Last month the Port of Tianjin, the third largest port in China, was destroyed in a series of deadly explosions fueled by hazardous and flammable chemicals stored in a warehouse there. Tianjin Dongjiang Port Ruihai International Logistics, which owns the warehouse, has a company culture that ignored regulations and used political connections to protect its operations from scrutiny. The explosions leveled an entire section of the city, caused 150 deaths and 700 injuries, displaced thousands of local residents, and left millions of people in fear of the toxic fallout that now surrounds them.
Chinese industrial accident rates are astronomically high, and not just in industries that deal with hazardous chemicals. The China Labor Bulletin has recorded more than 300 industrial accidents in the last seven months alone, with 750 deaths across the Chinese construction, manufacturing, and mining industries. In total, Chinese industrial accidents cause 70,000 fatalities each year.
This catastrophic cycle of industrial disasters is the direct result of a dysfunctional and corrupt government, and the residents of Tianjin remain angry at its poor handling of the disaster. China does have industrial safety regulations in place, but ineffective enforcement renders them useless. All too often, local governments are run by unprincipled profit-seekers who act like callous corporations, focused only on maximizing profits and neglecting environmental and human safety.
Widespread corruption makes matters worse. As the Tianjin explosions show, businesses can easily work around safety and environmental regulations by bribing officials. Two major shareholders in Tianjin Dongjiang Port Ruihai International Logistics were arrested, accused of using their family ties and political connections to gain approval for storing dangerous materials in their Tianjin warehouse—directly violating regulations that prohibit the storage of hazardous chemicals within 3,200 feet of residences.
Considering the impact this indefinite port closure will have on other Chinese ports, the destroyed local infrastructure, and the downstream effects on companies that lost their orders in the explosion, it’s no wonder Tianjin is causing even more North American companies to consider near-shoring. In fact, studies indicate that 48 percent of North American companies are likely to implement near-shoring, or producing goods closer to their customers, within the next one to three years.
Companies such as Plaid Enterprises, Inc. are leveraging tools like Ariba Discovery to help them in their near-shoring efforts. “Posting my buying needs on Ariba Discovery has been a huge success. I was able to discover a supplier that was right below my nose,” explains Leanne Melton, Strategic Supply Base Manager at the company. “Not only did I achieve huge savings and significantly improve quality, I can now market our products as “Made in America”—it’s a win all the way around.”
Check out the Plaid Enterprises case study to learn more, and be sure to read the first two parts in the “Supplier Risk Management Series”:
- Part 1 – Supplier Insolvency and Single Source of Supply
- Part 2 – Supply Shortages and Operational Risk