Uh Oh – is the End of Globalization and JIT etc. Nigh?  Or, How Many Containers are Lost at Sea Every Year?

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This reminds me of the series we wrote many years ago when we said, “Strategic Sourcing is Dead – and if Not, it Should Be”.  It may be time to take a look at how we have designed Supply Chains and acknowledge that perhaps the pendulum may have swung way too far in the direction of Globalization and Low-Cost Country Sourcing and JIT and so on and so on.  We may have absorbed wayyyyyyy too much risk in our Supply Chains while pursuing optimization.

Just take a look at that picture and tell me if it makes any sense to have the entire world’s economy be subject to a shipping choke point which cannot even absorb the width of the ship trying to navigate through it.  Yet, that’s exactly what we have.

Excessive Globalization is a term that I had not run across  but it made me think.  This constant chasing of saving the last nickel also means excessive risk.  The Ever Given stopped giving and just stopped global commerce.  This darn behemoth carries 20,000 containers so not only is it wide, but it is also tall when loaded.  And you can imagine what the wind can do to a tall structure, where the containers are acting like a giant sail.

The two events that are shaking up our thinking and putting on notice all the supply chain consultants and gurus could not be any more different.  Yet, their impact will be long lasting on our profession.  COVID was a worldwide phenomenon and the Ever Given was a single isolated event and yet they both demonstrated the fragility of our supply chains.  Massive shortages of PPE that infected more and more people leading to a dramatic spread of the virus demonstrated that stretched supply chains could not be counted on.  The spreading impact of the pandemic started breaking many other supply chains around the world leading to a mad scramble to keep operations running.  And we have yet to see the impact of the time it will take for the vaccine supply chains to reach the furthest corner of the world because unless we get everyone vaccinated, we are all unsafe.  If the virus finds a host, it will keep mutating.  And we haven’t even contemplated the need for a permanent global supply chain to deal with the entire lifecycle of COVID or future such events. 

Similarly, as we pointed out in our last blog, the impact of the Ever Given was no less significant and while the damage may not be as long lasting as COVID, it ill be felt for quite a while.  And by the way, even these two events are interconnected (go figure!!).  The massive demand for consumer goods generated by American (and European) consumers while we were all locked up due to the pandemic created huge pressure on the shipping industry leading to huge demand on shipping from China leading to delays for all other commodities, shipping from other ports, massive shortages of containers (last blog) and so son and so on.  The Ever Given just exacerbated that challenge many times over AND led to an even more massive container shortage.

Carpe Diem!  That’s the message for our profession.  It is time to start educating our Stakeholders (unless you’re lucky and they are ahead of you and already knocking on your door) to start reevaluating their Strategic Value Drivers and putting more weight on reducing risk and the resilient of your Supply Chain.  That is what’s going to drive a competitive advantage far more than LCCS or JIT – that’s a guarantee.  Start working with your sales and marketing organization to get ahead of this before your customers.  Incorporate Response Lead Time into your strategic planning.  And most of all, make sure that your people have the absolutely required STRATEGIC competencies that will help you deliver.  It’s the Strategic processes that require your focus.  10,000 – YUP, every year!!!

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Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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