Published 26 March 2021
Buckie Got It, St. Kitts and Nevis News Source
In Suez Canal, Stuck Ship Is a Warning About Excessive Globalization
The shutdown of the vital waterway and its impact on trade underscore the world’s reliance on global supply chains.
By Peter S. GoodmanMarch 26, 2021Updated 9:18 a.m. ET
LONDON — The world got another warning this week about the perils of its heavy reliance on global supply chains. As a single ship ran aground in the Suez Canal, shutting down traffic in both directions, international commerce confronted a monumental traffic jam with potentially grave consequences.
The troubled craft is not just any vessel. The Ever Given is one of the world’s largest container ships, with space for 20,000 metal boxes carrying goods across the sea. And the Suez Canal is not just any waterway. It is a vital channel linking the factories of Asia to the affluent customers of Europe, as well as a major conduit for oil.
The fact that one mishap could sow fresh chaos from Los Angeles to Rotterdam to Shanghai underscored the extent to which modern commerce has come to revolve around truly global supply chains.
In recent decades, management experts and consulting firms have championed so-called just-in-time manufacturing to limit costs and boost profits. Rather than waste money stockpiling extra goods in warehouses, companies can depend on the magic of the internet and the global shipping industry to summon what they need as they need it.
The embrace of this idea has delivered no less than a revolution to major industries — automotive and medical device manufacturing, retailing, pharmaceuticals and more. It has also yielded a bonanza for corporate executives and other shareholders: Money not spent filling warehouses with unneeded auto parts is, at least in part, money that can be given to shareholders in the form of dividends.
Yet, as in everything in life, overdoing a good thing can bring danger.
An excessive reliance on just-in-time manufacturing helps explain how medical staff from Indiana to Italy found themselves attending to Covid-19 patients during the first wave of the pandemic without adequate protective gear like masks and gowns.
Health care systems — many under the control of profit-making companies answerable to shareholders — assumed that they could depend on the web and the global shipping industry to deliver what they needed in real time. That proved a deadly miscalculation.
The same dependence explains how Amazon failed to provide adequate stocks of masks and gloves to its warehouse workers in the United States in the first months of the pandemic.
“We’ve placed purchase orders for millions of face masks we want to give to our employees and contractors who cannot work from home, but very few of those orders have been filled,” Amazon’s founder, Jeff Bezos, declared in a letter to all employees last March. “Masks remain in short supply globally.”
Some experts have warned for years that short-term shareholder interests have eclipsed prudent management in prompting companies to skimp on stockpiling goods.
“As we become more interdependent, we are even more subject to the fragilities that arise, and they are always unpredictable,” said Ian Goldin, a professor of globalization at Oxford University. “No one could predict a ship going aground in the middle of the canal, just like no one predicted where the pandemic would come from. Just like we can’t predict the next cyberattack, or the next financial crisis, but we know it’s going to happen.”
The disaster of the moment, in which engineers work to extract an enormous vessel from the Suez Canal, has left more than 100 vessels stuck at either end awaiting clear passage. Some are carrying oil — a reason that energy prices rose on Wednesday, though they pulled back on Thursday. Some are carrying electronics, and clothing, and exercise equipment.
None of them are getting where they are supposed to until the waylaid ship is freed. Each day the stalemate continues holds up goods worth $9.6 billion, according to a Bloomberg analysis.