Here’s a prediction for 2013: something big will happen.
OK, I’m not exactly going out on a limb here, but bear with me.
By “big” I mean a world-scale event such as a natural disaster, a political upheaval, or a technological breakthrough. Unfortunately, the statistics favor the first possibility.
According to the World Economic Forum more than 250 million people each year are affected by natural disasters. The annual number of these events has more than doubled since 1980 as a result of climate change, population increase, and rapid urbanization, states the Forum on its web site.[i]
Such is the scale of happenings like these that it can be difficult to relate them to your corner of the supply chain world. But mega-events of this ilk will probably reach you in some form or other during 2013.
Here is an example of what I mean.
In November 2012 the liquefied natural gas tanker Ob River left Norway on a northerly course for Japan. The BBC reported that the gas tanker is the first ship of its type to attempt a winter crossing of the Arctic[ii]. The route – often referred to as the Arctic Shortcut – chops 40% off the distance normally covered, and is made possible by the early melting of ice in the region.
The tanker sailed from the Hammerfest LNG terminal in northern Norway, Europe’s first LNG export facility. When Hammerfest was built one of its main markets was the United States, but the rapid growth of shale gas extraction in the U.S. has undercut that business. The terminal aims to fill the gap by shipping LNG to Japan, where the Fukushima nuclear plant disaster has sparked interest in alternative energy sources. The disaster was spawned by the tsunami that devastated parts of Japan in 2011.
So Ob River’s epic voyage was largely the result of five interconnected mega-events: global warming and the early disappearance of Arctic ice, the rapid growth in shale gas exploration in the U.S., and a nuclear disaster in Japan which was triggered by a tsunami.
The repercussions do not stop there. As Gunnar Sander, senior adviser at the Norwegian Polar Institute told the BBC: “The major point about gas is that it now goes east not west.” In other words, structural changes such as the exponential growth in shale gas production have reconfigured the way the global LNG industry transports product.
Numerous trading partners at local, regional and global levels are affected by this realignment. Consider just a few links in the supply chain that engages the Ob River. In addition to the Hammerfest terminal, the operators of the nuclear icebreaker that accompanied the gas tanker are involved, as are the Greek ship owners that chartered the vessel to the Russian company Dynagas for the voyage.
Hopefully these parties have mapped the redrawing of the LNG map and made adjustments to their businesses. But this is no easy task. Would, say, a shipbroker in the tanker market have forecast these shifting currents a few years ago? Perhaps climate change and the opening up of the Arctic sea lanes might have been on their radar screen, but anticipating a massive tsunami and resultant nuclear troubles in Japan was surely impossible.
How do supply chain managers keep abreast of such monumental events, and, importantly, figure out the implications for their backyards?
It has become a relevant question because as mentioned above events like these are happening more often, and the world we live in – and notably the supply chain portion of it – is more interconnected than ever.
If you can’t foresee game-changing developments, then at least you can prepare for them.
That means being receptive to world events and the potential consequences without driving yourself crazy trying to keep track of every occurrence. Also, stay operationally flexible and be open-minded about the news in other parts of the planet.
But above all, avoid the mindset that as a tiny fish in a very big pond, the ripples of an unthinkable event in a faraway place won’t affect you.
[ii] “Gas tanker Ob River attempts first winter Arctic crossing,” BBC News, November, 25, 2012