding that he views Resilinc as a critical partner in this journey.
“We really like the benefits we’re getting from EventWatchAI but obviously we want to go beyond
that and start using the full offering.” ·

32 RESILINC · 2021 ANNUAL REPORT RESILINC · 2021 ANNUAL REPORT 33

 CUSTOMER VIEWPOINT
What’s next for the
healthcare supply chain?
By Fred Crans, Healthcare BD Executive, St. Onge Company and Bindiya Vakil, Resilinc CEO
The healthcare supply chain was totally unprepared to
address the challenges presented by the pandemic.
Between an overnight increase in demand for key items
like PPE (70% of which came from the country where
the pandemic originated) and just-in-time inventory
management strategies aimed at reducing stock and
cost, the supply chain wasn’t able to keep up. Those
in charge of healthcare supply chains were put under
a microscope and asked by their C-suites to perform
miracles. Now, as the dust settles, the healthcare industry
has an opportunity to learn from the disruption and make
strategic supply chain decisions to prepare for the next
one. But will it? If history has taught us anything, it’s that
once things normalize, even pandemic-size supply chain
disruptions are often forgotten, particularly in healthcare.
This was a recent topic of discussion between a group
of key healthcare industry supply chain leaders from top
healthcare networks, group purchasing organizations
(GPOs), and humanitarian organizations. The following is
what they had to say about healthcare’s post-pandemic
landscape and what is likely to happen when it comes to
risk and inventory management; reshoring; what the role
of government should be; and what the future holds.
Risk Management:
COVID-19 wasn’t the first time the U.S. healthcare supply
chain was given a crash course in risk management.
In 2017 Hurricane Maria struck Puerto Rico which was
(and still is) an epicenter of manufacturing sites for
healthcare products, including mission-critical items like
IV mini-bags, which are used to administer intravenous
medications in a finely controlled manner. The alternative
is a nurse with a needle and syringe to deliver the goods:
a costly and time-consuming option.
When the hurricane hit, many companies discovered that
just one site produced all the mini-bags manufactured for
the American market, and the site was down. Because of
34 RESILINC · 2021 ANNUAL REPORT
this, around 70% of U.S. patients received delayed service.
A costly disruption.
Still, only a minority of healthcare organizations used
Maria as a wake up call for the need to prioritize supply
chain visibility. When COVID-19 hit it (re)opened the eyes
of healthcare systems and GPOs to the fact that they
need to know where the items they source are produced.
This includes the raw materials and tiny parts that go
into equipment. Becton-Dickinson (BD) for example
has implemented a regional sourcing model to spread
the production and mitigate the risk that comes with
overdependence on one supplier in one country. For The
American Red Cross’ supply chain team, led by Sadia
Lorentz, virtually everything has become about
managing risk, a far cry from five years ago when it was
barely top of mind.
Our prediction: Healthcare companies will continue
to invest in supply chain risk management (SCRM)
programs, including supply chain mapping and
monitoring.
Reshoring, Sourcing,
and Inventory Management
Strategies:
At the onset of the pandemic, the U. S. healthcare
supply chain was heavily-criticized for two things: (1)
sourcing most of the PPE items from foreign countries,
especially China and (2) for maintaining minimal on-hand
quantities of key items. Two conclusions immediately
surfaced: manufacturing should return to the U.S. and
organizations should maintain a minimum of 90 days’
supply of key items. Both conclusions were naïve and
simplistic. They also lacked context: starting in the late
90s manufacturing of items like masks and gowns had
transitioned to Asia because of the ample supply of the
It’s a mixed (doctor’s)
bag say experts
raw materials needed to produce those items, and a
virtually inexhaustible supply of cheap labor. What’s more,
there has always been pressure from the C-suite to keep a
lean supply chain; many healthcare supply chain leaders
would agree that building up inventory would have been
heavily criticized.
When discussing the prospects of onshoring
(manufacturing items in the U.S.) or nearshoring
(manufacturing in Canada, Mexico, Central America,
South America), healthcare supply chain leaders warn
that - what sounds like a good idea - is actually extremely
complicated. According to Ed Hisscock of Trinity Health,
onshoring or nearshoring is a mixed bag; in some cases
it will make sense but there are a lot of cases where it’s
incredibly labor and time intensive. For example: for
healthcare product companies, FDA approval for a new
supplier can take up to two years.
Cost and labor availability are also factors. BD for example
- at this time - doesn’t have the resources to bring
manufacturing home. The company’s CPO, Kevin Nelson,
also cited the lack of skilled talent in the U.S. being a
major concern.
Our prediction: No single strategy will successfully
address sourcing and inventory management.
Government’s Role:
Throughout the course of the pandemic, no entity
faced more continuous criticism than the federal
government. But what should the government’s
role be in strengthening and protecting our supply
chains? Some experts, including Charlie Miceli of the
University of Vermont Health Network and John Wright
of Intermountain Health, say it comes down to the
government aligning with the healthcare industry on
reshoring manufacturing; this includes setting standards
and creating incentives for the costs incurred by
reshoring. Both agree that without incentives, a reshoring
strategy will be nearly impossible due to the expense and
the time.
But that doesn’t mean health systems should rely on the
government for supplies. Historically there has been a
separation between government and the management of
supply chains. However, the pandemic has shown us that
there are fragilities not solved by the market, so, there is
a role that government and public policy can play, mainly
to make supply chains more resilient, sustainable, and fair.
According to John Strong of Access Strategy Partners,
this includes taking a look at existing distribution systems
and working with them; a much better solution than
trying to create something from scratch.
Our prediction: Government has to become involved
and remain involved with the private sector, but not
reinvent the supply chain wheel.
The Future:
When discussing the healthcare supply chain of the
future, predictions are both optimistic and pessimistic.
Some supply chain practitioners fear that when the dust
clears, supply chain’s status will “rubber band” back to the
pre-COVID days, when it was a transactional necessity
as opposed to a strategic element of the enterprise.
Others, such as Curtis Lancaster of Westchester Medical
Center Health, predict that the supply chain will be in
the forefront of change including Artificial Intelligence,
Robotics, participation in a new milieu of care and the
emergence of new competitors.
Our prediction: The pandemic may have been a
wake up call but it’s uncertain if the lessons learned
will stick. The only certainty is that there WILL be
another supply chain upheaval, so it’s best healthcare
systems be prepared. ·
RESILINC · 2021 ANNUAL REPORT 35