In the past few days, the news of the blockage of the Suez Canal by a massive container ship called the Ever Given has been dominating the news, so much so, that even kids are talking about it. This comes at a time when the impact of the Coronavirus is still being felt across the world. The phrase ‘supply chain’ is now being mentioned more often than ever before in news media. Some outlets have estimated the cost to be $9.6 Billion per day in delayed goods. According to the March 28, 2021 update on the Maersk website, they have had to redirect 15 out of approximately 45 vessels that were supposed to go through the Suez Canal to take the much longer route around the Cape of Good Hope. That number (33%) is amazing. If all other shipping companies had to redirect a similar ratio of vessels, that is just astounding.
I did a few clicks and according to this website, it seems that the Suez Canal has been blocked multiple times in the past. (Look for the image comparing the Ever Given to the Empire State Building; that gives one a sense of the size of the vessel). According to the web page, there were at least 4 incidences of a vessel being stuck in the canal. However, none of these events made the news the same way as the current one, at least not that I remember. There are possibly three reasons: The blockages were resolved quickly; the overall percent of world trade flowing through the canal was smaller; and possibly because none of the events happened during an ongoing crisis (COVID-19) which had already strained the supply chains across the world.
As a sidebar, I learned that the Suez Canal was constructed by the French (I had always assumed it was the British). I also learned about the Great Bitter Lake, where ships can dock mid-way through the journey across the canal if needed.
This morning, I was on the phone with someone who is in the business of organizing conferences. I asked him if they had a conference scheduled, and some of the supplies were stuck in such a blockage, how would they manage. He said that while anything was possible, he felt that they planned several things that could minimize the impact. Here are some that I remember.
- Plenty of time buffer: They organize things to arrive about 2 weeks in advance.
- Other forms of Transportation: The possibility exists to expedite using a different transportation mode even if it is way more costly.
- Digital Inventories: A lot of their inventory is digital in nature. This eliminates the need for product movement over long distances in the first place but also allows for local re-manufacturing where possible.
- Local Alternatives: They maintain a list of local alternative suppliers who they could contact in a pinch. This is because they realize that when it comes to crunch time, being timely and correct is more important in their business than minimizing the cost.
- Documented fire-fighting procedures: The department plans for contingencies and has pre-documented fire-fighting procedures to account for including working with extra staff through the night before and during the conferences.
After the discussion, I thought that it was not a bad list for all supply chain folks to learn from this crisis. Here is my modified list for a general supply chain practitioner.
- Plan for disruption: This is especially true when dealing with high-impact situations such as sole suppliers, or in this case, (almost) sole route. Granted things do not go wrong very often, but when they do, the impact can be extensive. One could thus plan for these disruptions by way of buffer time, alternate suppliers, and even higher local inventory.
- Diversify your transportation options: Have at least a backup plan on what back options exist to transport the product. This can be other modes of transportation; this can also be other suppliers.
- Replace inventory with information: Having digital inventories might be a bridge too far for most manufacturers. However, meaningful information can help mitigate some of these concerns. This can be around shipment and inventory visibility.
- Find Local Alternatives: With the overall pressure on the costs, it is difficult to move all supplies locally. However, events of the past year and this blockage suggests there is still room for it. Supply Chains should seriously consider and implement meaningful local supply, and if that is not possible, diversified supply.
- Publish Red book for firefighting: No matter what you do, there will be events that will cause the supply chain to break or get disturbed. Having clearly defined guidelines on what constitutes a situation worth firefighting for, and the steps that will be required to fire-fight should be listed in such a red book.
Well, this is my list. What is on your list of things you learned and would like other supply chain practitioners to do? Please let us know via comments.