How to counter supply chain disruptions

BlogDigitalization
25-03-2022

As we enter spring of 2022 in the northern hemisphere, there are quite a few generation-defining moments that are past us which have changed how we all operate. And just as we were recovering from this, we have an all-out war between Russia and Ukraine that severely threatens not only energy supply chains but also our food security. The war has severely dented 30% of the global supply of wheat that puts bread on our tables, quite literally. There is no part on the globe that will remain unaffected by this unwanted aggression. Most of us are already experiencing shortages of day-to-day consumables. Meanwhile, supply chains need to be kept moving, the shockwaves created by these disruptions need to be dampened. And ports globally, despite being severely affected by these constant changes, need to be resilient in being able to cope up with a multitude of supply chain disruptions to ensure the common man, like you and me, can continue with our lives. A port never sleeps!

A look back at 2021

When the Covid-19 outbreak forced nations all over the world to impose national-wide lockdown restrictions in early 2020, supply disruptions dominated the news. To limit the spread of the virus, terminal operators, port authorities, and multimodal transportation providers reduced social interaction. This, however, hindered port operations, requiring vessels of all classes to spend extra time in port. In November 2021, more than 70 container ships were stuck at sea outside the ports of Los Angeles and Long Beach.

The Ever Given incident in the Suez Canal demonstrated the dangers of the system running at such a tight capacity. When the container ship, got stuck in the Suez Canal for six days,150 other ships were halted on one day, causing delays in global supply chains to the tune of  $1 billion. This episode proved how disruptions have huge repercussions, with delays quickly causing problems along supply chains that take a long time to resolve.

Although the problem did not begin with the pandemic. According to the U.S. industry publication Transport Topics, truck and rail companies were already having difficulty keeping up with demand in 2018. An IHS Markit research, anticipated a year-on-year increase in the real value of global trade by 12.6% in 2021 (prior, it was +8.5%) with a forecast that will grow to 15.8 billion metric tons in 2022.

These events prove that the shipping industry is not sufficiently optimized to deal with the increased number of port disruptions.

The causes of port disruptions

Port disruptions are not the result of a single, easily remediable issue. In reality, several aspects of the whole supply chain are occurring concurrently, resulting in considerable port delays.

We can group shipping supply chain disruptions, in and around the ports, on a few factors:

  • Inadequate physical and digital infrastructure: The importance of infrastructure and logistics is more evident than ever. The Biden Administration’s $1 trillion infrastructure bill will include $17 billion in funding for port improvements and plans to standardize data-sharing requirements for shipping lines, terminal operators, warehouses, and land-based transport.
  • Poor schedule reliability: Global schedule reliability reached an all-time low in 2021 at 33.6%. Poor schedule reliability, coupled with high consumer demand, has handed shippers and forwarders a myriad of challenges,” said Sri Laxmana, vice president of global ocean product at C.H. Robinson.
  • Terminal capacity: Terminal utilization rates are set to increase over the next few years. Handling volumes will grow by an average of 5% a year between 2020 and 2025, whereas capacity will grow 2.5% a year, to reach 1.34bn TEU, putting further pressure on the global port congestion crisis.
  • Hinterland transport networks disruptions: According to the American Trucking Associations, there was a shortage of more than 80,000 truck drivers in the United States which has made this slow-rolling crisis much more acute.
  • Lack of timely data sharing: On 13 May 2021, Daniel Maffei, Chairman of the Federal Maritime Commission, said the country has struggled because it did not have the necessary digital tools to share information and plan resources. “If anything could have lessened the problems created by this import boom, it would have been to have information to be flowing more accurately, quicker, and more freely.”

The impact of unpredictable disruptions

According to the Business Costs of Supply-Chain Disruption report, disruptions have resulted in significant financial costs (averaging 6-10% of annual revenues), and reputational damage as companies struggled to maintain supplies of their goods.

The global COVID-19 pandemic has had a substantial impact on many agrosystems and associated livelihoods. And provoked a shortage of all kinds of products such as raw material, food, home and tech devices, and much more.

Moreover, the rapidly fluctuating demand cost businesses a lot of money in terms of inefficiency and waste throughout the pandemic. “It makes forecasting difficult, with algorithms based on historical data not being able to handle unexpected future events,” says Hau Lee, professor of operations, information, and technology, at the Stanford Graduate School of Business.

During the Ever Given disaster, numerous ports lacked accurate information about the location of the vessels stranded in the canal. Because the ETA was not updated, several docks remained allocated for vessels that never arrived at the port on time, causing significant port disruptions.

How to minimize port disruptions through digitalization?

While digitalization is not the holy grail to solving port disruptions, those that had invested in digital infrastructure and promoted data exchange navigated more smoothly through the disruptions last year.

To help companies increase transparency and mitigate the negative impact of port disruptions, we’ve designed PortXchange Synchronizer. It’s a centralized platform for sharing real-time data between ports, terminals, shipping companies, and other service providers during a port call. PortXchange Synchronizer creates a common situational awareness for all stakeholders and allows to better coordinates all activities during the port call.

If all parties involved in a port call share their planning data openly through a single platform, the overall predictability of a port call will be improved. As a result, companies can anticipate delays and react proactively to planning changes.

Want to learn more about how to build resilient port infrastructure? Join our upcoming webinar and get insights about how the Port of Houston revamps its digital and physical infrastructure today to meet the challenges of tomorrow. Free registration is now open: https://hubs.la/Q016MZjZ0

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About the author

Francesca Celano
Francesca Celano
Junior Growth Marketer

Francesca is a junior growth marketer who aspires to assist the maritime industry in its digital transformation. Her interest in technology and the shipping industry leads her to PortXchange, where she helps us communicate the advantages of implementing digital solutions to improve the maritime logistics chain.

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