Are you ready? The Hanjin example.
resilience and visibility

Are you ready? The Hanjin example.

Market shifts can break a business. The Hanjin disaster highlights this. And the importance of visibility, partner integration, and real-time data within and beyond supply chains.

From my office in Rotterdam, I can overlook parts of the container operations at Europe’s largest port. I started my career here, at the port of Rotterdam. But the sheer size and efficiency of this key logistics hub with over 500 line connections never seize to amaze me. So naturally, with sea freight close at heart, I’ve been following the media headlines on the “Hanjin disaster” with great interest.

Hanjin Shipping Co. is a South Korean shipping line – in fact, the world’s 7th largest in terms of capacity. As reported, it filed for bankruptcy in late August and Reuters reported yesterday that the courts in South Korea are still debating the future of the company. Selling the business is one of the options. It’s a tough environment for cargo vessel line operators these days – with international trade numbers down and globalization on the decline.

Different perspectives

Yes, of course, the shipping industry has always been full of challenges: major competition, tight delivery time frames, high customer demands, capacity issues, stringent regulations, fluctuating bunker costs, volatile currency exchange rates, extended services, … to name but a few. And today, businesses and operators have to prove themselves ever more flexible and agile to make it – in our ever more demanding and dynamic global marketplace.

Or they break, as the Hanjin example demonstrates. While feeling for their shipping line buddies, the competition basically sees it like this: what is a catastrophe for one, is a blessing for others. So, with less load capacity available in global waters, spot rates have already risen temporarily and vessel line operators are making the most of it.

More disturbing, however, is the perspective of terminal operators, logistics mangers, and shippers: extra storage, fallen through contracts, cash payments, irate clients, and missed peak season deliveries. And there are still ships with staff and cargo out there at sea waiting to be accepted for unloading at ports around the globe…

Erm, where is my stuff?

Interestingly, the first question that came to the minds of many shippers and logistics providers when the Hanjin news broke was: “Do we have cargo on board their ships?” And this question could not be answered with a few quick clicks of the mouse either. At least not for the majority of shippers. Serious panic broke out in many businesses, struggling to determine the whereabouts of shipments as well as the vessels they were loaded on.

You would think that in this “digital age” of ours, such issues don’t exist anymore. Everyone and everything is connected. Pffff – far from it. Unfortunately, while digitization and visibility are much discussed, even hyped since a while, global supply chains – in reality – are still full of gaps and holes in terms of information flow.

The Chief Supply Chain Officer Report 2016 by EFT found that while retailers, for example, have achieved a good grip on visibility of their own inventory by now, most still struggle to extend such visibility to their suppliers. Or to transport partners, for that matter.

The ideal set-up

Everything is available these days to prepare supply chains for disruptions and empower them to protect the business when things go wrong. In a nutshell, the following set-up shows the ideal basis for comprehensive visibility, risk mitigation, and delivery performance in the supply chain:

  • Relevant systems of supply chain partners are connected. This can include systems and applications, for example, from manufacturers, suppliers, customers, brokers, logistics providers, airline and vessel line operators, carriers, and customs authorities.
  • Relevant supply chain data from initial order and procurement to production and final delivery is scheduled and transmitted in real-time. It can be accessed by authorized parties at any time. Overarching platforms can assist in case of unharmonized IT landscapes.
  • Monitoring and alerting functionalities alert involved parties promptly once a defined milestone such as pick-up, customs clearance, container loading, vessel departure or arrival, for example, is not achieved as planned.
  • Business contingency measures following discrepancies trigger new orders, automated replenishment, or rerouting of shipments in transit to fulfill any orders in danger of delay.
  • Freight management systems support the calculation of best possible routes and transport modes for replacement shipments and automatically select the carriers with the best offer.
  • Shipment data is transmitted electronically to involved parties and barcode labels are in line with each carrier’s specification. Final deliveries are monitored until receipt is confirmed by the end customer – or until they are returned.

It’s worth it

Sounds easy enough to avoid any major trouble – even in case of unexpected scenarios like the Hanjin disaster, or a volcano eruption, or even a simple traffic delay. All of these can potentially cause you to lose a client, a contract, or your brand’s reputation.

It takes the right tools to achieve agility in supply chains and to manage disruptions effectively. And it can be a hard piece of work for a business to upgrade its supply chain’s IT environment and get all partners onboard, too.

But it is surely worth it. It’s a key factor today for sustainable success and to keeping a competitive edge. The right approach and the right tools will quickly pay off, too. You can find ROI example calculations for IT projects in a recent post here.

Have you had any containers onboard Hanjin vessels in transit at the time? How did you cope? I look forward to hearing from you on LinkedIn.

And let me know if you would like to discuss options for the ideal set-up any further – please contact us anytime.