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When it comes to efficiency, today’s global supply chain has never been better. In the last 20 years, the size of the container ship...

Logility VPs Dario Fischli and Jonathan Jackman recently hosted a webcast on overcoming ever-increasing business disruptions today while building a sustainable supply chain for tomorrow. It turns out these initiatives are two sides of the same coin.  Indeed, today’s supply chain disruptions are occurring more frequently, narrowing the window of opportunity for business leaders to […]

Evergreen Marine Corp. has hired the company that freed the giant container ship Ever Given last year when it ran aground for almost a week, disrupting global trade for months, to do the same with its vessel stranded near the U.S. capital.

A year after a giant container ship got stuck in the Suez Canal for almost a week and disrupted global trade for months, another Evergreen Marine Corp. vessel has run aground.

2021 was the year that supply chain and logistics became top of mind for everybody. The twin effects of the pandemic and the blockage of the Suez canal, combined with the explosion of e-commerce volume caused issues ranging from chip shortages in the automotive industry to empty shelves in supermarkets. And then we aren’t even […]

What a year it has been! The pandemic has caused disruptions in supply chains and logistics operations worldwide, and as a bonus, the Ever Given blocked the Suez Canal. Shortage of parts, like CPUs, are causing production stops in many industries. Never a dull moment when you work in logistics. The past year has proven […]

Almost three years ago, Harvard Business Review published a provocative article entitled ‘The Death of Supply Chain Management’. It became as...

The post No, AI has not killed Supply Chain Management appeared first on Supply Chain Movement.

The ongoing disruptions due initially to the COVID-19 coronavirus pandemic are firmly at the forefront of everyone's mind. It's hardly surprising then that the 'Evergiven Incident' has not only exasperated an already critical situation but should also serve as a timely reminder of the ongoing battles global supply chains are facing.

Just as COVID-19 vaccine distribution efforts began helping the global economy emerge from the economic impact of the pandemic, the Suez Canal disruption hit. Now that the Canal is open again, the global supply chain is adjusting to yet another “black swan” event – and recognizing the need for end-to-end supply chain visibility.

Image source: wikimedia commons

 Many have focused on the Ever Given episode as a symbol for the dangers of international shipping.  Some have discussed it in terms of "choke points" such as the Suez Canal where when one thing goes wrong entire supply chains are disrupted.  And, some have taken it as an opportunity to discuss the topic of the size of the ships.  Have ships become too big?  What happens when there is a problem with a 20K TEU ship?

All of these are very important questions and are being addressed however I believe the question is even bigger.  It is about how we structure our supply chains.  It is about the age old debate of efficiency v. resilience.  Basically, how much insurance are you willing to buy to mitigate the potential of disruption? 

Start with inventory.  What is inventory?  As I have discussed previously, inventory is merely a buffer of product to substitute for the lack of perfect information. In fact, Lean teachings tell us that inventory is considered waste.  What do good managers do with waste?  They try and eliminate it.  

So, as we have done over the years companies have fallen in love with the idea of eliminating inventory because it makes the balance sheet look amazing.  But, is inventory really waste?

I submit that inventory is not waste just like your fire and auto insurance is not waste.  Think of your insurance policies.  You may pay a couple hundred dollars a month for a product you hope you will never use!  Wouldn't you consider that waste?  Well, not if you are protecting your portfolio you wouldn't.  

So, now, let's go back to the Ever Given.  The lesson here is we need more insurance (read: resilience) in global supply chains.  If we have learned anything in the last year we have learned things will go wrong.  Buffer stocks help mitigate this.  

The next question is whether we will learn that lesson from this incident.  My answer is, I doubt it.  Efficiency drives short term results and effectiveness is for the long term.  Most businesses will not be able to resist the allure of the efficient.  Even if in the short term they sacrifice efficiency for effectiveness most will eventually look for efficiency.  Not only are businesses likely to do it on their own but Wall Street will demand it for the publicly traded companies.  Another reason private companies will always have an advantage. 

What can a supply chain manager do?  Well, first, we can strike from our "lists of wastes" the word inventory.  Inventory, as I have hypothesized above, is not waste, it is insurance.  Second, become a story teller.  Supply chains in the age of COVID and Ever Given should be remembered for what they have become - stretched to the limit.  The mantra of "Never Forget" comes to mind. 

If you have doubt of my position look at my favorite graph (posted here for years) measuring, for the United States, our sales to inventory ratio:

Notice the far right of this graph.  Here you will see our inventories in the US relative to our sales is at the lowest point since April of 2012.  This is what leads us, as consumers, to scramble for everything.  

Let's not make it so every generation has to learn the same lesson.  Let's build resilient supply chains.