Two months on from the Suez Canal blockage – four factors supply chains need to consider

Unforeseen, disruptive events like the Suez Canal blockage are unfortunately part and parcel of today’s modern world – supply chains cannot avoid them.  The problem is their fragility and vulnerability.

While the Ever Given ship was freed more quickly than expected, at the time, when hundreds of vessels were stuck behind it, there was huge uncertainty as to how long it could take, with some predicting weeks. What this situation shed light on though are the decisions that logistics and supply chain firms must make, and fast, in events like this. In this particular case these might have been: “what is the impact to my end customer if this goes on much longer?”; “what additional costs will we incur by re-routing via the Cape?”; and “is there a weather event on the alternative route that would mean we would be better to stay put?”.

The outcomes of these decisions can impact four vital factors: customer service, waste, time and cost. These are all expensive commodities, and they are vulnerable. That’s especially true given supply chains have already been severely impacted by other disruptive forces over the past year.

Why Ever Given created huge problems for the supply chain

While the theory of having an agile and resilient network is well known, organisations that put it into practice are still too few and far between.

In their hunt for efficiency, many businesses have ended up over-optimising on their supply chains. They’ve cut here, reduced there and instigated Just-In-Time inventory policies. Alongside this, supply chains have become stretched geographically which, combined with poor visibility across increasingly disparate networks, has made them difficult to manage and has heightened supply chain risk. This has left them fragile, vulnerable, and more susceptible to the negative impacts of disruptive events like the canal blockage, meaning the risk of delay was very high.

To reduce the impact of the blockage and other similar events as much as possible, supply chain leaders have to make some big decisions.

The four key factors to consider

For a few days, it remained unclear how long it would take to fully reopen the key trading passage through Egypt. Some vessels made the decision early to re-route via the Cape, a route which could add two weeks to the journey time, weather and congestion depending. When Ever Given was freed sooner than expected, these vessels had to weigh up whether to turn back on themselves or continue their journey. Others remained stuck behind the vessel, waiting it out.

Whichever option these vessels took, there were four key factors they each had to consider:

Customer service

We’ve already had a year of COVID-19 disruption and have all experienced delays to orders and shortages of products. At the start, we could make do, but consumers are growing weary. Just as we had started to see a light at the end of the tunnel, we were reminded of Brexit. The UK’s departure from the EU is resulting in delays and shortages to products across the board.

On top of this, supply chains are consistently being hit by other disruptive forces, be it the Suez Canal blockage or everyday occurrences like cyber-attacks, all of which have the potential to add further layers of disruption. In any situation like this, supply chain leaders therefore have to consider how much of a delay to goods they can afford before they begin to lose custom.

Waste

Hundreds of vessels ended up being stuck behind Ever Given, each carrying different products and goods, a lot of which would have been perishable. As a result, many vessels were battling the very real potential of their goods being written off completely and going to waste.

Time and cost

What this all comes down to, one way or another, is time and cost.

Re-routing via the Cape added many more miles onto a ship’s journey – around 6,000 to be exact. This requires a lot more fuel. What’s more, taking different routes can incur different tariff costs, costs logistics professionals won’t have considered at the start of their journeys. An extra two weeks at sea (at least) also means an extra two weeks’ worth of wages that need to be paid to staff on board. Additionally, while late goods can result in poor customer service, they can also result in penalty fees.

 

Why supply chain leaders are struggling to make quick decisions

Unforeseen events like this happen all the time. But each one is different and each one forces supply chain managers to take a gamble – go one way or the other.

The problem is that many don’t have the tools to make these decisions effectively – they are quite literally gambles. While logistics professionals are doing their best to take all of the above factors into account, the data for each of them is disparate, residing across multiple systems and technologies. This makes it difficult to process new information on the fly – but this is crucial when tackling an unprecedented situation that is changing every hour.

So, while there will always be pressure from people at the top to get a good picture of the scenario quickly, for those working from legacy systems, events like this will be one of the biggest challenges of many individuals’ careers.

So, what should these supply chain leaders be considering to help them tackle the problem and deal with future disruptive events?

Data-driven scenario planning

Scenario planning is key to ensuring supply chains don’t face the same negative impacts that were seen off the back of the Suez Canal blockage, when future disruption strikes. It supports a great number of possible responses to expected or unexpected market changes by enabling people to quickly assess and evaluate feasible options and make the best decision for optimal response.

Scenario planning, driven by real-time data, is critical for businesses looking to build a supply chain that is agile and can adapt to quickly changing circumstances without impacting the customer experience.

So if supply chain leaders take any learnings from the Suez blockage, let it be that while they can never know what’s around the corner, they can always be prepared, providing they have the right tools.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *