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Lessons from the Suez Canal — Disruption’s ‘domino’ effect

By Cas Brentjens, Vice President of Infor Nexus Supply Chain Business Networks, APJ

Though the Suez Canal’s nearly week-long blockage has since been cleared, repercussions of the disruption still ring clear today across the global shipping community.

The accidental grounding of the Ever Given container ship on March 23, in a strategic part of the Suez Canal, has added further strain to ongoing disruptions across global supply chains and trade. The sheer size of the vessel prevented other cargo ships from moving along the vital sea trade route. For businesses with containers aboard the ship, this resulted in at least a week’s worth of scrambling to reroute deliveries and forecast delays to goods.

A ‘domino’ of disruptions

But the refloating of the Ever Given did not spell the end of the logistics nightmare. European ports became severely congested when scores of delayed vessels that were initially stacked up at the Canal passage were suddenly free to move, and began arriving en masse with hundreds of thousands of twenty-foot equivalent units (TEUs) worth of imported goods. We also saw carriers skip port calls in Europe to avoid the congestion and instead rush to return empty containers to Asia, where high demand for exports resulted in higher prices. This chain reaction has impacted container availability, which has further widened the supply and demand gap.

Shipping companies across the world are now contending with containers of backlog consumer goods, which are slated to take months to clear, and generate billions in losses. While it may be easy to categorize the Suez Canal blockage as a one-off accident, the truth is that
disruptions to the global supply chain have become commonplace.

Just earlier this year, global supply chains were reeling from the worldwide shortage of shipping containers and chips, resulting in further delays and disruptions to global trade, and surging import costs. Cargo ships often encounter problems that delay their arrival or impact their cargo with some frequency. Most often the cause is weather and heavy seas, which accounted for the loss of 750 containers from a container ship operated by A.P. Moeller-Maersk A/S back on January 21 of this year.

Lessons from the Suez

Thankfully, it is not all doom and gloom. In fact, the lessons to be learnt from the Suez Canal blockage echo that of the pandemic disruptions in 2020. Both occurrences have shone a spotlight on the interconnectedness of global trade, and consequently, the fragility and vulnerability of supply chain networks. Black swan events like these remind us how important digital supply chain operations are, and the difference they can make in such situations.

End-to-end supply chain management solutions, for instance, allowed businesses to track their goods in real-time at every stage, and gain visibility into the scope of their orders and goods at risk — even for orders and ships that had not yet left their ports of origin. This gave businesses the breathing space and option to reroute their goods to Silk Road rail overland from Asia to Europe, or plan emergency shipments via air cargo to avoid bottleneck.

In situations like this, information trumps inventory. The order-centric operational visibility that businesses gain with such solutions equips them to stay informed and ahead of the impact that delays may have had on operations and customer fulfillment. Data-driven insights, based on predictive analytics and Estimated Time of Arrival (ETAs), also enable organizations to adopt a proactive, rather than reactive, approach to disruptions.

For businesses, this means being able to notify various stakeholders (including customers) across their value chain about forecasted delays, consider alternative options to avoid further disruptions, and as a result, minimize any losses.

IDC research indicates that 75% of Asia Pacific (excluding Japan) manufacturers recognize that a lack of supply chain visibility and resiliency will continue to be problematic for organizations. In the face of supply chain calamities like these, the benefits of adopting digital solutions within supply chain operations are clearer than ever.

The same report also predicts that by 2021, 60% of all manufacturing supply chains will have invested in the necessary technology and business processes for resiliency, with significant gains in productivity. Indeed, businesses who have been quick to build resiliency and agility into their supply chain operations have certainly seen a marked difference in their operations, and have rebounded stronger and quicker on the uptake.

At the end of the day, delays, exceptions and even disasters are potential situations that global logistics organizations, including forwarders and 3PLs, have to manage regularly in the course of their daily work. As dire as the supply chain and logistics outlook has been, there is a silver lining — these disruptions have served as a wake-up call for organizations to strengthen their supply chain for resilience. I am hopeful that technology has and will continue to play a mission-critical role in accelerating the pace of transformation in this sector, and better equip and position organizations to navigate the uncertainties ahead.

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