An integrated supply chain spans numerous domains. This article will be confined to the nuances of the maritime domain, which is broadly regulated by United Nations member states, making governance in the shipping industry dismal at best. Shipping is really a feast and mostly famine industry these days, with the Baltic Index (a shipping indicator) hovering at an all-time low. This low indicates shipping supply chains are cutting corners and jeopardizing their safety and security, adding risk to the goods being transported.
Corporations pay taxes assuming that the government will attend to Port Security, Maritime Security etc., but the reality is that security budgets worldwide have gone down. Due to this shift, there has been a rise in Oil Thefts, Piracy, Bank Liens, Arrests, Negligence, the list goes on.
It is always calm in the eye of the storm – the integrated supply chain appears to be resilient, however, impressions can be deceptive. Shipping is struggling with losses leading to consolidation and bankruptcies; Economies of scale are not there, the new mega-ships are being laid-up; New Regulations like container weights and carbon emissions are cost prohibitive to the service provider, and there is no transparency on governance and compliance. Maritime safety and security enforcement are declining; Events will start to take over and 2017 will see the worse.
Currently, there is a “Gold Rush” by satellite companies, with industry forecasts for 2019 at over 2,000 low earth orbit satellites delivering data from AIS Sensors, Radar, Electro Optic, Video, etc. to enhance the digital supply chain. This, along with the IoT revolution, will allow greater transparency and a decline in high sea thefts with the benefit of a machine-to-machine data exchange. Low earth orbit commercial satellites will be the game changer that will deliver on the promise for safer supply chains.
The biggest misnomer is that risk management is best addressed by insurance; the reality is that insurance providers manage their risk premiums but do not necessarily mitigate risk; this is the responsibility of the supply chain executive. An experienced and informed executive recognizes that it is difficult these days to increase the top line, thus protecting the bottom line is the modus operandi.
This leads to the importance of a “Risk Avoidance” strategy to alleviate any threat to the bottom line. The concept of risk avoidance today is new since the industry at large has adopted risk management processes and concepts i.e. action to be taken after an oil spill (BP, Exxon). It behooves the corporation to continuously engage in risk modeling activities, similar to the military practice of “what-if” scenarios, using near real-time data. Such live scenarios lead to awareness and in turn “Risk Avoidance”. This activity must be facilitated by continuous forensic analysis of the shipping supply chain service providers and the environment they are operating in. The reassuring nature of globally integrated logistics providers leaves a supply chain executive satisfied that they are safe, not realizing that there are a chain of unknown service providers struggling to survive, placing the goods at risk.
Captain Jatin S. Bains has 40 years of experience in the maritime domain. He is the creator of CATE (Computer Assisted Threat Evaluation), a risk modeling system and speaks regularly on maritime security. He may be reached at jbains@ChannelLogistics.com or visit www.ChannelLogistics.com to be better informed on risk avoidance.