Governments worldwide have ‘finally understand role of supply chains’, but big questions remain within the industry over how to adjust to new developments.
Logistics managers face big challenges as tech and environmental impacts grow
Governments have “finally properly understood the link between the health of the supply chain and health of their economies”, because of its role in recovery from the pandemic and the challenges it has faced, according to secretary-general of the Global Shippers Forum.
“Let’s hope that those lessons stick and we do not need to go back to class 101 in supply chain management once this is all over,” he said at a ‘Liner shipping post-Covid’ session at the recent Freight Forwarders Forum 2021, organised by freight forwarding association.
He emphasised that governments need to understand the consequences of their actions on the supply chain and warned of the problems if politicians mishandle the transition to a low-carbon environment, “for instance if a significant proportion of the world’s fleet is not able to operate because they do not meet the new regulations. Politicians don’t always respect the supply chain consequences.”
It is a critical moment for shippers, secretary-general of the Global Shippers Forum stated, noting: “We have just finished the peak season of all peak seasons. Shippers are asking: ‘was 2021 a one-off or the new normal?’ If capacity readjusts to get in line with demand, will we all just keep going until the next black swan event?”
‘Grey swan’ events
A risk management director for freight insurance and risk management specialist said it was important to also be aware of ‘grey swan’ events, noting: “We do get black swan events like Covid, but there are also plenty of grey swan events such as the Ever Given (stuck in the Suez Canal) and changing or divergent national policies which also affect maritime trade.”
And he predicted that decarbonisation will be “seismic for maritime trade” – for fuels, cargo and infrastructure.
A risk management director for freight insurance and risk management specialist has produced a report called ‘Brave New World – The Future Challenges for Container Shipping’, which outlines scenarios for the container shipping industry and discusses how the industry may ensure value creation over the next 25 years.
The study showed that containerisation has slowed considerably since the early 2000s but it is unlikely to reverse. Today, about 23% by tonnage of dry seaborne trade is carried by container.
The risk management director said there is an ‘almost religious debate’ on trade growth, noting: “People ask: will robotics, 3D printing and/or protectionism cause a slowdown?”. He predicted that the real value is in digitalisation, offering greater reliability and flexibility in e-commerce supply chains, for example.
Source: Lloyd's Loading List
Supply chain rethink needed
Container line Hapag-Lloyd commented: “The whole way we think about supply chain needs a reset. We have had 50-70 years of slow movement towards a world where you can get anything, anywhere, at a low cost.
“The supply chain needs pretty fundamental rethinking. We can’t have both just-in-time and the lowest possible cost. It has been all about thinking of every piece of cost mitigation, rather than making the supply chain more robust – as the military do.”
Importance of digital analytics
Director of ocean freight development said that digital analytics will be the most important trend, commenting: “Who will lead this – traditional freight forwarders or tech freight forwarders? Probably both together, as traditional forwarders have been very innovative as well.”
She was, however, quick to acknowledge that modern technology is not always the answer, noting: “The pandemic has revealed the fact that the human factor is key in our industry despite the fact of digitalisation. We would see countries go into lockdown and it was people who were developing new solutions and alternative plans.
“That would not be possible in a world of only platforms and digitalisation. We needed people to charter flights and ships. Forwarders, whatever their size, have proximity to their customers and showed flexibility and agility and the capacity to design new networks to meet customer needs. Even the shortage of truckers in the US and Europe shows that the human is still a big part of the supply chain.
“Is it the end of just-in-time and a move to just-in-case? It is not a single on-off decision. It will take a lot of cost and management time to make a switch. I think a lot depends on the next few months and how economies react to the threat of inflation and labour shortages.
“The big word for me is collaboration. It requires a paradigm shift in the way different partners work together, especially to achieve carbon targets and the overall customer care package.”