Prepare For Black Swan Events With Supply Chain Resilience

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How can organisations best cope with the persistent pressure currently being placed on their supply chains?

If you didn’t know what black swan events were five years ago, the chances are you do now. For those not familiar, ‘black swan’ is the term given to an extremely rare event that has a severe impact on almost everything around it.

Importantly, it’s an occurrence that could not have been predicted beforehand, however sophisticated the forecasting tools (and whatever those gifted with hindsight might try to claim). What’s more, a black swan event will inevitably have implications for local or even global economies. We’ve faced one after another in recent times, and one of the areas particularly vulnerable to disruption is business supply chains.

In this guide, we’ll highlight some of the major black swans from the past few years, looking at them through the supply chain lens. We’ll then look at how businesses and organisations need to react and adapt to the increasing pressure from these events. We start in February 2020…

The world we live in today

Recent black swan events As we consider recent black swan events, let’s start with the big one. As we know only too well, there was hardly a single aspect of life that wasn’t turned upside down by the global pandemic and the long periods of lockdown.

According to the Institute of Supply Management (ISM), around 75% of the companies surveyed reported supply chain disruptions, with 80% expecting further disruptions in the near future and 62% reported delays in receiving goods.

The world grinding to a halt was challenging enough for most companies, but the ripple effects of the pandemic continue to cause disruption even after lockdowns have ended in many countries globally. With fewer containers moving around the world, there are fewer empty containers ready to be refilled.

COVID-19 has also played havoc with the natural rhythms of the global trading calendar, pushing back seasonal peaks and troughs in demand by months at a time. Normally these peaks are planned and forecasted to ensure equipment is positioned to satisfy seasonal demand, but they are still being used elsewhere as the world struggles to play catch up.

Global supply chain is called a chain for a reason. The interconnectedness of activity means that a disruption to one element has a knock-on effect across the entire system. And many containers are in short supply.

That means manufacturers of all sectors – from retail to food to pharma – are struggling to get the necessary parts or ingredients they need. As a result, buyers and suppliers are struggling to meet demand which puts pressure on warehousing.

In the middle of all this chaos, we were than confronted by another black swan event. On 23 March 2021, a container ship operated by EverGreen Marine became wedged between the banks of the Suez Canal, blocking the waterway completely. Around 12% of global trade flows through the canal on a daily basis, but for six days it came to a complete standstill.

Data from Lloyd’s List highlighted that an estimated $9.6 billion worth of trade was held up every day during the impasse.2 Even though the blockage lasted for less than a week, it had knockon effects for supply chains for many weeks to come.

As well as congestion at ports, many vessels were not in the right place to fulfil their next scheduled journey. This event added to all those supply chain problems, such as container shortages, that had been building up during the pandemic.

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Source: Aircargonews

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