I would like to comment on the recent opinion article by Shipping Australia published in the DCN about supply chain resilience. I believe that some of the assumptions quoted in the article do not represent the full story.
First of all, the reference to Hohenstein et al in Research on the phenomenon of supply chain resilience: a systematic review and paths for further investigation was published in 2015 and uses data from 2003 to 2013 (pre COVID). More recent research in supply chain resilience suggests that “the COVID-19 pandemic clearly shows the lack of resilience in supply chains”, as quoted in the research paper Trends and applications of resilience analytics in supply chain modeling: systematic literature review in the context of the COVID19 pandemic by MS Golan et al (May 2020).
Furthermore, the UNCTAD bulletin, Impact of the COVID-19 pandemic on trade and development, which is referenced in the article, also mentions that “Supply chains have ruptured, generating shortages of essential medical equipment, protective gear and active ingredients in key medicines, while leaving suppliers unpaid” (page 114). The bulletin also states that “calls for a reshoring of critical medical and food products to take back control of strategic production processes have combined with observations that COVID-19 might include a shortening of supply chains and a more general reshoring of production to developed countries in an effort to make supply more robust and resilient” (page 122).
And, while port calls may have recovered as stated in the article, it has come at an enormous cost and disruption to shipping lines and their customers. The shipping lines are now reaping the benefits of pent-up demand and reporting record profits whilst shippers now pay exorbitant freight rates (if they are able to secure a booking) to import or export their cargo.
On a local level, it is interesting to note that the Productivity Commission in its interim report on vulnerable supply chains, which dealt with import freight, stated that some supply chains are vulnerable especially if relying on a single, concentrated source of supply where few alternatives exist. The just-in-time principle, which is adopted by industry using contemporary agile supply chains, has suffered due to the interruptions caused by COVID-19. Consequently, many importers now carry increased stock which results in additional inventory costs. The commission received nearly 50 submissions from industry associations, business and individuals. The final report, which will include observations on export supply chains, is due to be handed to the government by July.
Based on the above, I disagree with the statement in the Shipping Australia article that “Every aspect of the test of supply chain resilience is satisfied” and agree with “various commentators” that the global supply chain is vulnerable to, and not particularly resilient to, unexpected events such as COVID-19.
Peter van Duyn
Maritime Logistics Expert, Centre for Supply Chain and Logistics, Deakin University