In March 2021 the Suez Canal was blocked by the large container ship Ever Given. The event focused the attention of the world to how vulnerable supply chains can be when something like that happens. We spoke to Antony Francis from Endava about what the blockage has taught us, can it happen again and what can be done to avoid similar disruptive events along the supply chain.
Was the Suez Canal accident a one-off or should we prepare for more similar problems?
Canal transits are an efficient time saving solution for large cargo ships, both bulk carriers and container ships. In the Suez Canal, the ships are escorted along the waterways but are not tightly attached like they are in the Panama Canal locks. So, high winds and reduced visibility from a sandstorm are specific to Suez. Additionally, the sheer size and height of container ships make them vulnerable to strong winds. The Ever Given container ship was exceptionally long at 400 meters and with containers stacked 10 levels above the deck line, this caused the sideways blockage. Now, I am no shipping engineer, but I think it is fair to say that this could happen again. Could it have been prevented? Perhaps, in future, they should prevent transit through the narrow channels during such events.
So, what are the consequences for shippers? The cost of transiting the Suez Canal for a ship the size of the Ever Given, is approximately $500,000. Since the alternative is a lengthy and even more costly diversion to the Cape of Good Hope (CGH), there are really no viable alternatives, except in the case of an “event”. The Suez Canal has known its share of crises, logistically and geopolitically. What they can do is to be better prepared, developing contingency plans and focusing on critical elements.
As supply chains were stretched to the point of rupture in 2020 and 2021, the term “just-in case” vs. the old adage of “just-in-time” challenged the status quo that had become accepted practice for several decades. Manufacturers, 3PLs and retailers began looking at ways to use predictive analytics and buffer inventories to mitigate the risks of rupture. It created a new sense of “what if” and showed just how vulnerable very tight supply chains are. As an example, after the Ever Given accident happened it took another 7 weeks for products to arrive in Felixstowe (UK) and Rotterdam (NL). For retailers, this translated into a huge miss in sales, with a ricochet effect that went on for months.
How can we track issues in real-time and respond quickly?
Historically, data was published after the event, usually weekly or monthly in static tables as part of regular management review and there was little immediacy in the reactivity to situational change. Today, data is transforming the supply chain by providing real-time response to events with fingertip information for management and decision-making tools and alerts though AI/ML.
It has evolved beyond simply tracking packages and has evolved into multi-faceted solutions that are the combination of two processes:
The capture of the data to be able to provide status
Numerous tools are available today to capture information about events happening in the extended supply again. These include numerous scanners (wearable, handheld or fixed); RFID and asset tag solutions that track assets (alerting on events like usage information, providing alerts for preventive maintenance); and those that track people (badge systems, etc.), vital in high security and safety situations (oil rigs, refineries, etc.); to those that track vehicles (truck position/theft; driver health and safety information, like tiredness.
Reporting systems and control towers/dashboards to communicate status.
Capturing data is one thing, but it is what you do with that is more important. Thus, systems must provide alerts in real-time. The advent of digital displays allows companies to push information to the end user about production performance and qualitative issues on the production line and alerts management to needed mitigating action. Another example is the ability for a freight forwarder to pre-alert the destination port of potential delays in clearance of goods due to missing documentary paperwork. Everything becomes more immediate and less reactive.
Is more tech the answer or tech at the right spots?
I have always been in favor of looking at the business processes first, and then applying tech where it makes the most sense. However, the 2020/2021 crisis, which exacerbated supply chain disruption, shed additional light, and focus on three areas that we had been discussing for a number of years, namely: supply chain visibility, trading partner connectivity and real-time information delivery.
Optimizing supply chain visibility began with a simple track and trace solution by the major integrated carriers. It was a point solution at best but was very valuable to the end user and enhanced customer satisfaction. It did not give value to the other players in the supply chain, and it lacked package content knowledge and real time condition status that is now provided by IoT trackers and devices that report back to cloud storage condition of goods (temperature and physical state – shock, breakage, location, etc.). These are important tactical details. However, more strategically, we need to be looking at the extended supply chain.
Take the case of a product manufactured in a remote part of China due to be delivered via an e-commerce platform to an end user. Knowledge and updates on no less than 35 different touch points along its journey from the port of Ningbo to a customer in, say, Toulouse, France must be captured and disseminated. The challenge is that these 35 events take place in approximately 20 different vendors across multiple time zones. These participants may not have the system connectivity to be able to share that information or may not be inclined to share this information. Without this information, the system breaks down.
This is where control tower systems come in, allowing information to rise up to a reporting layer that all participants can access via dashboards.
In addition, what are the right areas for technology to be implemented?
In addition to visibility, end to end information sharing and predictive analytics highlighted above, there are several other technology solutions that help transform supply chain resilience and drive cost reduction and improve the bottom line.
The last two year’s supply chain crisis has driven many companies to rethink where products should be produced to mitigate disruptions. Making products closer to where there is demand allows companies to cut back on logistics and transportation costs, reduce their carbon footprint, circumvent geopolitical risks and tariffs associated with offshore outsourcing, and get products to consumers faster. In today’s consumer driven society, there is a competitive upside – improved delivery performance and customer satisfaction. So, why haven’t they done this before? Labor costs in overseas manufacturing sites outstripped the re-localization arguments and were essentially headcount driven vs. using automation to drive down costs.
Furthermore, since many enterprises relied on foreign production, they didn’t need to have a clear business case for technology or fully explore how it could be beneficial. They were not producing the product. Now that they are near-shoring production, they are looking at ways to offset the labor cost differential and high inflation, through increased automation.
The focus has moved from manual processes to systems that use demand management tools to enhance strategic sourcing; the use of embedded systems to drive hardware tools and physical computing; and using AI and machine learning to drive down operational costs. In manufacturing environments, they are increasingly using robotics and automation to drive cost per unit efficiencies in fulfillment operations.
Technology is all well and good, but technology for technology’s sake doesn’t work. At the end of the day, it must either solve a costly business problem or put the company in a position to seize on new opportunities. It all goes back to the goal of supply chain resiliency and the pursuit of new business models.