The risk of actual (and perceived) provenance issues

Summary: There have been 141 childhood deaths from Acute Kidney Injury (AKI) in Indonesia. The cause is thought to be high levels of ethylene glycol and diethylene glycol in some syrup-based medicines although not confirmed. It is suspected that medicinal raw ingredients (i.e. the supply chain) are to blame. We look at three case studies of other supply chain / raw material issues - milk, shampoo and luggage.

Why this is important: Other products may be impacted, both those containing the suspect medicinal raw ingredients and others if the manufacturing process of those ingredients is compromised and impacts other ingredients too. Liability could be far reaching.

The big theme: Provenance of products and raw materials is a key risk factor for any manufacturer. It is essential that companies have appropriate governance measures for their supply chains (and downstream distribution) and have action plans for dealing with disruption to supply and/or sales.

Between 2008 and 2015, whilst working at Morgan Stanley, I was focused on the Asia markets, from India in the West to Australia and New Zealand in the East; from the ASEAN countries in the South to Mongolia and Japan in the North.

At the time, outsourcing was accelerating and the commodities supercycle was in full swing with rising demand from emerging markets and the BRIC countries (Brazil, Russia, India and China). This meant that supply chains grew rapidly and in many cases opaquely giving rise to a number of scandals across different industries. From milk to shampoo to suitcases. We shall discuss those later.

In a recent story, simple cough medicine may have contributed to childhood deaths with the issues potentially arising from the pharmaceutical supply chain.