What Businesses can learn from the “Ever Given” Container Ship Episode?!!

I am repeating my favorite quote again!!

“The flap of a butterfly's wings in the Amazon

can cause a tornado in Texas”

If you think this is a cliché or just a theory, think again, it has become reality!! Welcome to VUCA world.

Way back in 1980s, as a college student, when I was reading one of my favorite author Frederick Forsyth novel, “The Devil’s Alternative”, used to wonder, whether it is really possible for a single ship to influence Geo political and commercial events!! I am sure many of us, who read that novel, would have had same thoughts too.

Though the novel was written around 4 decades back, it appears that, such things are even more possible in this VUCA world now. What happens when about 2, 20,000 Ton monster of a ship veers off course in Suez Canal and gets wedged between two sides of canal?!! Who would have ever thought, a container ship 400 meters long, stuck in a around 200 meter wide Suez canal, can give sleepless nights to many businessmen across world ?!

It resulted in around 400 super tankers, super containers ships and big ships carrying millions of tonnes of goods stranded and nail bitingly waiting for “Evergiven” vessel to release its nose from the sand!! And specialists from many countries were roped in, with assorted tug boats trying to release this monster of a ship.

It was reported by BBC News that, the loss the business community was around 10 Bn USD per day!! (https://www.bbc.com/news/business-56559073) . One of the most asked question in the internet during these 7 days was, not how NIFTY or NYSE or NIKKEI is moving but rather whether the ship was successfully pulled out or not! Many organizations, whether they are into shipping, trading or manufacturing, whether they are in Syria, Rotterdam, Taiwan or in India, were all burning midnight oil taking crucial decisions, on minute to minute basis. Shipping costs was sky rocketing and there was real threat of oil shortage. And of course, if there are perishable goods, they may arrive at destinations too late to be sold!!

So this is a VUCA moment no doubt and Murphy law will ensure this or similar mishaps, either man made or natural disasters, to happen at most inappropriate time. Can a Business leader or supply chain head predict such things in this fragile supply chain balance and take preventive steps?

 While a water tight plan for every contingency is impossible, it is surely possible to mitigate the effects of such events to a big extent. Let us see possible actions / precautions that a Business Leader can put in place as Risk Management system related to this incident.

1.      Never place all your Eggs in one basket: While you may decide, as a policy / relationship commitment, to have fewer suppliers, keep alternate vendors from other zones / countries / continents ready. It is not just QDC alone anymore. Add Strategy too. Possibly you may buy a small percentage of your supplies from these suppliers. This avoids last minute rush to develop a vendor.

Always have a Risk mitigation plan that suits your organization, product and customer. Conduct a Risk audit

 2.      Predict / Foresee challenges: Normally FMEA is conducted for Engineering goods, processes, and designs. Why not for Supply chain management? While planning your supply chain management, predict / foresee where the bottlenecks are going to be and what would be your actions if something goes wrong in the process. It is not a bad idea to know what to do when something goes wrong, rather than working on this contingency when it actually happens!

Main role of a Leader is to “see” what his team members cannot “see” and that is why he is on a higher perch!!

3.      Have plan B, or C or D! : Have alternate plans for certainly critical paths (such as Suez Canal) but also for less critical paths too. You do not know what may be lurking round the corner. Brain storm with your team, experts and consultants and keep alternate plans for every step. It is like Fire escape route displayed in Hotel rooms, you may never need to use it, but when can be life savior, if such need arises. You see the picture. Thousands play professional Tennis, and there is ONLY one Serena and you know why now!

 Do not get stuck with plan A, even though it is working like a dream right now!! Explore and be ready with other options

 4.      Delivery or Cost? : Explore and find out whether your customer wants delivery “at all cost” or he is willing to sacrifice delivery time for cost. In first case, built up cost buffer in price if possible. Or build up “Logistics Contingency Fund” over a period of time, which may come in handy during VUCA times. Since Air freight can cost a bomb, such emergency funds will ensure that you are not eating into your working capital. Based on your margins, continuity of orders etc, you may even consider having a safety stock (instead of JIT) for critical parts, assemblies.

Do not shy away from keeping aside this “Contingency fund”, how much ever you are tempted to use this fund for something else!!

5.       Have an insurance: Though this is a very old and basic step, consider having insurance where there are penalty for late deliveries, delays in receipt of payments, (due to such VUCA moments and PESTLE events) and / or for logistical nightmares. Yes, it will cost some money, but it will save your skin during rainy days. Such planned expenditures are better than unplanned emergency expenditures.

 Insurance can be your umbrella during difficult, unpredictable and rainy days!

 6.      Be agile in decision making: A Business Leader must have a capability to take decisions on the go, in this ever changing 21st Century. Yes, due consideration must be given to all stake holders, take their opinion and arrive combined decision and is more tougher if teams are spread across the world. But it is responsibility of leader to quickly take a call on next action since situation can become bad to worse in blink of an eye. This is where, having ready plans for various situations comes handy

 On many occasions, what is required is almost correct but quick decisions, rather than very accurate but delayed decisions

CONCLUSION : In a nut shell, a Business leader can and should take some pre-emptive steps to make sure that his organization comes out unscathed or with minimum damage due to similar future VUCA moments. You cannot stop what is happening around you, but at least, one can be better prepared to handle the crisis.

Pic credits : CNN, Hindustan times, Gulf news, AZ quotes, AHA