Deep Dive: Shipping & Supply Chain Disruptions

Welcome to this week’s PRO Research report. These are long-form analyses of something that’s important to decision-makers, giving them the background and context on the issue along with some insight into how things might develop.

This week’s report focuses on maritime supply chains, what can interrupt these, and how you can make your supply chain more resilient.

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The Importance of Shipping

Acknowledging the importance of shipping alone won’t help organizations plan for potential disruptions. Particularly as the category of ‘shipping’ covers a wide range of cargoes, routes, vessels, origins and destinations. So there’s no single shipping market, meaning there’s no single supply chain.

However, there are common factors that affect all shipping-related supply chains, and if we pay attention to these, we will get a good sense of the macro-level health of the maritime element of an organization’s supply line.

There are a lot of elements in a supply chain, but for simplicity, you can use these three factors to quickly determine your exposure to shipping disruption.

Volume

How much essential material moves by sea?

Given that 80% of international goods travel by sea then, unless something is uniquely local and highly insulated, its supply chain will be affected by what happens at sea either directly or indirectly. There are exceptions to this and the exact amount of exposure will differ, business by business, but sea freight still dominates supply chains worldwide.

Stocks

How many days of supply does a business hold?

Whether these are car parts for an assembly line, sacks of flour for a baker, or fuel for the filling station, the ability to withstand disruption is heavily dependent on the days of inventory or supply on hand. As many firms practice ‘just-in-time’ inventory to help manage efficiency and save costs, these stocks can be surprisingly small. For example, from a UN Report:

• Apple keeps around 5.2 days of inventory on hand

• Amazon holds inventory for an average of 36.8 days

• Tesla has an inventory period of 20.2 days

• McDonald's has an inventory turnover period of 11.6 days.

At the national level, supplies can also be surprisingly limited. The UK only has a few days worth of fuel readily available as shortages in 2021 illustrated.