Sometimes disruptions in supply chains affect so many players that they make the news headlines. This was the case with the recent events around the container ship Ever Given. It blocked all traffic in the Suez Canal for 6 days and kept more than 400 ships waiting for passage.
The uncertainty on when a resolution would be found forced companies like Kühne & Nagel, who had at the time ~60.000 TEU blocked, to consider alternative freight routes. Respective to the immediate problem this would have meant to divert ships via different routes (around Africa) or unloading and continuing by land-based means of transports and significalntly increasing delivery times.
All this happened while freight routes are still disrupted by the ongoing effects of the corona crisis:
International trade has picked up again after an initial shutdown during the early days of the Covid-19 pandemic. This happened so quickly that ports were often shorthanded for unloading already docked ships and containers could not be circulated around the globe quickly enough. This leads to a significant shortage of containers in the Asian market, which means available containers are booked at premium price and some shipments cannot be made at all.
Why should I care?
international supply chains react delicately to these kinds of disruptions. Delayed or more expensive raw materials and components impact carefully planned production schedules and sales cycles. This leads to delayed deliveries, revoked customer order confirmations, increased prices and ultimately a decrease in customer satisfaction.
What can I do?
In the following paragraph we will have a closer look on what digital solutions can do to mitigate disruptions on individual supply-chains, utilizing SAP and SAP-partner software.
Short term it is important to identify if your company is affected. This kind of visibility is achieved by a real-time view on the goods that are inbound to your company. In the example of the Ever Given, the ship and (your) respective containers could have been tracked by ClearMetal. This data would be fed back via the SAP Logistics Business Network to your core ERP to determine if there is a delay in production critical materials.
Based on the determined delays and their impact, steps could be taken to mitigate the issues. here are a few examples:
- Source the missing materials from different suppliers with SAP S/4HANA procurement and SAP Ariba, utilizing MRP Live calculations to determine open demands
- Adapt your production plan in SAP S/4HANA PP/DS
- Revoke existing confirmations to customers using the SAP S/4HANA Advanced Available to Promise functionalities to protect your A-customers
The described problems can reduce the long term benefits of a globalized economy for the individual companies that take part in it. However, measures can be implemented for risk mitigation that are not involving higher safety stock levels or complete abandonment of global sourcing. Examples of these are:
- Diversification of transportation lanes and carriers, for example using business shares in SAP Transportation Management
- Early planning and booking of freight to increase the chances of container availability whilst monitoring carrier reliability in SAP S/4HANA
- Diversification in sourcing by adding additional suppliers to the portfolio, with the option to discover them in the SAP Ariba Network
The underlying principle for risk mitigation and resilience as described in this article is a modern digital backbone where data can be reviewed and processed, supported by applications in the cloud that add additional functionalities.
Using S/4HANA and the SAP cloud solution suite hence helps to keep your business running during crisis.