It’s a new world for global supply chains. It’s called the New Normal.
Global supply chains are reacting or responding to new trade agreements. They’re reacting or responding to the aftereffects of Covid-19. And they’re reacting and responding to recession.
There’s a big difference between reacting and responding. A reaction is passive, whereas a response is proactive. The former implies a lack of foresight and planning. The latter implies the opposite.
Due to the factors cited above, supply chain management (SCM) is becoming more important. Its impacts to the top line and bottom line are unmistakable. Supply chains are becoming more strategic, more integrated, and more detailed.
In this post, we’ll look at how supply chain risk management is changing. More importantly, we’ll reveal what those changes mean to you and your business.
To succeed and win you will need to adapt your business and supply chain to the New Normal.
Increasing Risks to Global Supply Chains
It’s no secret supply chains are undergoing transformation. New trade agreements, Covid-19, recession, and new technologies are some of the factors impacting supply chains.
Today’s and tomorrow’s market conditions have changed and continue to change. As a result, risk management must also change.
Diversification out of China has been underway for at least two years. Vietnam has increased production of wireless and electronics by 157.8% from 2019 to 2020. Likewise Malaysia has increased its manufacturing by 57.1%. And Thailand has increased its business activity by 32.4%.
In addition, shipping from Asia to the west coast is shifting to the east coast. The following ports have seen increases in cargo: Houston – 52.2%; Charleston – 32.4%; Savannah – 22.8%; Norfolk – 14.8%; and NY-NJ – 12.6%.
Furthermore, businesses are experiencing increased instances of mis-declared cargo. According to TT Club, an international transport and logistics insurer, ship fires are on the rise. Fires are being reported every two weeks. Ship fires comprise twenty-five percent of damaged cargo.
Theft is another problem plaguing shippers. During the outbreak, masks and other medical supplies went missing without a trace. This issue requires keen attention. Learning from the Coronacrisis, availability of critical supplies is vital.
Combating Risks with New Approaches and New Technologies
Conventional approaches to combating risks will have limited effects. Typical monitoring coupled with fines don’t deter theft effectively. Yet some shipping lines are increasing fines in hopes to stem the rise of cargo fires.
APL LeHavre and Evergreen have increased fines to $35,000/container. Hapag-Lloyd has increased fines to $15,000/container. And HM has increased fines on Chinese exports.
To make headway, industry stakeholders must take new approaches. They must respond to changing conditions as they occur. Two ways to do this are with better business practices and increased use of technology.
Done right, both can lead to reduced risk and increased competitive advantage.
Enhancing and Enforcing Business Practices to Combat Risk
Better business practices start with improving monitoring and reporting. To this end, the Cargo Incident Notification System (CINS) is making progress. Founded in 2011, CINS exists to improve information sharing of cargo-related incidents.
CINS is a consortium of 17 shipping lines. It focuses on both loss of life and loss or damage to property. Its members include some of the biggest container lines. CINS’ membership of big shipping containers gives CINS increasing influence in enhancing and enforcing business practices.
Next, let’s look at how technologies can help reduce risk.
Employing New Technologies to Combat Risk
IoT offers some promise in fighting risk, but IoT technology isn’t quite there yet.
The industry is exploring the feasibility of fusing sensor-collected data with other information.
For example, sensors can pair data on heat, humidity, etc., with GPS data and cargo movement. Once collected, you could send this data to decision makers at any level or location in real time.
Keep in mind this capability doesn’t exist yet, but it offers hope. Additionally, IoT is not yet in wide use. Fewer than 1% of container lines use IoT.
That brings us to a technology that is available and can help manage risk. In particular, predictive analytics is available today in scale and sophistication.
Technologies exist that can transform data and information into actionable intelligence. For example, two weeks before the media began reporting on Coronavirus outbreak, companies using this type of technology received alerts (Resilience 320 and Bluehost).
The merging of public and private data offers a powerful tool in creating actionable intelligence. Coupled with communications, you can notify various organizational levels for immediate decision. Early alerts/notifications translate into quicker action.
Going beyond notification/alerts, businesses can achieve even greater risk reduction. For example, you can improve responsiveness and resilience by integrating these technologies into your business processes. Doing so will result in more fluid operations.
For example, you can re-route a shipment to another port. Or you can change the mode of transportation without delay. Or you can stop payments to a supplier, freeing up working capital. Integrating technology into business processes can expedite your decisions and actions.
Reducing Supply Chain Risk in the Future
The operative words describing SCRM are flexibility and anticipation.
As someone said, flexibility is the best defense against disruption. SCRM must change full tilt as conditions change. That calls for rapid better-informed communication and collaboration. Achieving both requires people as well as technology.
To achieve flexibility SCRM plans must be more comprehensive. Your SCRM plan must be broader and deeper. Planning must account for what could happen because the future will not look like the past. It goes beyond planning for the unexpected. You must address possibilities – not just probabilities.
Also, communications must extend beyond your company to suppliers and customers. That will ensure decision makers at the appropriate level take action without delay. This compresses the decision cycle time-to-action.
Deeper planning must take the scope and scope and duration of crisis into account. That’s a lesson learned from the Coronacrisis. Preparing for the Coronavirus shocks required global visibility and early notification .
You can also add precision planning to that list.
Putting this into practice means modeling and testing different scenarios. It implies using new tools to achieve real-time status and end-to-end visibility. And that will facilitate anticipation.
Implementing these measures requires insight into how supply chains can affect your business. Partnering with a 3PL who has some flexibility built into its operations would help. They should be able to scale up/down aligning your changing needs.
You must identify your critical nodes and prepare for the expected as well as the unexpected. This will promote rapid execution when you need it most. One-size-fits-all plans won’t work. Precise planning leads to competitive advantage and will replace general planning.
Is Your Business Responsive and Resilient?
SCRM is changing. The need to adapt is more critical than ever. The changes to global supply chains are extensive and swift. Only the most competitive companies will survive.
Your business must be responsive and resilient. It must expect the unexpected and respond with speed and agility. You must position your business for the future.
To do that you need a SCRM plan that will withstand the peaks and troughs of business as well as unexpected crises. Supply chain management is transforming right now. To survive you must transform your SCRM now to avoid the landmines that lie ahead.
Contact American Global Logistics today if you’re interested in preparing for the New Normal.
Our expert team can help you adapt and compete in the new competitive landscape.