How can we prevent global supply disruptions like the Suez Canal blockage?

The blockage of the Suez Canal by the Ever Given has demonstrated that global supply chains are vulnerable to a single point of failure – albeit this is the first time the canal has been closed since the 1967-1975 conflict between Egypt and Israel.

The recent closure occurred at a time when global supply chains have already been stretched by the coronavirus outbreak, giving rise to consumer and industrial demands and a worldwide shortage of containers. Higher freight volumes and lower contingencies mean that these global supply bottlenecks now have a greater impact.

Although ‘just in time’ supply chains may be a thing of the past, as the industry evolves to a ‘just in case’ model to create a more reliable network and minimise risk, the need to mitigate supply chain disruption is more necessary now than ever. We need to understand what caused the blockage and assess whether it requires a process or infrastructure solution (i.e. do we prevent vessels in the canal if similar weather conditions occur, or is it a modification to the canal)? In the long run this will help eliminate the knock-on effects of disruptions. However, we cannot look past the need to address this issue systemically.

To address the knock-on effect to the entire supply chain (as opposed to individual shippers/companies), robust response scenarios need to be developed for different types of disruptive events.

‘What-if’ scenarios and contingency planning can be extremely valuable and should be considered in all layers of supply chain planning.

Scenario planning should not be a ‘one-off' exercise but instead conducted at a system-wide level with industry representative bodies and governments who have a responsibility to make sure such risks are being looked at holistically and systemically. There is also an onus on beneficial cargo owners of the world and all the other parties in the supply chain to challenge one another in considering where the vulnerabilities are and what the options are to offset such risks.

In the context of the global supply chain, logistics providers and transport asset owners need to be prepared to explore alternative routing options for example considering what air cargo options can exist in lieu of traditional ocean. The development of more container rail options from East Asia to Europe is good example of alternative routing. The foundation beneath all of this is to diversify sourcing options to enable quick pivots.

Increasingly dynamic models, sometimes referred to as techno-economic models and digital twins are used to understand, optimise and plan the development of our critical infrastructure. Such models use different linear and non-linear logic to accurately simulate how infrastructure ‘ecosystems’ perform given different assumptions, business rules and external inputs. These models can simulate the impact of disruptive events and test multiple response scenario options.

In the case of the Suez Canal, historical vessel movement data could be used to develop a simulation model which considers global shipping flows. This type of model could then be used to see how vessels would build up in the event of such an incident and understand the effects of different scenarios, in order to facilitate decision-making and minimise the effect on global supply chains. For example, simulating the impact of an immediate decision to re-route all vessels around Africa. The added benefit here is the ability to assess the overall economic cost of delayed production inputs, exports, trade, fuel supply depletion which ultimately impact GDP. Importantly these models can understand and quantify systemic risks across supply chains and enable us to test where, when and how we intervene to enable the lowest net-risk outcome.

The peak season for container trade is soon upon us with rising consumer demand and therefore the need for transportation options will only grow. Fundamentally speaking, all parties in the global supply chain must continue to embrace the investment of using data to make more informed decisions. That same data can be shared holistically, enabling the greater supply chain to build modeling options, ultimately yielding nimbleness and resilience.