Supply chain wisdom

The TT Club said that these influences are eroding traditional buffer mechanisms to ensure continual goods supply so a new assessment of potential risks needs to be undertaken.

”We are suffering from a disappearing ability to absorb short-term shocks to the supply chain because of fundamental societal and geopolitical changes to the global equilibrium,” commented Dorota Jilli, a senior underwriter at TT speaking at the annual European Sea Ports Organisation (ESPO) conference in Valencia.

“Yes, Covid and the war are disruptive and are driving up prices but the longer-term trends of production cost increases in Asia and stricter demands of ESG mean that cheaper goods and transport services are features of a past global economy.”

Obvious risk

Ms Jilli said that the on-going effects of the pandemic, with its associated lockdowns and the war in Ukraine are proving catalysts to ignite underlying economic and environmental trends that will continue to fuel long-term changes in the pattern of global supply and demand.

Abandoned cargo is more prevalent with delays through port congestion and lockdown closures meaning the incidence of consignee bankruptcy or goods being unwanted due to loss of markets is higher.

This is particularly concerning when dangerous good are left in storage for excessive periods as the tragic incidents in Beirut last year and in Chittagong more recently attest.

“Cargo at rest, either at ports or inland staging areas, some of which have been hurriedly pressed into service as overflow facilities, is increasingly subject to theft. With shippers looking for ‘workarounds’ to reduce costs or avoid congestion, thieves have been quick to adapt their methodologies and the use of online means of deception and insider recruitment are now both more common,” Ms Jilli said.

She said that adequate risk assessments need to be undertaken across the full breadth of an operation in order to understand thoroughly the various risks and, where appropriate develop mitigating actions and continuity plans to protect business.