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Impact of Covid-19 on Container Shipping Industry

The shipping industry is central to our globalized world. Just one of these containers carries enough goods to fill an average house. The enormous ships that transport goods around the world often carry tens of thousands of container boxes at a time. In recent times, there has been a challenge of container shortage and rising freight cost.

The short term impacts of the coronavirus on trade around the globe might tell us something much deeper about the long-term future of the world’s shipping industry. 

At the beginning of 2020, the coronavirus hit Chinese shipping hard. Fast forward a few months and a flow of ships from Asia to the West has come under intense pressure. That pressure is falling particularly on the ships that carry goods to consumers in Europe and the US. This is because the ships setting off in the East depend on shops in the West. Some parts of Europe, including Italy and Spain, have shut down completely as there’s no opportunity for purchase. The department stores in the US have also curtailed their hours. Hence, this has been one of the biggest driving factors of reduced shipping activities. 

Even though China has transformed itself into the world’s manufacturing hub, much of its production is still consumed by the West. This arrangement consolidated the east-west shipping routes as the most important artery of world trade. One of the best indicators of the health of the world economy is the prospect of a deep recession in the West looms over the industry. The indications are now crystal clear. The world’s biggest container shipping company, Maersk says its east-west trade has been the worst affected part of its business.

However, the fall is not as steep as you might expect. The container shipping industry plays a central role in the smooth function of the globalized economy. This means that for the most part cranes are still operating and ships are still sailing. In May 2020, around 40 sailings from East Asia to the west coast of America were cancelled unexpectedly. The action of pulling ships is not unprecedented. It happens year-round and it happens spontaneously when they find that they are being underutilized and will not hesitate to pull a service or a vessel.

What’s concerning is that it’s the first time the shipping industry has seen a drop of 12%. Its decline may not appear to be huge in our eyes. However, a drop such low has never been experienced before. Empty containers and idle ships are the short-term effects of the pandemic. The long-distance routes have suffered the worst. While the pandemic has put pressure on consumption in the West, there are other longer-term threats to long-distance shipping. The most obvious is the trade tensions between the US and China which have escalated over the lock down and are likely set to outlive the coronavirus pandemic. 

Beyond this, changes to the structure of manufacturing including the rise of automation and the competitiveness of Chinese labour markets could also disrupt the flow of ships globally. A deeper insight indicates the transformation of the shipping industry and logistics. Pandemic and trade war might just have accelerated far more significant and long-lasting changes. 

Redeure provides the best sourcing from India. We are living in uncertain times but with challenges come opportunities. The application of advanced technology like automation and blockchain would enable a more transparent and efficient system. It would eliminate the need for manpower for routine and other operational tasks while creating new jobs simultaneously. In turn, this would benefit the shipping industry as one of the reasons for container shortage is the lack of manpower.

Original Source: Redeure Blog

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How Effective Procurement Provides Real Value to Business

Effective procurement may seem like a basic business process. However sometimes the obvious can be overlooked. It can have a massive positive impact on your profits for a relatively small amount of work.

1. Ask Your Current Suppliers for a Lower Price

Research the market and if you think you were overpaying ask for a better price. Don’t assume that because you’ve been loyal to a supplier for a long time they are giving you their best price.

2. Review Your Prices and Supplier Lists Regularly

It’s also important to benchmark them against the market. Complete a full review of your supplier portfolio at least once a year. For high-value items and one-off purchases get at least 3 comparative quotes as there can be a surprising range of prices available.

3. Use Your Negotiation Skills

Reduce the size of your order from your current supplier and push extra volume or activity to a new one. Once you inform your supplier that you will send more orders their way if the price is right you just might see a sudden willingness to negotiate.

4. Look Out for Hidden Fees

When ordering looks out for suppliers adding unwanted charges like delivery insurance handling fees. These items tend to be low-value add-ons but can mount up and add zero value.

5. Look Out for Opportunities

In addition to your trade suppliers, the following areas often provide an opportunity for cost savings Insurance for motor vehicles liability or workers compensation bones and wireless connections, banking and finance charges and marketing. 

However, settling with the lowest price isn’t always the best decision. Other factors can be equally important such as reliability, quality, competence and expertise. Achieving an optimal mix of price and service creates value.

There’s an unprecedented level of expectation of procurement as a function in corporate and government today. The traditional role for procurement was mainly around trying to achieve savings on the addressable spend. However, there’s an emerging role for procurement and an expectation to deliver corporate, social, and environmental outcomes.

How Does Procurement Deliver Savings? 

For a long time procurement has focused on strategic sourcing and contract negotiation as a way of delivering savings to a business. But now more and more businesses are looking beyond that point to post contracts to deliver real value to the business.

The real savings come from post-contract awards through managing the contract more effectively. The savings are sustained by making sure that suppliers are delivering to their obligations. Supplier performance management is where we’re seeing real value being extracted from the contracts that procurement has put in place. Leading companies are going a step further than that and looking to work more closely and more collaboratively with their key suppliers. They’re un-tapping new streams of value to the business through collaboration and supplier innovation. 

How does procurement deliver real value to the organization?

It requires a very tight alignment of procurement objectives to the business objectives. More specifically, procurement strategy to the supply chain strategy of the business. Often, there’s a misalignment of procurement strategy and supply chain strategy. The two can even be opposing when developed in isolation. 

Procurement strategies largely focus on delivering the lowest cost goods and services to the business. In financial terms, you might consider it a gross margin, however, your end motive is to maximize a gross margin on those goods or services. Whereas supply chain is taking into account all of the supply chain logistics, inventory, including working capital costs, associated with the delivery of goods or services. As a financial measurement, it’s more about a net margin approach as compared to procurement that’s focused on gross margin. Together they can deliver suboptimal outcomes in terms of cost, quality, and service.

Beyond this, there’s also a need for supply chain and procurement to work together at a more operational level to extract the real value of the contractual arrangements. Essentially, these contracts are an asset to the business, and procurement and supply chain needs to work together to deliver real value to the businesses. In practice, it can be executed by managing the contract more effectively and managing supplier performance.

Source: How Effective Procurement Provides Real Value to Business

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Understand the Risks in Supply Chain

Supply chain security refers to efforts to enhance the security of the supply chain. It combines practices of supply chain management (SCM) with the security requirements of the system, which are driven by threats such as terrorism, piracy, and theft. The main purpose of security in the supply chain is to make the process more transparent so that you understand the associated possible vulnerabilities in products. Supply chains are complicated as many vendors are involved.

More involvement means more communication and transfer of data. Organizations have information and technologies that need to be protected from theft by foreign adversaries. A common vulnerability increasingly being exploited is the acquisition supply chain. 

Earlier, protecting our nation’s secrets was simple. Confidentiality was practiced and no one without the proper authorization had access. Those secrets were kept out of the hands of Cold War adversaries but those days are over.

Today information is targeted by foreign intelligence services, foreign militaries, corporations, criminal organizations and terrorist groups. They are targeting more than just classified information. They are looking to steal your technologies, your trade secrets, your research and development and anything that will weaken your national and economic security.

In response, government agencies and private industry have strengthened their defenses. The physical and personnel security programs have been bolstered. The information assurance and cyber defenses are now leading organizational priorities yet there’s still one missing piece to this integrated defense i.e the integrity of the supply chain.

The supply chain is the interconnected web of people, processes, technology, information and resources that deliver a product or service. 

For example, suppose you purchase a new pickup truck. You purchase the truck from your local dealership. The dealership got the truck from a manufacturer. An assembly plant put the parts together. The real question is – Where do they acquire parts used to assemble the truck? 

There are hundreds if not thousands of components. It’s no different when your organization acquires computer telecommunications equipment or countless other goods and services that are vital to its mission. Reliance on traditional physical personnel and information security countermeasures makes it not adequately safeguard sensitive data and assets. 

This leads to a discussion of supply chain risk and how your organization can mitigate the risks in the supply chain. The supply chain risk is the possibility that an adversary may exploit a weakness to compromise a component of the supply chain. 

To Manage These Risks We Weigh Several Factors Including:

Threats to the Supply Chain

The vulnerability of the Supply Chain

Likelihood of an Attack

Potential Impact on SCM

The key to managing risk is to mitigate vulnerabilities introduced through the supply chain as well as vulnerabilities that emerge over the lifecycle of a product or service. 

So what can you do to mitigate risks and minimize the possibility of exploitation?

Ensure your acquisition and procurement offices are fully integrated with other organizational components, most notably – information assurance and security.

Let’s take another example of a high-level meeting at a major government contractor. Here, critical data and the organization’s IT systems have been targeted by foreign governments. 

The CEO has gathered key officials to discuss vulnerabilities and how to strengthen their defenses. Security assurance is that all physical access points of the building and IT systems are being monitored. Information assurance reports that they have detected no network intrusions. The insider threat is monitoring employees with access to the critical data ensuring there isn’t unauthorized activity.

However, one person is missing from this meeting i.e a representative from the organization’s acquisition department. This individual isn’t considered a part of this organization’s integrated defense and that is a recipe for failure.

To mitigate risks and minimize the possibility of exploitation knowing your suppliers due diligence is imperative. So make sure your acquisition team is asking the right questions before procuring a particular product or service from an outside company. The companies must ask questions like who are their strategic partners and subcontractors.

Are they associated with organizations that are competitive or adversarial? How do they manage their supply chain risks and who are they purchasing parts or services from?

In short, Integration of acquisition and procurement teams into your organization’s defensive efforts is important. Practicing due diligence with the companies and suppliers your organization is doing business with are the foundation for successfully managing supply chain risks. 

By mitigating those risks of the supply chain you will strengthen your organization and help safeguard the national and economic security. Redeure is the best sourcing from India that helps you mitigate risk by following the best practices. Contact us to know more.

Source: Redeure Blog

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Find the Role of AI and IoT in Supply Chain in 2021

Several vendors, analysts and systems integrators look at new disruptive technologies such as IoT, AI and block chain individually. The real value to the supply chain comes from combining these technologies. However, here we will only focus on the impact of AI and IoT on supply chain management. Learn more about – The Role of Block chain in the Supply Chain.

As digitization continues to radically transform the landscape for global supply chains disruptive technologies are paving the way for true end-to-end digital supply chain visibility. Organizations need to ensure they have an end-to-end digital foundation or backbone in place. The digital foundation allows companies to seamlessly exchange electronic business transactions with 100% of the trading partners in a digital business ecosystem. Once the foundation is in place, the companies can leverage the combination of AI and IOT to enable an autonomous supply chain.

Artificial Intelligence

Artificial intelligence derives insights from information moving across the digital business ecosystem. Whether analyzing transaction information to determine the best performing trading partner or analyzing IOT centre information to determine if a piece of equipment is about to break down, AI helps companies optimize and drive efficiencies across an end-to-end supply chain.

Supply chains deal with powerful and big data. With the penetration of AI, the capability to analyze and get value out of its use cases are now possible. It would apply to areas like forecasting and demand sensing as it will give a better picture of the demand and preferences of the end customer. A major challenge with AI is dealing with poor data quality. To apply AI, supply chains managers need to have pre-classified data sets.

AI is one such technology that can continuously and autonomously detect, investigate and respond to attacks in real-time. Supply chains around the globe have allowed international trade to thrive, the recent pandemic has also shown us just how fragile they can be. It’s a good practice to remember that supply chains are only as strong as their weakest link. Supply chains operate in highly complicated environments and hence it is important to mitigate supply risks and prepare yourself for the future.

Another disruption that can bring supply chains to a grinding halt is cyber-attacks. The smaller suppliers are targeted first and then the attackers will pivot to larger organizations. It can disrupt the production or distribution process. There are certain risks that an organization faces when dealing with supply chains. Learn more about: Risks in Supply Chains. AI strengthens the resilience of cyber environments by identifying vulnerabilities.

Every time an organization introduces a new element or changes an ingredient, it introduces an element of change into the organization. This change is to be brought forward and implemented in all of the policies and procedures across the company, this however creates blind spots and vulnerabilities. For instance, a company is either bringing a new product to market or substituting an ingredient or element. These changes also need to be reflected in the policies and purchasing systems and in things like accounts payable and not just the good itself.

Internet of Things

IoT allows companies to create a digital twin of a piece of equipment or serviceable asset. For instance, IoT sensor information can be leveraged to not only identify shipment location while moving through the supply chain but also monitor shipment condition. We can also remotely monitor the condition of the track systems.

The Implication of IoT

Shipment Tracking

Companies can use IOT driven track and trace systems to connect shipment and assets throughout the supply chain. All shipment and product movements can be monitored in real-time. Data from sensors and other IoT devices can be augmented with other supply chain data such as warehouse and transactional information to build more connectivity.

Shipment Monitoring

This solution will help deliver condition-based monitoring to supply chain operations. Every aspect affecting goods in transit can be monitored in real-time. This enables the SCM to take immediate corrective action if any deviations are reported. It provides much greater control over the shipment of perishable and high-value goods with high levels of transparency and supplies chain efficiency. At the same time, it reduces the waste and damage of products in the supply chain.  

Shipment Insights

It combines IOT data management with AI and machine learning to bring end-to-end visibility and continuous improvement to all parts of the supply chain beyond simple track and trace solutions. This holistic solution uses the captured data to apply predictive analytics to areas such as planning, route optimization and predictive maintenance.

Another disruptive technology that drives innovation across the supply chain is blockchain.

Blockchain in its simplest form is a distributed ledger that archives information from across the extended enterprise from a supply chain point of view. The most popular use case relates to track and trace and knowing the origin of goods or raw materials. An autonomous supply chain will help companies establish a highly intelligent connected self-aware and trusted environment.

An environment that leverages deeper insights to supply chain performance to refine business processes improve traceability of goods and record and secure an archive of all digital interactions between a company and its trading partner. Learn more about How is block chain revolutionizing the supply chain industry.

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Best Product Sourcing India | Sourcing Products from India - Redeure

Looking for Sourcing Products from India, Redeure is the right place for you. We have assembled a global team of highly skilled Sourcing and Procurement specialists, with hands-on enterprise and consulting experience at leading enterprises worldwide, to provide you with the tools, support and results only an industry veteran can consistently deliver. For more information, checkout our website or call 09779775880.

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Digital Transformation of Supply Chains

No matter what your company deals in, disruptive technologies are here to stay. A quick overview of these technologies provides an ability to see how they can be used to improve the supply chain. Everything that is enabled by technological advancement creates a platform for the digital supply chain. Just as we’re electronically connected every moment of our daily lives, so should our supply chains. The digital age is here and it will only continue to further permeate our lives.

There are several revolutionizing technologies like – Internet of Things, artificial intelligence, robotics, the blockchain, data analytics, virtual and augmented reality, drones and autonomous vehicles, 3d printing and additive manufacturing. There’s also cloud computing, simulation, cybersecurity, nanotechnology, mass customization and renewable energy. These are the backbone for creating the future supply chain 4.0.

How will these technologies shape the future supply chain 4.0?

A fully integrated digital supply chain with end-to-end transparency and integration enabled software is to be developed. It is coupled with sensor tracking and full traceability along with being dynamically adjustable.

The synchronised supply chain networks will be in play with multiple sources carriers and machines operating under a supply chain cloud. The dynamic network configuration and predictive inbound and outbound logistics will be complemented by blockchain technology which enables the electronic and independent verification and recording of events throughout the supply chain. Optimization with real end-to-end data management, predictive analytics and supplier connectivity will perform a significant function in the SCM system.

There will be a shift from data tracking on paper and spreadsheets to data analysis in the supply chain. It will enable better transparency and visibility as there is further scope for automated logistics. The digital supply chain will give managers better control over the entire logistics process as smart warehouses and manufacturing facilities enabled by drones perform a safety inspection and track the physical flow of goods.

This will lead to higher productivity in your company, reduced time to market, lower costs, better asset management and better overall financial performance.

To turn this utopian vision into reality, you also need to select the right supply chain professionals. Choose the ones who have the skills and capabilities that include strategic planning, full end-to-end supply chain expertise, technological expertise, management capability, the efficiency with data analytics and risk management.

The advances in digital technology are having a huge impact on the world around us. It is leading to big changes in customer behaviour. Today, connected customers behave digitally responding to social media trends and taking part in online conversations across a vast interconnected global community. However, many supply chains can’t keep up because they’re structured in a very traditional and sequential way.

Let’s take a look at how a typical company with a traditional supply chain would react to a sudden peak in demand.

A celebrity posts a picture of a bag on Instagram creating excitement and generating a sudden demand for the product across the world. The bag manufacturers demand forecast was based on data on previous sales. So when their sales reports show their product has sold out unexpectedly. This causes a sudden change in demand, then the company adjusts its forecast to reflect the new level of demand. Till the time they acknowledge this they are out of materials or the production capacity to make replacements.

So they call their suppliers but they also don’t have the materials available in short notice.

The contract manufacturer asks them to order new materials and hasten shipments leading to additional costs. Finally, when the materials arrive and the products are produced, they are transported to the stores. The transportation wasn’t planned for in advance which means premium shipping costs. In all, it took the company around four months to replenish their product.

Unfortunately, the customer just wasn’t going to wait that long. In the meantime, they bought a similar product from a rival manufacturer. With the unplanned additional costs and the unsold products, our bag manufacturer made a loss out of the whole experience.

But it doesn’t have to be like this.

The traditional supply chains must evolve into an interconnected, smart and highly efficient supply chain ecosystem. It can develop with layers to address custom solutions and digital operations. Companies who can set up and run such an ecosystem empower themselves to proactively manage and fulfil customer needs can quickly identify changes in demand and organize their supply chain accordingly.

In this way, they can transform their supply chain to have competitive advantage and use it as an enabler for new digital business models.

Now, let’s look at how a company with a digital supply chain would have reacted to a similar peak demand situation.

The company’s proactive sensing capability including social media tracking identifies a peak in demand early on. The production plan is adjusted automatically. There’s a direct link between demand and manufacturing and through that link, an updated demand plan is shared with all relevant suppliers who immediately include the new requirements in their material planning and adjust their manufacturing priorities accordingly.

Meanwhile, the customer can track the progress of the order keeping up-to-date on when it’s being manufactured and when it will be delivered. Throughout the process, the supply chain transparency solution monitors relevant supply chain data from a variety of internal/external

structured and unstructured sources enabling proactive risk management.

The company leverages an established flexible logistics network with a shared infrastructure for the last mile delivery to the customer.

Companies that leverage digital supply chain operations with the versatility and agility that’s needed in the digital age. This translates into happy customers and flowing profits.

Supply chains are extremely complex organisms and no company has succeeded in building one that’s truly digital. However, the companies that get there first will gain a huge advantage in the race to industry 4.0 and will be able to influence their technical standards in future.

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