February 11, 2014
Panama Canal
The Panama Canal | Image Credit: Wikipedia

We wrote last year about the important ongoing expansion work being done on the Panama Canal. Well it goes on no longer, for the moment at least, as a labor dispute worth a mammoth $1.6 billion halts operations.

The disagreement centers on costs that appear to have run over-budget and the associated bills that are outstanding. A Spanish-led group of engineers tasked with completing the expansion work is becoming increasingly frustrated at what is sees as underpayment and a lack of commitment, while the Panama Canal Authority is reportedly saying that the claims “amounted to blackmail.”

As with most labor disputes the truth behind the latest Panama Canal strike probably lies somewhere in the middle, but that’s of no comfort to the many global businesses counting on a project that is running over on many counts.

Checking the other box true of most projects, the expansion is already expected to run over its previous deadline of August this year. This would have seen the Panama Canal celebrate its centenary – the first navigation of the waterway was on August 15th, 1914 – in fine style, but work isn’t now expected to be completed until some time in 2015.

Any extended delay now risks pushing the project into a second year of delay, not something acceptable for a channel that the ASCE describes as one of the seven wonders of the modern world.

Though happening thousand miles away, the disruption isn’t something that tri-state area businesses can ignore. The route is a vital one for global trade, affecting goods both in and out of the United States to the tune of hundreds of millions of dollars. The expansion will allow passage for vessels carrying more than 2.5 times the current maximum capacity, bringing down supply chain costs for import and export businesses alike.

English: George Washington Goethals, photo sca...
George Washington Goethals – Image Credit: Wikipedia

And historically-speaking we have even deeper reason to take an interest locally.

The supervision and completion of the Panama Canal was under the control of none other than George Washington Goethals, the very same man for whom the bridge connecting Staten Island, NY to New Jersey is named.

Goethals has a storied place in U.S. history, both engineering and military, so it’s just one more item to add to the laundry list of reasons hoping that one of the world’s most important waterways gets its act together, before the project sails into more dangerous waters.

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December 9, 2013
Truck stuck in the snow
Truck stuck in the snow (Photo credit: OregonDOT)

The latest in a series of yearly logistics surveys finds supply chain disruption a common challenge that many organizations are failing to remedy.

The fifth annual Zurich survey found that fully three quarters of managers don’t believe that they have a complete handle on levels of disruption to their supply chain, while only 25% actually coordinate across their business to understand disturbances that do occur.

The latter only compounds the former, as individual or departmental preparedness can only go so far in dealing with an interruption that affects the entire organization.

Counting the Costs

The report goes on to put a price tag on the individual instances of supply chain disruption, with 70% costing less than 250,000 Euros (around $343,000). The worrying statistic comes in the 15% of interruptions that cost more than 1 million Euros (around $1.35 million), demonstrating the maximum potential risk that organizations open themselves up to in failing to review and address persistent disruption.

In some cases, such as natural disasters or civil unrest, it can be almost impossible to build in sufficient protection to mitigate such costs. Others, however, including telecoms outages or breaches of data, fall into a category in which it is much less acceptable to be caught unprepared. A lack of back-up systems or an emergency plan are issues that can be remedied ahead of time and result directly from the aforementioned 75% of organizations who are failing to review the potential for disruption.

A primary takeaway from the report should be that the potential costs of supply chain disruption warrant the investment in cross-departmental action groups tasked with mitigating the risks that their organization could face.

Planning for Supply Chain Disruption

Last month we wrote about building room for flexibility into your supply chain for 2014.

While preparing for the unexpected can be something of a shot in the dark, it shouldn’t deter planners from trying to make the supply chain as adaptable as possible. The balance, of course, is between full efficiency and maintaining a little slack that offers increased time to react and reroute resources as necessary.

The Zurich report backs this up, showing that managers responsible for supply chain disruption issues must drive the change that the numbers show is required. The turn of the year provides an excellent opportunity to do so, setting new priorities and refocusing organizational attention on areas that could increasingly costly should they fail.

As the report states, its results “continue to indicate a passive approach to reviewing the likely effectiveness of supplier business-continuity arrangements.” That approach will need to become far more active if supply chains are to become more resistant to to damaging disturbances.

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