A Forbes news source talks about Supply Chain: Planning For Water Logistics Constraints.
Supply chain was plagued with transportation issues
On March 23rd, 2021, supply chain issues became headline news when the Ever Given, a 20,000 TEU container ship, blocked the Suez Canal. Over the past two years, the supply chain was plagued with transportation issues impacting cost and reliability. This week, another shoe dropped. On May 24th, The Panama Canal Authority (ACP) announced a restriction in weight of ocean vessels moving through the locks. A second restriction, announced on May 30th, reduces the draft to 44 feet. So what? Who should care? I believe this is a canary in the coal mine. If we have a long, hot summer, expect more logistics constraints.
Water levels decreased at the Panama Canal due to severe drought, forcing vessels to lighten their loads and shippers to pay higher rates. Following the announcement, Hapag Lloyd announced a PCC (Panama Canal Charge) of $500 per container effective June 1 on all cargo loaded on its Asia to US east coast sailings via the canal. In addition, this drought is another factor affecting supply chain lead time variability making it difficult to predict inbound deliveries.
Expect increased costs and lead time variability through the summer as Panama struggles with drought. The drought issue is not new, but it is worsening. Approximately, 6% of annual global maritime trade moves through the Panama Canal.
Steps to Take
The design of the supply chain assumes waterway predictability to enable the movement of ships and barges through locks, canals, and rivers. Disruption like the current issues in the Panama Canal are not new, but few companies are proactive. (For example, last year, drought conditions reduced barge traffic on the Rhine and Mississippi rivers. In 2018, the Rhine River water levels forced closure for barge traffic for 132 days.)
As a result, supply chain leaders need to invest in network optimization technologies to constantly assess transportation lead times, relative costs, and plan feasibility to ensure business continuity through what-if optimization. This work requires close collaboration with between finance, procurement, manufacturing, and planning. With the current level of disruptions, the required frequency is monthly, and should precede the Sales and Operations (S&OP) meeting cycle. Alignment of these functions is an issue.
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