Learning mode is ‘always on’

Risk events suffered by others give us pause for thought.  Do they tell us something about our own organisation?  Can we learn something from them that would benefit us?

The container ship the Ever Given ran aground last week in the southern part of the Suez Canal, blocking it for seven days. The Ever Given is a mega ship, longer than the canal is wide.  For a week it blocked 10% of global seaborne trade worth nearly $10bn per day.  

The event cost the Egyptian government $90m in lost fees, and will cost large sums to insurers.  It also disrupted supply and production around the world.  In addition, more than 300 ships were held up at either end of the canal, with increased risk of falling prey to pirates at the southern end.  And over 200,000 animals were stuck on board ships in less than salutory conditions during the blockage.  One risk begets another, and another.

A risk event is often down to a control failure of some sort.  It now seems that the accident was down to human error, not winds and sandstorms as originally thought.  The control here is that ships passing through the canal take local pilots on board who know the canal well.  That could be where the human failure might lie.

Supply chains are quite opaque to most people.  They don’t care as long as they get the goods.  But supply chains create dependencies and any dependency brings risk that needs to be understood to determine how comfortable you are with the level of risk; and then it needs to be monitored for change.

Change may exacerbate risk, and so may complexity.

Change has made such an accident more likely to occur.  Ships have got bigger.  In 2000, ships carried around 5,000 containers; the Ever Green was carrying more than 20,000.  Bigger ships are more likely to get stuck in the narrow canal and will take longer to become unstuck.  Infrastructure has not kept up with the increasing size of the ships.  A 22-mile stretch was widened in 2015, but most of the canal is quite narrow.  Nevertheless, shipping companies prefer Suez to the additional two weeks it takes to go round the Cape of Good Hope.

Complexity can multiply the impact of the accident, making it more widespread.  Supply chains are more complex and products tend to have far more components from different sources.  The Pfizer vaccine for example has 280 components that come from multiple countries.  You only need disruption to the supply of one component to hold up production of the final product (a fire in a Japanese microchip factory last month caused several car plants to shut down). 

And then some aspects of supply chains just make you wonder…….Among the Aladdin’s Cave of products onboard the Ever Given was a consignment of French oak, owned by a UK company and sent to China for reprocessing as veneer flooring.  It was on its way back to be sold to a customer in the UK.  It is to be assumed that the risk of supply disruption on the long journey to China and back is worth the reward.

Data Sources: The Financial Times, The Guardian, The Jakarta Post, The National News

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