CSCMP Opinion by CSCMP Corporate Member Gravity︱What Does Risk Mitigation Mean When Disruption to Supply Chains is a Norm?
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What does risk mitigation mean when disruption to supply chains is a norm?
Written by CSCMP Corporate Member Graham Parker, CEO of Gravity Supply Chain Solutions
Introduction
Disruption has never left our sight. For years, we have faced disruptive events to supply chains in the form of capacity issues, blank sailings, missing transshipment vessels, extreme weather, and geopolitical conflict [1].
Enter the global pandemic – of which its aftermath quite easily eclipses the disruption [2] caused by any of these events above.
We have seen how global supply chains have faltered, how ports stay congested for days and weeks, and how shipments remain stuck at terminals because of limited in-land transportation and logistics network support.
Shanghai’s lockdown and the knock-on impact on other ports
On April 11, Shanghai tightened its COVID stance to a city-wide lockdown. From mid- to end-April, Spire Maritime’s Automatic Identification System (AIS) data revealed an increase and eventually a peak in the average delays of container vessels to the terminal in both Shanghai and Ningbo ports across Year-To-Date (YTD) data.
In Shanghai, the average delays of container vessels to the terminal increased from 33.3h per day in the first week of April, to its peak in the third week of April with an average delay of container vessels to terminal at 66.8h per day. In Ningbo, the average delays of container vessels to the terminal increased from 30.7h per day in the first week of April to 39.1h per day in the third week of April, peaking in the fourth week of April with an average delay of container vessels to terminal at 58.0h per day.
Figure 1: Graph of the average delay of container vessels to terminal (h) in Ningbo and Shanghai for April 2022, based on Spire AIS data
Ningbo’s rise in average delays of container vessels to the terminal is partly due to the diversion of container vessels from Shanghai to Ningbo, to ease port congestions in Shanghai [3].
Now that Shanghai is easing its COVID-related restrictions and gradually re-opening the city this month, we expect a substantial push on their manufacturing capacities to make up for the lost orders over the past months. The subsequent knock-on effect will likely see port congestion issues move downstream to the destination ports, such as those in the US and UK.
What does this mean for businesses?
Supply chain variability is the new normal that businesses face. This variability is the highest now in the history of supply chain management [4].
In heightened supply chain variability, it becomes even more essential for businesses to upkeep a completely transparent and synchronized 'data-driven' view of their entire supply chain at both the order and Stock-Keeping Unit (SKU) levels from the first mile.
Having access to the latest critical path view on a single integrated platform and enabling stakeholders to make data-driven decisions will allow businesses to be more capable of mitigating these risks and managing customer commitments.
Does visibility alone translate to control?
We operate in a market with no shortage of innovative solutions and technologies, each delivering one or a combination of outcomes focused on transparency, automation, traceability, and collaboration [5]. But do these outcomes directly enable you to be “in control” of your supply chain and manage risk in a time of uncertainty?
While the importance of Supply Chain Visibility is well-understood, it is equally important to understand how this visibility can be achieved, starting with the first mile.
The first mile often begins with purchase orders to suppliers – a multi-step process that requires visibility and management of the contract of agreement between the shipper and manufacturer. The efficiency of this process largely hinges on accurate multi-stakeholder information exchange [6] to ensure all stakeholders stay regularly updated and kept informed of any potential threats.
Having sight of a truck, a vessel, or a container, then moving other platforms, systems, or spreadsheets to understand what that means is not enough for a business to manage its supply chain. Emailing, phoning, and requesting additional information up and down the vendor base is also not being ‘in control’ of the supply chain.
There can only be control when visibility and execution capabilities are aligned. Insights shared through all stakeholders on a single visibility and execution platform with “one view of the truth,” where all vendors are connected, is the only way businesses can be in control of their global supply chains.
Predictive insights as a best practice for risk mitigation
Stakeholders communicating and addressing change as it happens, being able to predict risk at the lowest denominator within the order, and full synchronization across the manufacturing base and logistics players enable control and accurate decision making.
By communicating and addressing change as it happens, businesses are putting themselves two steps ahead of their peers.
As we acclimatize in an environment of disruption and uncertainty, it is essential to recognize that predictive insights are no longer a “nice to have” but rather a “need to have.”
Full controls enable quality customer service
Full control of the supply chain is the key enabler to quality customer service. Any business is only as good as its people, its promise, and the loyalty of its consumer. Are you prepared to risk customer loyalty and growth by not having control of your supply chain?
Conclusion
Global supply chains continue to experience variability, especially when disruptive events happen all too frequently.
Organizations will benefit significantly from evaluating the use and benefits of their existing systems and building new capabilities as needed, starting by investing in their first mile. As illustrated above, supply chain leaders face evolving priorities and will need to promptly adopt processes that enable their businesses to stay competitive and relevant.
References
- Parker, G. (N.D) “Disruption In Supply Chains Is Nothing New.” Gravity Supply Chain Solutions (Blog). Retrieved from: https://blog.gravitysupplychain.com/disruption-in-supply-chains-is-nothing-new/
- Accenture. (2022). “Supply chain disruption.” Accenture (Supply Chain & Operations). Retrieved from: https://www.accenture.com/us-en/insights/consulting/coronavirus-supply-chain-disruption/
- Basquill, J. (April 2022). “Cargoes diverted from Shanghai as port congestion worsens”. Global Trade Review. Retrieved from: https://www.gtreview.com/news/asia/cargoes-diverted-from-shanghai-as-port-congestion-worsens/
- Cecere, L. (May 2022). “Preparing For The Dark Clouds Looming Over The Supply Chain.” Forbes. Retrieved from: https://www.forbes.com/sites/loracecere/2022/05/02/preparing-for-the-dark-clouds-looming-over-the-supply-chain/?sh=19428fd7225d/
- O’Donnell, J. (Dec 2021). “Supply chain disruption will persist in 2022, but tech may help.” TechTarget. Retrieved from: https://www.techtarget.com/searcherp/feature/Supply-chain-disruption-will-persist-in-2022-but-tech-may-help/
- Industry Today. (Jan 2022). “Supply Chain Disruption? Or Our New Normal?” Industry Today (Articles). Retrieved from: https://industrytoday.com/supply-chain-disruption-or-our-new-normal/
