Resilinc: Impact of Tianjin explosion will be worse than expected

"Repercussions on the global supply chain will be felt over the next few months and perhaps years to come," said the CEO of supply chain research firm Resilinc.

Resilinc: Impact of Tianjin explosion will be worse than expected

"Repercussions on the global supply chain will be felt over the next few months and perhaps years to come," said the CEO of supply chain research firm Resilinc.

Resilinc: Impact of Tianjin explosion will be worse than expected

"Repercussions on the global supply chain will be felt over the next few months and perhaps years to come," said the CEO of supply chain research firm Resilinc.

 
The Aug. 12 explosions at a warehouse storing chemicals in the Port of Tianjin, China will have a far worse impact on global supply chain than suggested by Chinese officials, says Bindiya Vakil, the chief executive officer of Resilinc Corp.
    The Milpitas, California-based company says it provides the “leading cloud supply chain resilience and risk management analytics solution.”
    “Be skeptical of media reports indicating that business and port operations will shortly return to normal,” Vakil said in a press release issued by the company Tuesday. “This event’s economic relevance and its repercussions on the global supply chain will be felt over the next few months and perhaps years to come.”
    Resilinc said there are “an accelerating number of impacted suppliers” located in or around the port, which it notes is the third largest port in the world, and 10th largest container port, with half of its U.S.-bound cargo going to either Los Angeles or Long Beach.
    Resilinc says China frequently downplays disasters that have environmental and human health consequences. Nevertheless, Vakil said environmental officials have expressed concern that recorded levels of sodium cyanide in the explosion zone were as much as 350 times higher than the safety level and that cyanide levels in the waters around Tianjin port had risen to 277 times the acceptable level.
   “This has direct implications for suppliers whose workforce will be unable to return until concerns about hazardous working conditions have been addressed or must stay home to care for children as result of school closures in the evacuation zone or disruptions to the transportation infrastructure,” the company said.
    Global industries depend on goods from Tianjin in the electronics, aviation & aerospace, automotive, petrochemicals, equipment manufacturing, and biotech industries. Resilinc has mapped over 200 electronics, life sciences, and automotive manufacturing sites in the broader Tianjin region and about 30 sites within 10-15 miles of the explosion.
    “Some of these suppliers that go lines down represent sole sources of parts required by large global electronics and machinery OEMs to ship their product,” said Vakil. “And, because these suppliers may be many levels deep in their supply chain, the impact to future shipments and revenue is unknown to them because of a lack of sub-tier supplier visibility.”
    Vakil warned there is potential for long-term environmental and public health impacts that may begin to manifest as a result of several tons of dangerous chemicals polluting the air supply and water table in the region. Companies should expect and prepare to be affected by new regulations, audit requirements, and heavier fines for their supplier’s non-compliance, she said.
    “I have seen this headline before,” said Vakil. “Read all about it. Public outcry and media criticism about irregularities in compliance and safety standards leads to a government crackdown and shutdown of hundreds of suppliers overnight – is your critical supplier one of them?”
   She says companies have been slow to adequately invest in resiliency strategies, processes and tools, such as 24/7 global event monitoring, supply chain visibility/mapping, proactive risk mitigation, and crisis response planning.
    Resilinc has made available a white paper called “The Aftermath of the Tianjin Explosions: A Global Supply Chain Impact Analysis—It’s Far Worse than You Think.”
    Meanwhile, OOCL told its customers in a notice since the Tianjin dangerous goods warehouse incident, "a significant number of terminals" have introduced additional restrictions on handling dangerous cargo and/or suspended handling dangerous cargo.
    "Under the current environment we will continue to work with our customers and related parties on contingency plans," the Hong Kong-based ocean carrier said, asking customers to contact their local office for additional information.
An often heard concern pertaining to online freight platforms is that they will lead to a ‘race to the bottom’ as shippers will always choose the lowest rate. Based on access to 780,000 online spot rate offers, I have analyzed to which degree this fear is real. The data is clear. In cases where shippers had a choice between different providers for a departure on the same day, 49 percent did not choose the cheapest provider.
Spot container rates from Shanghai to Europe clocked in at $979 per TEU as of Jan. 11, while rates from Shanghai to the Mediterranean stood at $980 per TEU, both of which dropped 1.7 percent from a week prior, according to the Shanghai Containerized Freight Index.
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