Two weeks ago, the explosion of thousands of communication devices used by Hezbollah in Lebanon reignited concerns over supply chains and increased global logistics costs, experts said.
“I believe that over time, there will be greater focus on security and supply chain management, whether due to terrorism concerns or some form of competition, or attempts by companies or intervening actors to disrupt business,” Rosemary Coates, Executive Director of the Reshoring Institute and President of Blue Silk Consulting, told FreightWaves.
“We have long advised clients that they must control their entire supply chain. You can’t just assume you can place orders online and expect everything to be fine. You need to know who your suppliers are. Audit your suppliers to understand the risks.”
The attacks on Hezbollah in Lebanon using ordinary electronic devices, targeting pagers first then walkie-talkies, resulted in 42 deaths and over 3,000 injuries from September 17-18. Hezbollah and the Lebanese government blamed Israel, but Israel neither confirmed nor denied involvement.
Hezbollah is an Iranian-backed armed group in Lebanon. Tensions between Israel and Hezbollah have steadily escalated since the war broke out between Israel and another Iran-backed militant group, Hamas, eleven months ago.
Given the difficulty in identifying specific supply chain vulnerabilities in the recent pager attacks, management consultant Mark Zetter believes that thorough supplier evaluations and asking the right questions are necessary to address this challenge.
Zetter, formerly an operations executive in the electronics manufacturing services (EMS) industry, now provides supply chain risk-reward analysis.
“This will enhance visibility for corporate compliance offices, with a greater role and responsibility for compliance managers,” Zetter told FreightWaves. “I see some companies starting to pay more attention to the command chain within their supply chains, such as procurement and purchasing, sales and operations planning. Depending on the product and industry, as well as policy-making and laws, verifying the origin of raw materials and material handling during production and distribution will become increasingly important.”
Zetter noted that manufacturers may implement stricter record-keeping procedures to protect their logistics chain.
“Supply chain executives basically want tamper-proof record keeping,” Zetter said. “The recent events in Lebanon have drawn more attention to the robustness of manufacturing supply chains, with compliance offices and supply chain management wanting to know when, where, and what is introduced into product manufacturing supply chains.” They need detailed information, including verifying authenticity and identifying raw materials.
## Hezbollah Pager and Walkie-Talkie Supply Chain Mystery
Although Israel has been implicated in attacks on Hezbollah, the supply chain for the explosive pagers and walkie-talkies remains unclear.
Early media reports indicated that the AR-924 pager was produced by Taiwan-based wireless communications company Gold Apollo. In a statement on September 18, Gold Apollo said it had authorized BAC Consulting KFT to use its trademark to produce and sell the AR-924 model of pagers.
“Our company only provides brand trademark authorization without involvement in product design or manufacturing,” Gold Apollo stated on its website. Although the company’s website was taken down after the pager incident, BAC Consulting’s LinkedIn page remains online. The company describes itself as having over a decade of consulting experience in environmental issues, innovation and development, and international affairs.
The address provided by Gold Apollo is shown on Google Maps as a residential building. According to The Independent, BAC Consulting CEO Christiana Balsoni-Arcidiacono denied manufacturing the pagers. The Hungarian government also denied that the pager ever existed within its borders.
The Jerusalem Post revealed that Bulgarian authorities are investigating Norta Global Limited because Hungarian media reported that the company was involved in assisting with pager sales. Newsweek reported on Friday that Norta Global CEO Lin Sen Jose went missing while traveling in Boston.
## How Are Logistics Providers Responding?
Regardless of how pagers and walkie-talkies were tampered with, it is unclear whether these attacks will lead companies to shift their supply chains to countries aligned politically and economically.
Manufacturers will continue to seek the lowest-cost suppliers as price remains a key driver for many management decisions. The Asian region will continue to play a significant role in global supply chains due to increasing global consumer spending moving from west to east.
“There are fewer ‘unicorns’ in Asia compared to the West, but with advancements in technology and inventions, especially in areas like electric vehicles, semiconductor manufacturing, and communication devices and connected devices, this is changing,” Zetter said.
Unicorns typically refer to privately-held startups valued at over a billion dollars that have not yet gone public.
“The shift of global power centers weakens Western influence in Eurasia,” Zetter added. “Additionally, Western countries want access to markets with large populations and growing disposable income. To achieve this, manufacturers aim to locate production closer to consumption. The supply chain ecosystem is equally important. For instance, India currently lacks private foundry semiconductor manufacturing capabilities. Attracting a robust supplier ecosystem for mature electronics industries is necessary. Without advanced semiconductor manufacturing capability and talent, India cannot truly compete with China in providing a sound manufacturing supply chain ecosystem.”
The pager and walkie-talkie explosions may alter the amount of investment companies are willing to make to protect their supply chains.
“There’s no doubt we’ll see stronger supplier evaluations, better inventory management, real-time tracking… these are expensive implementations,” Zetter said. “Complete traceability systems or registration… monitoring the movement of raw materials and products is possible. While there are benefits, it creates costly overhead for small companies, leading to many going out of business as they try to offset rising operational costs with unprofitable balance sheets. I see a lot of opportunities in sales and operations planning that have profound implications on supply chains. Understanding the outcomes of decisions helps build protective measures around the supply chain.”
Coates said these attacks could prompt more global supply chains to use visibility software.
“I believe we are moving towards a future where there will be more software,” Coates said. “Some companies can map your supply chain, not just top-tier suppliers but also second and third-tier suppliers so you have a comprehensive view of the global supply chain and all partners involved.” This is expensive, but for large companies, I think it will become essential. If your product is volatile or has potential for such terrible interventions, you must manage your supply chain more diligently and control every aspect.”
_Contributed by Caleb Riviere._
—
Source: FreightWaves
