Hanjin Shipping Bankruptcy Illustrates that Supply Chains Relying on Overseas Manufacturers are a Dangerous Gamble
Friday, September 30, 2016
Earlier this month the shipping giant, Hanjin Shipping Company, threw manufacturers and retailers of all sizes and from across the globe into a panic when, upon declaring bankruptcy, they were forced to leave as much as $14 billion worth of cargo out at sea.
Hanjin cargo ships aren’t being allowed into port because a bankrupt status means that port authorities can’t be sure how bills for docking fees, container storage, and unloading services will be paid. These bills are hardly insignificant: the unloading fees alone are expected to be $600 billion. To make matters worse for companies awaiting shipment via Hanjin lines, creditors have seized some of the cargo ships in an attempt to recover debt owed by Hanjin.
It’s no mystery how this could negatively effect US manufacturers and retailers if the situation persists. Without essential parts to manufacture goods or the goods themselves to stock shelves, retailers are likely to face backlash as well as dreary financial reports. The problem only intensifies as the holiday season approaches when many retailers do the majority of their annual business.
What may be less obvious is how manufacturing companies, at least, can avoid this fate by designing a safer supply chain. When a company relies on goods from overseas, they are subject to not only US import regulations but also the uncertainty inherent (such as this) in the global marketplace.
Choosing to build a US-based supply chain can have distinct advantages, including better agility in a constantly changing market.
While there’s no question that parts and goods from overseas often win the war on cost, one aspect of the supply chain that often gets overlooked is the speed at which the marketplace changes and a company’s ability to respond to those changes in a timely manner. Changes in the marketplace can come from customer demand or from economic roadblocks like the one presented by the Hanjin bankruptcy. If customers are interested in a new version of your product that will require you to change your order from an overseas supplier, how long will it take for them to adjust? Similarly, as in the case of sea-bound container ships, if your company is forced to wait weeks or months to get an essential part in you manufacturing process, how will that affect business?
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