Hanjin Collapse – Supply Chain Disruption Waves Roll Ashore

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“Merchandise is in limbo at the moment and retailers are working hard to make sure it ends up on store shelves in time for the holidays.”
National Retail Federation Vice President for Supply Chain and Customs Policy Jonathan Gold on shipping blog gCaptain.com.

The collapse of South Korea’s Hanjin Shipping (117930.KS), the world’s seventh-largest container carrier, has disrupted global trade networks and driven up freight rates. The following infograph created by TuscorLloyds Global Logistics charts only some of the impacts by the numbers:

Hanjin-Shipping-in-Numbers-InfographicSources: TuscorLloyds Global Logistics, FT, Reuters, Alphaliner, Bloomberg Business
  • $14 billion – the estimated value of cargo tied up globally as Hanjin ships idle outside ports that won’t let them in.
  • 400,000 – the estimated number of containers stranded on Hanjin ships.
  • 8,300 – estimated number of cargo owners involved.
  • $38 million – the value of goods, mostly TVs and appliances, that Samsung Electronics (005930.KS) alone has said it has stuck aboard two Hanjin ships.
  • $1,700 – the average cost to move goods in 40-ft containers from the U.S. West Coast to Asia – up from $788 in May.
  • 7.8 percent – of the trans-Pacific trade volume for the U.S. market carried by Hanjin.
  • 141 – the number of ships Hanjin has (97 container ships, 44 bulk carriers). More than half are blocked from docking, and four have been seized as of Sept 11.
  • $5.5 billion – Hanjin’s debts (6.1 trillion won) as of end-June.
  • $293 million – Hanjin’s market value (322.5 billion won) – down by around a third in the past two weeks.
  • $226 million (249 billion won) – Hanjin’s operating loss in April-June, on revenue of $1.3 billion (1.43 trillion won)

According to Reuters on Monday, September 12, a portion of the $14 billion in cargo trapped began moving out of a California port on Monday as shareholders and executives of the South Korean firm pledged funds to help resolve the turmoil created by its collapse.

[FOX] Hanjin now says it has $18 million set aside to unload four ships in the U.S., and the judge told the company to make whatever deals it can to get the cargo into stores on time. Korean Airlines (KAL), Hanjin’s biggest shareholder, is giving $54 million to get ships docked and unloaded. One ship unloaded in Long Beach over the weekend. But about a dozen other ships are waiting to enter American ports.

The Hanjin Greece, one of roughly a dozen of the company’s ships destined for the U.S. West Coast, docked in Long Beach on Saturday after a U.S. bankruptcy court granted it protection and terminal operators agreed to take it.

Workers started unloading the Greece over the weekend, and on Monday trucks began moving the containers for distribution to retailers who are waiting for goods ahead of the busy holiday shopping season, said Teamsters spokeswoman Barbara Maynard.

What Can Businesses Do?

Every business should periodically formally assess their supply chain risks as part of a business impact analysis. Even if you have regularly conducted periodic assessments (and especially important if you have not), it is imperative that you conduct a new supply chain formal risk assessment in light of the Hanjin and possible other like collapses.

  1. What are your unique risks?
  2. Do you have a clear understanding of how such a disruption would impact your operations?
  3. Give thought to your plan(s) for supply chain disruption consequence management.

The keys for increasing resilience of your supply chain and managing a supply chain disruption crisis are to Predict.Plan.Perform.®

Follow up with Firestorm and our supply chain disruption planning resources to enhance your readiness. It is important to get your supply chain risk assessment on track.

  • What steps can you take now to mitigate or reduce these risks?
  • Can you take steps now to add resilience to your supply chain(s)?
  • Can you get everyone in your business “on deck” in this assessment and planning effort?
  • Do you have a supply chain disruption crisis management process in place?
  • What is your plan?
  • What alternative backups do you have prepared to utilize or adjustments to make in your business processes if there were a major supply chain hiccup?

In 2013, Firestorm in partnership with Georgia Tech, researched supply chain business continuity preparedness. We found that the  majority of suppliers either do not have business continuity plans or have business continuity plans that are not sufficiently robust to ensure continuity of delivery to customers in the face of a natural or man – made disruption.

Business continuity is frequently equated only with IT recovery. While restoring IT is vitally important after a disruption, recovering data is only one part of a comprehensive business continuity program. Simply requiring suppliers to have and maintain a business continuity plan, while better than nothing, is unlikely to result in major improvements in supplier resilience since most companies will aim for minimal compliance and pass any costs along to their customer.

A more robust response involves establishing business continuity criteria as part of competitive requests for proposals (with detailed business continuity criteria defined), incorporating business continuity planning and performance (where extant) in annual supplier ratings, and working in close cooperation with suppliers to develop thorough, joint business continuity plans.

Learn more by contacting Firestorm today and let us discuss your Supply Chain vulnerabilities and steps toward resiliency.

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