Peak shipping season is approaching, but the movement of goods has been disrupted in a key shipping channel thanks to climate change. The Panama Canal is one of the world’s most important passages for trade in terms of container traffic, and in mid-August, the Panama Canal’s operator was forced to conserve water and reduce capacity due to an ongoing drought. As a result, ships have been backed up at the mouth of the 50-mile-long waterway that connects the Atlantic and Pacific Oceans. According to The Wall Street Journal, more than 200 container ships were held up while waiting to pass through the canal earlier this month, with some waiting as long as three weeks.
The Smart Way to Manage Supply Chain Risk
The supply chain disruptions witnessed over the past few years have had enormous consequences for businesses, and the effects of this drought-induced crisis will be widely felt. Yet, there are ways for businesses to minimize the impact of these events.
Sphera’s Supply Chain Risk Management (SCRM) solution is a market-leading, AI-powered technology which enables supply chain risk management that’s more intelligent and more agile. As a solution that rises to the challenges of today’s supply chain disruptions, it’s unrivaled.
Media coverage of the canal’s shipping crisis is currently reaching a crescendo, but the events leading up to this crisis have been monitored and known for months. Through SCRM, Sphera made sure that customers were promptly notified of the event and updated as the crisis evolved. With 6% of global maritime trade and 40% of all U.S. container traffic relying on the passageway, timely information is essential for business continuity.
Information Is Key
Information is indeed a powerful tool, and companies that manage risk well know the importance of up-to-date, accurate and comprehensive information. It serves as the foundation for sound decision-making and prudent action. Sphera’s SCRM provides a wealth of real-time information that allows supply chain managers to act quickly before the effects of a crisis are even felt. Its alerts achieve a 99.98% accuracy rate and a score of 99.99% for relevance, demonstrating the highest curation quality.
Panama’s climate-related issues began months before ships started backing up at the entrances to the canal. In April this year, the Panama Canal Authority imposed draft restrictions on the largest ships that use the canal; the restrictions were necessitated by falling water levels in nearby lakes. Information like this should put supply chain managers on alert, which is exactly what Sphera’s SCRM solution does through 24/7 monitoring. The solution fed this information to its users so they could actively monitor the situation and respond to any developments that would affect their supply chains. And the alerts continued as the situation evolved.
Understanding the Consequences of Supply Chain Disruption
Supply chain managers need to be aware of the repercussions of risk events—whether the events are financial, natural or cyber-related—and how they affect their supply chains. The possible consequences include:
- Delays. Producers do not get the parts and materials they need on time. And this can leave customers waiting for finished goods.
- Shortages. A lack of parts, materials or components can lead to production stops. Enterprises or entire industries can be forced to shut down.
- Higher prices. Higher prices for gasoline and fuel squeeze profitability. And price increases for transported goods also drive inflation.
- Loss in revenue and job cuts. If manufacturers can’t deliver the goods, revenues are reduced. Loss of profitability can lead to layoffs.
- Contract fines and damage to reputation. Enterprises can face penalties for late delivery or non-fulfillment of contracts. Business partners or consumers can lose trust.
What Comes Next: Finding Solutions to Supply Chain Challenges
Understanding risk events and their possible outcomes is just the beginning. Once supply chain managers see trouble on the horizon, they need to prepare for disruption.
Sphera’s SCRM solution provides a range of components that bolsters a company’s ability to manage their supply chains in the midst of climate change-related events such as droughts, hurricanes and floods or geopolitical events such as political unrest and labor shortages and disputes. Sphera’s SCRM advances a company’s ability to manage and mitigate supply chain risk by helping it:
- Identify alternative shipping routes or suppliers when necessary.
- Assess a supplier’s criticality and detect vulnerabilities to understand the impact of the supplier’s potential failure.
- Collaboratively plan risk mitigation actions internally and with suppliers so they can act quickly in the event of an incident.
- Gain visibility into the layers of their supply chains to proactively deal with threats in their sub-tiers.
- Monitor commodity risk in order to optimize sourcing results.
Additional components allow businesses to monitor their supply chain for compliance-related violations and enhance their knowledge of suppliers with automated supplier and third-party risk assessments.
Don’t Wait for the Next Risk Event
Among today’s most nimble, competitive businesses are those that have mastered the management of supply chain risk. The challenges faced by suppliers that rely on the Panama Canal will soon be replaced by problems of a different nature. Whatever they may be, Sphera’s SCRM solution is ready for them.
Sphera’s SCRM leads the pack because of its ability to identify and inform users about emerging and evolving risk events and help customers respond to them with speed and efficiency. SCRM provides the information, answers and options that companies need in the face of supply chain challenges. It gives users updates about critical commodities; suppliers and their possible weaknesses, even at sub-tier levels; and violations of supply chain regulations and other relevant laws.
Boost your readiness for the next supply chain disruption by contacting us now.