Editorial

Just in time … or not?

Have you ever given the just-in-time supply chain a second thought? Probably not. We take the supply of consumer goods as a given. We expect the the cogs of the global supply chain to keep on spinning so that our every demand is met at the click of a button. But what if a massive container ship – one longer than New York City’s Empire State Building – becomes beached on one of the world’s key trading routes, potentially slowing the supply of essentials like toilet paper and coffee? Then you might take note.

In March, the world’s attention was drawn momentarily from the COVID-19 pandemic when one of the world’s largest container ships, the Ever Given, became lodged in the Suez Canal during strong winds and a sandstorm. The giant vessel was stuck at an angle, blocking the critical trade route – through which about 15% of all global shipping passes – for six days. The blockage delayed about 300 cargo ships, and many others were rerouted, causing significant disruption to the global supply chain.

Beyond the immediate impacts of potential market supply challenges, there were also domino effects at destination ports and terminals due to schedule disruption, yard capacity strains and the accumulation of cargo. Final-mile delivery carriers also felt the brunt; a shrinking driver pool was expected to pick up the slack and help the market fulfill its just-in-time guarantee.

The grounding of the Ever Given has highlighted the delicate nature of the global supply chain at a time when it was already under monumental stress as a result of the COVID-19 pandemic. It was proof of how a disruption in one part of the world can have a profound impact on supply in another part of the world. And these disruptions can come in all shapes and sizes: a natural disaster, political tension, war or, these days, a mass technology failure. The point is, there are risks to the offshoring and just-in-time delivery model that dominates the global supply chain – risks with more significant consequences than the caffeine jitters from a coffee shortage.

A disruption in one part of the world can have a profound impact on supply in another part of the world

The team at Insurance Business America www.ibamag.com MAY 2017

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