lost-at-sea

Lost at Sea

By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE
The title of this week’s Supply Chain Management Now isn’t from a new Hollywood thriller; this situation is real, and it’s serious. One of the world’s biggest shipping companies, South Korea-based Hanjin Shipping, filed for bankruptcy earlier this month, leaving as much as $14 billion worth of cargo floating and manufacturers uncertain, according to The Wall Street Journal.

Since Hanjin filed for bankruptcy, “dozens of ships carrying more than half a million cargo containers have been denied access to ports around the world because of uncertainty about who would pay docking fees, container-storage and unloading bills,” Costas Paris and Erica E. Phillips write. “Some of those ships have been seized by the company’s creditors.”

Bloomberg reports that Samsung Electronics is one of the manufacturers with cargo stuck in international waters. To meet its contractual obligations to customers, a Samsung spokesperson said they are considering chartering 16 cargo planes, which would cost about $8.8 million.

Stranded items range from apparel and handbags to televisions and microwave ovens. Manufacturers are scrambling to secure alternative transport methods and container shippers. “Retailers’ main concern is that there’s millions of dollars worth of merchandise that needs to be on store shelves that could be impacted by this,” said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation, in the Bloomberg article.

Last week, a US Court of Appeals upheld Hanjin’s bankruptcy protections in the United States, echoing the ruling by a Korean bankruptcy court. The decision enables Hanjin’s ships to move in and out of ports in the United States and Korea without asset seizure, but it doesn’t account for how the company will pay docking and unloading fees. “Moreover, the courts’ rulings don’t necessarily apply to ports in Asia and Europe,” Paris and Phillips write for The Wall Street Journal.

Earlier this week, CNBC reported 93 vessels, or two-thirds of Hanjin’s fleet, are not operating as scheduled, including ships that have been seized, barred entry to ports or terminals, denied services, or are moving slowly. Crews face shortages in food, water, and fuel.

Global commerce risks
Although Hanjin accounts for only 3.2 percent of the world’s container capacity, according to The Wall Street Journal, 95 percent of global manufactured goods are transported in shipping containers. The Hanjin bankruptcy illustrates the risks inherent in all partner relationships.
Consider the following description of logistics network design from the APICS Certified in Logistics, Transportation and Distribution (CLTD) Exam Content Manual: “Logistics network design addresses the transportation and inventory economics that critically define supply chain network design considerations. It includes an introduction to the modeling tools and techniques, which enables supply chain spatial and temporal integration, and addresses the need for today’s logistics managers to extend this responsibility to include the processes, resources, and tools for managing risks.”

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