Written by Percy R. Pyne
Perhaps the biggest takeaways are the references to the global supply chain.
A great deal of information has been forthcoming on Evergreen Marine Corporation’s vessel, the ‘Ever Given’, which ended up grounded on the Suez Canal for nearly a week.
What is the “Global Supply Chain”? I define it as the highly complicated and sophisticated worldwide transportation system on which containers move from their origins to their destinations. The global supply chain involves trucks, railroads, ships, ports, customs, terminals, DC centers, 3PLs, container brokers, manufacturers, shippers, consumers, and the list goes on.
It’s an understatement to say that there are a lot of moving pieces that need to be coordinated to make the global supply chain work properly.
To me, the Global Supply Chain is like a symphony of many instruments.
What are some of the takeaways from the Ever Given?
- The Ever Given is only one of the more than 450 ships that were affected by having to either wait to go through the Suez Canal, or decide on the longer journey around Cape of Good Hope, adding time and cost to their goods.
- The imbalance in the system caused by the gridlock isn’t just about the 18,000 containers on the Ever Given, but about all the containers on all the other ships delayed. The number of delayed or stranded containers could reach into the millions. Lloyd’s List has estimated that $9 billion in goods pass through the Suez Canal every day.
- Each and every container is governed by its own specific logistic chain designed to move it from its specific origin to its destination.
- Each delayed container has a compounding knock-on effect on:
- Port of entry and its unloading schedule, customs clearance, and its movement in and out of a port terminal. Ports have a schedule of arrivals and sailings. Ports do not have unlimited quay capacity so they are limited to how many vessels can be in port at any one given time.
- Excess gantry capacity to load and unload delayed ships arriving at the same time as scheduled arrivals. A gantry crane can only load and unload a certain number of containers per hour and there are only a set number of gantries in each port.
- Terminal capacity – containers need to be “landed” and stored until they leave a terminal. If a terminal is full due to all the boxes arriving at the same time, it can’t take any more until there is room. Hence the fleets waiting outside ports to be unloaded.
- Trucks and railroads, or feeder vessels, already scheduled to transport a container to its next stop on its particular supply chain journey. All these moves have to be rescheduled.
- Finally, consumers who were expecting timely delivery of their goods, some for an upcoming holiday, won’t get their merchandise even if they have already paid. Some of the goods on the Ever Given were perishable and by the time they will make it to their destination, they will be spoiled.
- It has been estimated that it will take the global supply chain at least 60 days to return to normal – that’s ten times the number of days the vessel was stuck at a cost of between $1-$1.5 billion per day.
- All the different handlings of a specific container have to be reordered due to a delay.
- Distribution center capacity and throughput are affected by the delays.
- Goods reaching a store are delayed and inventories have to be reordered.
- Delay of fulfillment of customs orders are delayed.
- Scheduled recapture and utilization of empty containers are in chaos.
- The delayed ships have to be rescheduled and redeployed.
Financial Costs of the Ever Given
Each and every point on the list enumerated above has a “time element” and a “financial cost”. Who bears the burden when there is an accident like the Ever Given grounding? Who bears the cost of time delays caused by the daily accidents on a highway?
Who pays the cost of a time delay of a rail derailment?
It will be a costly reset of epic proportions which only demonstrates the fragility of the global supply chain. The Ever Given nightmare is added to the already existing upheaval caused by COVID-19 pandemic. Putting aside the physical disruption, I suspect there will be endless lawsuits that will take years to resolve and cost billions of dollars in legal expenses and court resources.
How Can We Be More Resilient
While the world unravels it will take longer for the United States to recover simply because we do not have the third mode of transportation to relieve our ports from the existing and oncoming congestion. While the world uses trucks, rail roads, and water to distribute cargos, the U.S. has only two, road and rail distribution outlets.
Green Shipping Line’s mission is to add short sea shipping to the U.S. distribution networks, bringing our country into the 21st century. It’s our job, our passion, and our goal to re-create our water networks that we relied on for so long. The sooner water is added to our domestic logistics chains the better, as there could be another Ever Given in the future. It’s not a matter of whether or not it will happen again, it’s a matter of when.
About the Author
Percy R. Pyne is the Chairman, CEO, and Founding Partner of Green Shipping Line (GSL). GSL was born from long family histories of American patriotism and the desire to solve our country’s infrastructure crisis by reintroducing the concept of transporting containerized freight via the American Marine Highway and ensuring full use of the marine transportation network in the U.S.