I’m sure I’m not the only one who feels like the world has gone unstable. One of our concerns is our country’s security of supply. How will consumers get the products they need from abroad in the future, and how will industry handle the necessary transportation?
The war in Ukraine is the third consecutive global shock affecting supply chains. The first of them was the 2008 financial crisis, which forced states take better care of banking, and the second was the corona pandemic, which shook the structures of healthcare and other social activities.
The unpleasant truth is that capacity bottlenecks in transport chains and energy price fluctuations are a normal situation in the global transport system. The last 10 years of calm and balanced period in the world transport business is gone. Transport prices have also remained at a reliable level. Now the supply chains have to be rebuilt taking into account the risks related to availability, transportation, price and schedule stretching.
Until a few decades ago, supply chain risks were minimized by keeping large inventories. After all, humans has been making inventories for thousands of years to prepare for difficult times. However, warehouses are expensive. During the last twenty years, unnecessary inventories have been decreased, while at the same time production has been moved further and further away to countries with cheap production.
Now that we’re back to the old normal, we’re missing the stocks back. However, there are new tools to ensure that supply chains work, and large inventories are no longer the only way to improve reliability on fast, low-risk supply chains. Dependency is also reduced by better information flow, use of subcontractors, planning of alternative products, predictability, moving the order penetration point to the last possible moment and reducing wastage.
Another significant change is the transition away from fossil fuels. During this decade, both Russian war and EU regulations have increased the cost of fossil fuels and will continue to increase. There is no going back to cheap diesel on land or sea.
Now at the latest, transport companies must prepare their fuel strategy so that they remain competitive and productive. The first thing to do is to add a fuel clause to the transport contracts, which transfers the rising fuel costs to be paid by the customer, i.e. the person in need of transport. Companies must prepare for low-carbon supply chains and make risk management a part of the daily planning of transport chains again.
This opinion piece was published in issue 3/2023 of the Finnish DSV Cargo magazine on 12 December 2023.
Tales of Talsinki 