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GUEST COMMENT This boat won’t float: what one stuck ship in the Suez Canal means for your company and the future of supply chains

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Consider it a warning shot across the bow. The ship stuck in the Suez Canal should be a signal to everyone that asingle event can shut down the global supply chain. For six days in March, the 1,300-feet long Ever Given stopped 12% of the global trade on the 120-mile waterway. Insurers say GDP $6.5 billion worth of goods were sidelined every single day.

Even though the ship is finally free, experts say the incident will impact the supply chain for months. “The disruption of a week of this size is going to continue to have cascading effects,” said Stephen Flynn, professor of political science at Northeastern University.

TheNew York Times reported the nautical emergency highlights the increasing use of “just-in-time manufacturing.” The practice successfully reduces costs and boosts profits because money isn’t wasted on stockpiling goods in warehouses. However, it also explains how this good result can bring danger during an emergency— for instance, the shortage of adequate protective gear when the pandemic began.

“As we become more interdependent, we are even more subject to the fragilities that arise, and they are always unpredictable,” said Ian Goldin, a professor of globalization at Oxford University. “No one could predict a ship going aground in the middle of the canal, just like no one predicted where the pandemic would come from. Just like we can’t predict the next cyberattack or the next financial crisis, but we know it’s going to happen.”

Short-Term Actions

This is a good time for companies to get prepared, informed and accountable before the next major disruption—whether it’s a human-made or natural disaster. Here are four issues businesses should address now:

  1. Vetting—Most sizable global supply chains use third-party contractors and suppliers. Companies can reduce their liability by having a system to vet third parties for proper certifications, training and experience.
  2. Auditing–Frequent audits can protect your supply chain and give you visibility to manage risks and prevent future incidents.
  3. Monitoring—Suppliers should be vetted and monitored to ensure they have proper insurance if something goes wrong.
  4. Planning—Develop a Business Continuity Plan to determine steps to take when something unexpected happens.

Long-Term Actions

These are the immediate steps businesses can take, but executives can also use this as an opportunity to prepare for the decade ahead. Avetta, a supply chain risk management software provider, put together a white paper,Supply Chain 2030: Doubling Down On the Evolving Changes, Opportunities and Technological Possibilities, to help companies create a long-term strategy.

The Supply Chain 2030 report encourages supply chain partners to take action in the following areas:

  •   Increasing cost savings—Procurement leaders need to find new ways to shave costs. A2020 Deloitte survey found cost management is the top priority for operations. Technology can reduce costs by leveraging real-time supplier information to negotiate contracts and make competitive bids.
  •   Rethinking sourcing strategies—Reduce the number of third parties, contractors and suppliers that have an inordinate impact on procurement costs. Streamline your contractor network to help collaboration and long-term development opportunities.
  •   Determining contractor risks—Organizations should take a deep look at their contractors and their potential risks based on market reputation, financial stability, business capacity and continuity.
  •   Setting sustainability goals—More companies are demanding their contractors meet specific environmental and social standards. Many businesses scrutinize tier 1 and 2 suppliers, but companies should make sure the supplier network uses sustainable practices.
  •   Using technology—Again, a long-term strategy should include a digital approach to stay current on key trends. Companies will need to balance the solutions and technologies to get the best ROI on procurement initiatives.

Companies should identify any gaps and find ways to improve the process. Executives should also realize spreadsheets and packed filing cabinets can no longer get the job done. Cloud-based solutions and the Internet of Things (IoT) are now needed to help companies ensure all suppliers are thoroughly prequalified and in full-compliance with regulatory standards. 

When choosing a digital system, company officers should make sure it has the following: 

  • quick supplier onboarding
  • the ability to manage training and development
  • remote and real-time monitoring

Heed the Warning

You have been warned. This is time to stop and take a break to make decisions that will save you massive amounts of time and money, as well as the peace of mind knowing your employees and supply chain partners are protected. Extensive supplier data makes it easier to quickly retrieve, process and validate supplier information in a matter of seconds. Organizations that rapidly adopt these emerging solutions while incrementally replacing legacy systems will be better prepared to navigate the next decade successfully.

The good news is the next generation of supply chain management applications is becoming easier to use and less expensive. Your company can and should be ready the next time your ship does or does not come in.


Danny Shields, CSP, is Vice President, Industry Relations at Avetta

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