April 22, 2016

New Lithium-Ion Battery Shipping Regulations Can Impact Electronics Supply Chains (Part 2)

Neil Shenoi

dangerous_goods_cargo_label.jpgIn part 1 of this blog, we examined lithium-ion batteries in the supply chain context and examined the recent ban's stipulations. In Part 2, we discuss why many shippers and advocacy groups disagree with the prohibition, what this ban can mean to supply chain and procurement professionals, and provide next steps for those potentially affected.

Safety Measures or Unnecessary Hurdles?

The ICAO’s new safety measures have been met with opposition from the battery shipping community, particularly the Portable Rechargeable Battery Association (PRBA). The PRBA does not believe the new safety measures help address the actual safety risks of shipping lithium-ion battery consignments, arguing the new provisions present unnecessary hurdles for shippers to deal with and, in turn, impact the global battery supply chain.

According to PRBA’s statement on the regulation changes:

Unfortunately, [the ICAO] completely failed to address the most important safety issue associated with lithium batteries in transport: the lack of compliance and enforcement of the existing lithium battery dangerous goods regulations. The ban on the shipment of lithium ion batteries aboard passenger aircraft also raises serious questions about the delivery of lifesaving medical device batteries needed by patients, doctors, nurses and hospitals in remote areas and shipments to US armed services around the world.”

Whether or not the ban addresses the safety risks of transporting LIBs is, for our purposes, irrelevant. Though poorly enforced, LIB-related dangerous goods regulations have been around since the early nineties. In addition, the fire risk of LIB transport is inherent in all aircraft configurations, all-cargo or passenger aircraft. The real safety risk is, and has been, unscrupulous shippers and poorly manufactured counterfeits that infiltrate the battery supply chain.

Those that continue to ship poorly manufactured and improperly tested batteries will continue to endanger others by way of illegal, undeclared shipments and low-quality counterfeits. Until non-compliant shippers and counterfeit manufacturers are held accountable, the safety issue will not be addressed. In turn, the ICAO may continue developing new, additional restrictions which could further compromise LIB shipping as a whole.

What does this mean for supply chain and procurement professionals?

It goes without saying that the transportation of hazardous goods is inherently risky. But in trying to mitigate safety risk, ICAO’s new prohibition presents new supply chain risks for companies using LIBs in their Bill of Materials. 

Shippers and suppliers are now tasked with navigating new regulation changes which present their own compliance risks. The requirement that all LIB cells be shipped at a state-of-charge of 30% will require extra steps, precision, and oversight from shippers and suppliers alike. If consignments do not carry the “Cargo Aircraft Only” sticker, they will not be allowed onboard any cargo plane.

Changes to the production and packaging process of lithium-ion batteries can result in production delays. Thus, companies will either have to ensure their shippers are compliant with the new regulations, or potentially face supply continuity disruptions due to the carelessness of another party.

With the commercial air transportation of LIBs now banned, alternate shipping options which may not be as “just-in-time” will be required to move the batteries along the supply chain. Cargo aircraft availability and routes are limited and some destinations are only serviced by passenger aircraft.

Cargo shipping may be able to accommodate the influx of shipments, but it does not afford shippers the value of swift and expedited delivery. As such, route alterations could mean longer lead times for some products that use these batteries, which could require more finished-goods inventory, delayed revenue, and increased spend.

Next Steps

Unlike many impactful regulation changes that take a while to gain noticeable momentum, the ICAO’s new prohibition is unequivocal and immediately enforceable. Therefore, companies utilizing lithium-ion batteries in production are recommended to: 

  • Map the supply chain to the site, subcontractor and sub-tier level
  • Evaluate LIB supplier(s) and put audit programs in place
  • Contact suppliers and shippers to agree on viable shipping routes/procedures and establish a collaborative process
  • Qualify existing suppliers to ensure the absence of counterfeit battery cells
  • Determine your company’s overall reliance on passenger aircraft for LIB shipments
  • Identify and revise key shipping routes to avoid shipment delays
  • Ensure suppliers and shippers are up-to-date with the new shipping regulations
  • Address current dependencies on shipping routes that have relied on passenger aircrafts and determine alternative shipping procedures.
  • Prioritize higher-risk products and sourcing/supplier locations based on revenue and their strategic importance to your business

The suggestions provided above are best positioned within an overarching supply chain risk management initiative. Incorporating supply chain risk mitigation and supply chain resiliency measures into your overall SCM strategy helps your company prepare for a wide spectrum of risks, including those associated with regulation changes.

Not sure where to start? Resilinc's "Ultimate Guide to Supply Chain Resiliency" is the go-to resource for companies starting their journey towards greater enterprise resiliency.

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Image source: IATA.org

Topics: supply chain visibility, supply chain resiliency, supply chain risk management, logistics