World logistics – resilient logistics

Published on: May 11, 2021 / Update from: January 3, 2022 - Author: Konrad Wolfenstein

The corona pandemic has shown us, impressively and frighteningly at the same time, how fragile and brittle our networked and globalized world has become. Supply chains that had worked for decades collapsed. Flights were canceled for the foreseeable future, trucks were no longer allowed to cross borders and countless container ships were stuck in front of the ports.

And as if that wasn't enough and workarounds in the supply chains were used to gain some breathing room, the next catastrophe happened: the container ship "Ever Given" got sideways in the Suez Canal and ran aground. It blocked all shipping traffic for almost a week. The Suez Canal is one of the most important trade routes in the world. Especially for the synchronized supply chains of the European market with China and Asian trading partners. 30% of the global container volume is handled via this goods highway every year. Ascending trend. The 400 m long and 60 m wide “Ever Given” can hold just over 20,000 containers (TEU standard containers). In 2020, around 18,800 ships transited the Suez Canal.

With container ships, it is usually not important that they arrive quickly, but rather on time. The schedule is tight. If supplier parts from the Far East are missing, production in Europe comes to a standstill.

The Suez Canal is also the most important trade route for Europe and North America for oil from Saudi Arabia, the United Arab Emirates, Kuwait and Iraq. As a result of the “Ever Given” accident, the price of oil also rose.

There were also significant delays in the export of machines and machine parts for the Asian market, among other things.

The Suez Canal accident, an unfortunate coincidence during the corona pandemic? Actually less. It's rather surprising that something like this hasn't happened before. While in 1980 the capacity of container ships in global maritime trade was 11 million deadweight tons (dtw), in 2020 it increased to 275 million dtw. That's an increase of 2,500% within 40 years. Deadweight Tons is a measure of how much weight a ship can carry. During the same period, no new sea routes have been added and will not be.

Shortly before the start of the corona pandemic, a survey was carried out on the biggest geopolitical challenges in 2020, which was published as part of the Global Risk Report 2020. It addressed the greatest threats to the world and the population. The report is based on a global survey of around 750 risk experts from business and politics, NGOs and government organizations. Almost 80% of respondents to the World Economic Forum said that this includes economic confrontations and tensions between major powers.

So are domestic political polarization, extreme heat waves, destruction of natural resource ecosystems, cyberattacks on infrastructure, protectionism on trade and investment, populist agendas, cyberattacks on data, recession in a major economy and uncontrollable fires.

Some recognized scenarios such as cyber attacks, protectionism and populist agendas e.g. B. are known to us from recent times.

The experts did not foresee or plan for a pandemic or a “small” seaway highway closure lasting several days.

It is now becoming all the more important, especially for logistics, to react to this development and take precautions.

A March 2020 survey of 2,900 senior management respondents found the following:

52% of respondents said changes are being made to global supply chains as a result of global events. 40% plan to reevaluate and only 8% see no need for change. Almost 40% of companies surveyed also said they were planning changes to their workforce.

36% are planning a further approach to automation, 41% are considering revising the current speed of their automation.

Opportunities for change in world logistics for resilient logistics

The regionalization of supply chains will be one of the consequences. Increased “reshoring” (returning production to local areas – Made in Germany) also seems plausible in some areas.

Strikes in particular, but also climate change and acts of war, were already known risks for global supply chains. As early as 2015, according to a DHL study on the topic of “Risk & Resilience”, three out of four companies stated that they had been affected by disruptions in the supply chain. Among other things, due to the conflicts in the Middle East or the strikes in the US ports. The latter caused damage to American retailers estimated at 7 billion euros. Disruptions in production and transport processes already exceeded the $380 billion mark in 2011 in 2015.

Even back then, resilient supply chains were described as a solution to global risks. Risk management and improved controlling were among the solutions.

But ultimately the global supply chain seems to be reaching its limits. New and faster sea routes cannot be built and there will probably not be an alternative in terms of freight transport for a long time. Strictly speaking, the next logical and logistical step would be to be able to beam goods and goods. But as we all know, this is far from any serious planning for the future.

Sustainable logistics

While the costs of sea freight and air transport have fallen steadily since the end of the Second World War, the costs of communication have almost reduced to nothing. The end of the flagpole seems to have been reached.

The risk of rising costs due to the accumulation of global risks makes regionalization and reshoring all the more interesting.

In addition to robotics, autonomous power supply and full automation of logistical processes, regional raw materials and products have long been a serious alternative.

Sustainability is a principle of action for the use of resources in which long-term satisfaction of needs is to be guaranteed by preserving the natural regenerative ability of the systems involved.

Sustainable supply chain

In general, global supply chains are complex and unpredictable. Existing and functioning supply chains are largely not touched. The fear of risks and the possible consequences of deterioration or even failure is too great if the necessary optimization potential and improvement do not bring the desired success. Many companies turn a blind eye to this and know nothing about potential sources of danger. In the event of a crisis, responsibilities can easily be diverted to the complexity of the issue.

Honest and open self-transparency and consciously dealing with possible risk potential (risk management) are an important step in getting a holistic picture of your own supply chains. This is the basis for future strategies to optimize purchasing decisions and supply chain management.

Sustainable intralogistics

Sustainable intralogistics consists of storage and energy efficiency of storage and logistics processes. Especially in intralogistics, automation up to full automation is a decisive advantage and a factor for cost reduction and know-how retention:

• Flexible scalability of intralogistics to current conditions
• Sustainable and autonomous energy supply through renewable energies ( Learn from Amazon Logistics )
• Increasing resilience to changing or unexpected events:
  • Buffer storage concept in combination
  • Micro fulfillment
  • Micro hub
  • Local decentralized hubs – logistics centers
  • Autonomous retail systems
  • Expansion of KEP services for last mile logistics

For global competitive regionalization, the points listed in their intersection are a key for each economic sector, which must be designed and adapted accordingly.

For this purpose, it is recommended to work with internationally positioned and experienced specialists.

globalization

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