Your efficiency might kill you (figuratively)
I feel like we had enough of Black Swans lately. Honestly, I'm not too thrilled about it. I'm exhausted by their murmuring. Watching the shipping industry face another crisis feels like a déjà vu, and this time the storm raging on the Red Sea.
Thousands of years ago, a group of wandering tribes crossed the Red Sea with ease. But now, it's a different story for massive ships. Admittedly, the ancient tribes didn't deal with cruise missiles or ballistic warheads, and they certainly were not worried about high insurance costs for sea passages.
The consequences are piling up. Experts predict a noticeable drop in global trade with lasting effects. Cargo ships are stuck in a tough spot—either brave the risks of the Red Sea or face hefty costs and a 10-15 day delay by taking the longer Cape Route. The outcome? Shortages, higher shipping fees, and extra expenses for managing inventory.
The impact is hitting places like the Volvo car plant in Ghent and the Tesla Gigafactory in Germany, both pausing production. Many other European factories are in the same boat, relying too much on hyper-efficient supply chains that struggle when faced with disruptions. Maybe it's time we rethink our strategies? Depending solely on just-in-time systems without any safety nets seems shortsighted.
Robust, agile and strategic procurement is the name of the game today to ensure business continuity. What happened to Nearshoring and Onshoring? What happened to spreading shipments over different transport modes and/or different actors? Lessons learned or lessons forgotten? A delay of around two weeks in a transportation mode known for its unreliability should not cause major problems considering all the challenges that the industry has survived in recent years.
Creating a sustainable and resilient supply chain requires more than just focusing on cutting costs. Efficiency and resilience don't always go hand in hand. Diversification and risk mitigation alone won't solve disruptions. It's crucial to take a holistic approach, especially during tough times. Strategic insights and sustainable approaches in logistics procurement, supplier sourcing, and freight allocation are vital for a strong supply chain—even if it means sacrificing a bit of efficiency.
To thrive today, manufacturers should regularly test for weaknesses and have solid risk-mitigating plans in place. Embracing new technology can give them better control over the entire transportation network. But, let's face it, that's easier said than done. Human memory seems about as reliable as remembering what murmuration means.