The supply chain is a delicate balancing act. The slightest disruption can bring down the entire operation. Victor Restis is considered one of the most important and illustrious shipping figures on the planet, and he discusses how supply chain disruptions are affecting the shipping business.
How Shipping Drives the Supply Chain
Shipping is a major component of the global supply chain. It transports goods and resources from one country to another. The shipping industry employs over 30 million people worldwide, making up 4% of the world’s workforce (International Labour Organization). That equates to 7 out of every 1000 jobs around the globe!
A huge amount of merchandise is shipped around the world. In 2015, over 50 billion tons of materials were transported by ships (International Maritime Organization). This figure is expected to grow in 2020.
The impact of shipping on the business community cannot be denied. It has facilitated sales and manufacturing operations around the globe. The industry is part of many sectors, including essential goods such as food, fuel, and pharmaceuticals. In addition, automobiles, consumer electronics, clothing – all require shipping for their production and distribution across national borders.
Innovation in Shipping Increases Supply Chain Effectiveness
For businesses to keep up with growing demand and maintain a competitive edge in today’s global marketplace, they must embrace new technology and strategies that will improve management and warehousing functions within their supply chain.
Supply chain management is a key factor in business success because it allows companies to plan, reduce waste, and increase profits. By using new technologies such as artificial intelligence, to better monitor the flow of goods, businesses can improve efficiency.
The innovative company Zappos used this technology when they implemented an automatic replenishment program called ‘Zappos Insights.’ This system works by automatically restocking stock based on sales data collected from customer orders.
Another example is Amazon, which uses artificial intelligence for warehouse picking/packing operations, reducing human error in selecting stocks for shipping purposes. As a result of these two examples, businesses can reduce costs due to fewer errors within their supply chains. In addition, artificial intelligence is also being used to help provide customers with personalized supply chain solutions.
Innovative shipping management has been a big part of the success of businesses today. However, with constant advances in technology, shipping services will continue to change and evolve as the needs of consumers change around the globe.
The sudden interruption of supply chains can have devastating effects on business productivity. For example, in 2015, a fire at a chemical warehouse caused a major disruption in the global supply chain – impacting scores of companies worldwide (KNBC). This same year, floods in Texas disrupted refinery operations and distribution networks across the U.S., leading to increased prices for gasoline and other petroleumized products (CFRB). The cost to re-establish inventory after such an event would be enormous.
The History of Shipping Volatility
One of the most notable disruptions that have impacted shipping supply chains was the 2010 Icelandic volcanic eruption. This event shut down airspace for over a week, halting European air traffic and bringing global shipping to a screeching halt (Huffington Post).
In 2007, earthquake activity in China also led to shutdowns at major ports, which impacted global shipment times by days or weeks (CNBC). The impact of this disruption on manufacturers can be substantial – especially when inherent delays are factored into delivery timelines. For example, if an electronic gadget is manufactured in China but needs to be delivered to consumers in Europe, there are added costs associated with travel time via ship. If the gadget’s production deadline cannot be met, the company will incur losses.
By tracking information on demand and inventory levels throughout the shipping process, companies are better able to avoid disruptions like these. By providing real-time updates that account for transit times, businesses will meet their commitments more consistently (Ambient Insight). The result is greater trust between consumers and companies globally, increasing sales numbers in an interconnected marketplace.