The Suez Canal is among the world’s busiest waterways, carrying over 10% of global trade—some estimates value its daily marine traffic at $9.6 billion. Under normal circumstances, it is a testament to the strength and efficiency of our global economy, a key intersection of the many organizations in the commodity and direct materials space that support industry throughout the world. It enables business as usual—until a 400-meter container ship runs aground, blocking the canal for a full week and all but guaranteeing months of chaos for supply chains.
The Ever-Given incident will go down as a turning point for firms dealing in commodities and direct materials – and not just because it captured the attention of the world. It also served as a stark illustration of the risks inherent in trading these assets. An organisation can make all the right moves in terms of cost reduction, but there is always the potential for things to go haywire.
To solve for this, entities on the supply chain must take a broader view of how they combat risk. It’s not just about hedging and diversification—it’s also a question of having a full view of a given situation, assessing options in real time and making targeted decisions. Digital transformation is the answer. By automating processes to track contracts and goods across the enterprise and enabling fast and complete access to all suppliers and buyers in a single view, an organization can be prepared for any scenario.
Let’s say a company is waiting for a large coffee shipment that is stuck in the Suez Canal. If this company deals only in coffee, it probably has a good idea of how much it is losing—but if the organisation is buying this coffee to use with commodities sourced from elsewhere, like milk or sugar, it might not have a clear view of its overall exposure. In the same example, if the organization has a ton of money tied up in that shipment, it may lack the liquidity to pay suppliers and otherwise operate as usual. In both cases, it is necessary to take a holistic view to inform business decisions amid unprecedented disruption.
Cloud offers the solution. Through an integrated cloud platform, businesses can understand and take more effective actions in terms of trading and risk, supply chain, sustainability, financial management, and more.
Once an organisation has this information, it can respond. If a supplier is stuck outside the canal, the buyer could leverage digital solutions to do short-term spot buys or financial trading, informed by an enterprise-wide view of exposures. If a seller is unable to move its product through the canal, the cloud solutions can be leveraged to more easily communicate with customers, reroute somewhere else or look at alternative sourcing. In both cases, the organization could run simulations to better understand the potential impact and risk as the situation unfolded. They could also enable AI-powered alerts to suggest course corrections.
The possibilities are endless. By bringing these operations from spreadsheets to the cloud, firms can help usher in the future of this industry and significantly reduce the impact of supply chain interruptions.
If experience is the best teacher, then perhaps there will be some good to come out of the Ever Given saga. The world has seen more than its share of black swan events over the past year, underscoring the need for a robust suite of tools that enable a higher level of insight. The sooner commodity and direct materials businesses begin their digital journey, the faster they will see long-term recovery and growth.
Views are personal. The author is CEO & Founder, Eka Software Solutions.