A Textbook Case of Supply Chain Mismanagement

How an ISO 9001 audit could have prevented the Tianjin warehouse explosions

Published: Wednesday, September 23, 2015 - 15:39

On the morning of Thursday, Aug. 13, 2015, I woke to find dozens of posts from netizens clamoring about events that had occurred late the night before. There had been two massive explosions reported from a warehouse in Tianjin, a prominent port city in northern China.

Shockwaves were felt several kilometers away from the blast site, and soon phone videos of the explosions taken by people in Tianjin revealed the extent of the disaster. Eyewitness accounts started to clash with state media reports. Despite the best efforts of the Chinese government to downplay the incident and censor those who were sharing what they had seen, both videos and speculation proliferated.

While the true number of casualties and some other facets of the disaster are still uncertain, this article will illuminate, based on what is known, how the Tianjin warehouse explosions could have been prevented through the use of an ISO 9001-type audit.

What we do know about the Tianjin explosions

Near midnight of Aug. 12, 2015, firefighters were working to put out a blaze that had started in a warehouse owned by Ruihai Logistics, a company that handles hazardous materials near Tianjin’s Bohai Bay. The warehouse was a storage area for containers of hazardous materials. Within an hour, there were two explosions large enough to be seen from space. The chemicals that were stored in the warehouse are still unidentified, but 700 tons of sodium cyanide, 800 tons of ammonium nitrate, and 500 tons of potassium nitrate are confirmed to have exploded. Chemical experts have said that water used in fighting the fire could have mixed with calcium carbonite to create acetylene, a highly volatile gas, which could have triggered the explosions.

Immediate damage and casualties reported

As of Sept. 14, 2015, the number of people reportedly killed from the explosions has reached 173, with nearly 800 others injured. The death toll includes 95 firefighters, making the Tianjin warehouse explosions the deadliest incident for Chinese firefighters since Communist China’s founding in 1949. Many have speculated, including Reporters Without Borders, that the number of casualties has been significantly underreported by state media. Evidence, such as the location of a major residential area less than 1 km from the blast site, suggests that casualties may be much more numerous.

A massive crater formed at the site of the exploded warehouse. More than 8,000 new cars were burned from the explosions. Buildings as far as 4 km away from the blast site incurred damage to walls and ceilings.

Potential chemical fallout from the blasts

One factor that continues to pose a threat is the potential for toxic chemicals to pollute the area surrounding the blast site. Within a week of the explosions, thousands of dead fish washed ashore along the River Hai near the blast site. Residents of Tianjin reported seeing an unusual foam left on streets after the first rainfall following the explosions. Others reported skin irritation after coming in contact with the rain. Officials have claimed these issues are not due to pollution.

Poor supply-chain management

How could the Tianjin warehouse explosions have been prevented? And what can this tragedy teach us about managing supply chains?

Although the precise cause of the fire and resulting explosions is unknown, there are several areas where negligence was likely a major contributing factor. Questions were raised soon after the disaster regarding the legitimacy of the warehouse and the method for handling and storing the hazardous materials involved. An investigation into the warehouse by means of an audit might very well have mitigated, or even prevented, the effects of the explosions.

Incompliance with local law

A few issues regarding the legality of the storage area that exploded are especially concerning. First is that the warehouse involved was located well within 1 km of a nursery, an elementary school, a motorway, and a large residential area, despite government regulations prohibiting such proximity to these areas. Given the radius of the blasts, there very likely would have been fewer casualties if Ruihai Logistics had abided by these regulations.

Another concerning factor lies in reports of the quantity of hazardous chemicals stored at a warehouse. It’s estimated that 70 times the legal quantity of toxic sodium cyanide was stored in a nearby facility. This lack of compliance with local law has real implications regarding the continued threat of contamination to local water supplies.

Finally, reports found that Ruihai’s license to handle hazardous chemicals expired in October 2014 and was only reinstated in June 2015, meaning the company had been operating illegally during that period.

How an ISO 9001 audit might have prevented the disaster

Properly conducted, an audit of the warehouse would have been able to identify issues related to compliance with local law. Additionally, issues with Ruihai's handling and storage of the hazardous materials might have been identified during a specific audit based on ISO 9001 standards. If such issues contributed to the disaster, it's likely the warehouse could have taken corrective action to limit the risks of contamination or explosion, based on the audit findings.

What are ISO 9001 standards?

ISO 9001 standards come from a family of ISO 9000 standards related to quality management systems. These standards are designed and maintained by the International Organization for Standardization (ISO). Manufacturers and distributors can acquire ISO 9001 certification if they meet certain criteria. Similarly, qualified third-party inspection and auditing companies can audit manufacturers’ and distributors’ facilities for adherence to ISO 9001 guidelines. Five main areas from the current ISO 9001:2008 guidelines with which this kind of audit is concerned are:
• Quality management
• Responsibility and professionalism of management
• Resource management
• Product realization
• Measurement, analysis, and improvement

The two main areas of an audit based on the current ISO 9001 standards concerning the handling of materials are quality management and product realization.

ISO 9001 and materials handling

Both quality management and product realization deal with the traceability of materials. The excerpt below from an actual ISO 9001 audit report template shows that the traceability of materials is verified by matching documentation to finished products. In the case of the materials stored in the Tianjin warehouse, documents should have been available tracing chemicals and their quantities back to their origin.

Section 7.5.3 of ISO 9001:2008 specifies that product realization include measures taken by the facility to control the unique identification of the product and maintain records onsite. If those responsible were unaware of the presence of 70 times the legal quantity of toxic sodium cyanide, an audit for ISO 9001 would have revealed this.

Part of product realization relates to the proper storage and labeling of materials, a lack of which likely played a role in the Tianjin explosions. As shown in the following excerpted audit template, ISO 9001:2008 is relevant not only for how it applies to labeling, but also to proper storage of chemicals and materials to avoid contamination.

Proper separation of materials and chemicals is also a key facet of an ISO 9001:2008 audit to prevent contamination and other hazards, including fire.

Related changes in the ISO 9001:2015 revision

The ISO 9001 standard has been revised, and an updated version, ISO 9001:2015, is expected to be released this month. Although the final revision has not yet been made public, new requirements concerning materials handling will be contained in section 8.5. Specifically, section 8.5.2 covering identification and traceability deals with:
• Identifying the materials used for production and a supplier’s ability to link those materials to finished goods
• Monitoring the status and quantities of materials stored
• Maintaining records and a procedure for uniquely identifying and tracing materials used in production

The updated version of ISO 9001, with greater emphasis placed on “risk-based” thinking, contains guidelines to help companies avoid problems related to the handling of materials, such as those that occurred in the Tianjin disaster.

Conclusion

The tragic Tianjin explosions have, so far, left many questions unanswered. Censorship of the media by China’s central government has made it difficult for the public to be sure about the exact cause, number of casualties, and extent of damage done by the disaster.

But one point we can be sure about is that negligence on the part of the company responsible, whether deliberately or unknowingly, led to the illegal storage and handling of dangerous chemicals that ignited the blasts. The disaster has led to almost 200 deaths and another 800 casualties, while threatening the safety of the local water supply. An audit of the facility involved would have revealed the risks and, quite possibly, prevented the fire and resulting blasts. The Tianjin explosions will likely be remembered for decades to come as a textbook case of supply chain mismanagement.

About The Author

John Niggl

John Niggl is a client manager at InTouch Manufacturing Services, an American-owned company that provides solutions for quality and overseas manufacturing issues through product inspection and related quality control services.