The photograph shows global air and sea routes. These shipping lanes and air routes move goods throughout the world and are critical to the effective functioning of supply chains. Forty per cent of world shipping passes through the Malacca Straits connecting the Indian Ocean with the South China Sea and twelve per cent passes through the Suez Canal a major route from Asia to Europe.
Disruption to shipping routes
Ever Given is the name of the ship in the news this week causing severe disruption to shipping through the Suez Canal. The ship belongs to Evergreen a Japanese company. There are reportedly 230 ships (and growing) caught up behind the Ever Given awaiting passage to the Mediterranean Sea and on to European ports. Oil, gas, consumer and industrial products are among the many goods held up. Goods valued around £10 billion per day pass through the canal. The 400m-long (1,300ft), 200,000-tonne vessel is lodged sideways across the canal. It happened during high winds and a sandstorm conditions which are not that unusual in the region. Some have questioned the competence of the helmsman but it may simply be that this ship was too big for the narrow canal. Such a blockage has not happened previously but of course these huge container ships are much larger than many that previously travelled through Suez.
There was a failed attempt to refloat Ever Given by marine engineers and salvage operations on Tuesday 23rd March. Suez is the shortest route from Asia to Europe linking the Red Sea with the Mediterranean Sea. Avoiding Suez adds about two weeks to the journey sailing around the Cape of Good Hope, South Africa. Salvage experts say it could be weeks before they are able to move the ship. Some are more optimistic and expect to dig out the sand to get movement in a shorter time-frame of days rather than weeks. At this point it remains to be seen. Delays will cost millions and expect big insurance claims from suppliers and customers impacted by the disruption. The longer trip around Africa will also have further risk and cost – for example, extra fuel and risks from piracy. Twelve per cent of global trade passes through Suez. It is likely that shipping freight rates will increase as there is a shortage of ships caught up in the crisis and those that sail from the Far East will need to take the longer route around Africa.
It takes some skill to get a ship blocking a canal side to side like this. Let’s hope it is not something to be repeated. One alternative being considered is to remove the containers to lighten the load but this is an expensive operation that is likely to take longer given there are no facilities immediately available nearby to lift the containers.
Astra Zenica’s Covid 19 Vaccine is in the News this week
A rumbling dispute originally framed as a political argument between the EU and the UK erupted as shortages of the Astra Zenica vaccine are said to be limiting the EU roll-out. The EU was of course slow to approve the Astra Zenica vaccine and there have been misleading comments about the efficacy of the vaccine which held up the EU vaccination programme in several countries including France, Italy, Germany, the Netherlands and Denmark. It was reported in Nature the Journal that efficacy rates of 76 per cent were confirmed in trials by Astra Zenica. There had been a claim that a previous statement claiming 79 per cent efficacy was misleading but this was clearly unintentional in a rushed press statement with the company keen to give assurances to the wider public and EU that the vaccine was effective. If Astra Zenica’s vaccine really is in question why is the EU now so keen to get its hands on the vaccine saying its dispute is not with the UK but with the company who they claim are failing to meet their contractual obligations. This is really not helpful. There may be supply chain problems but instead of carping the EU would do better to see how it could help and support the roll-out to its citizens so that everyone is protected.
The company clarified that the most recent figures were estimated 15 days or more after participants received their second dose of the vaccine, and were consistent across all age-groups including people aged 65 years and older. None of the vaccinated participants developed severe disease or were hospitalised.
Nature 25th March 2021 – Latest results put Oxford–AstraZeneca COVID vaccine back on track
The Astra Zenica vaccine is clearly a triumph of science. Yes we know supply chains can be difficult but this is a completely new product brought to market in less than a year with increasing demand on an unprecedented scale. Most supply chains would struggle in these circumstances. What is remarkable is that the supply chain is effective despite some reported production difficulties in scaling up production and distribution. This Covid 19 vaccine has 200 components (including: glass vials, filters, resin, tubing, trays, packaging and disposal bags in addition to the vaccine itself) supplied from 80 countries with around 20 production centres. One of those manufacturing sites in the UK is Wockhardt UK, in Wrexham, North Wales where they have set up at speed to produce vaccines for the UK government supply contract. One of the largest deals struck by AstraZeneca, UK was to manufacture 2.9 billion doses using 25 firms in 15 countries (Source: Nature 25th March 2021). The largest partnership contract is with the Serum Instititute in Pune, India which is scheduled to produce one billion doses. It is a success story given the quick response to develop, licence and distribute the vaccine at cost on a non-profit basis to millions of people world-wide. The US Drugs and Food Administration Agency is likely to approve the vaccine within weeks for roll-out in the US.
One of the biggest threats to vaccine supply is the political threat to block exports to other countries if conditions worsen or countries do not think they are getting their fair share. The worst that could happend is that bureaucrats intervene and disrupt supplies. Interventions in supply chains never work out quite as planned as students of the supply chain discipline who played the ‘beer game’ as part of their learning about systems dynamics (Bullwhip effect) will happily tell you.
Turbulence in Chip Supply
Apple’s IPhone 12 launch was delayed by two months because of problems getting sufficient microchips to manufacture handsets. Chip supply shortages have emerged as a big threat to the production of electronic goods including tablets, phones, computers, televisions and car manufacture. These shortages are likely to mean higher prices for supplies.
What started as a temporary shortfall as chip manufacturers affected by the Covid pandemic closed or slowed production has grown into a serious disruption in production supply chains for all types of consumer electronics. It is not only impacting the elctronic industry but it has seriously disrupted vehicle manufacture as many modern cars are now fitted with sophisticated electronics to manage fuel and engine systems as well as satnav and in-car entertainment. Chips with everything in the contemporary world has made supply chains vulnerable as they compete to get the components they need to manufacture goods.
Supply Chain Disruption
One thing is certain and that is disruption will occur at some point in any supply chain. There is a need to be ready for disruption when it happens by planning for disruption and developing strategies to cope with disruption. Depending on the type of disruption it is worth being prepared for the inevitable and learning from what other organizations do to make their supply chains resilient and overcome problems. This usually requires a good dashboard system that alerts you to potential problems before they happen. An ability to sense threats is critical to becoming resilient. You may be able to have plans B or C ready to go when needed. Felxibility and adaptability are key to overcoming the disruption.
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