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Earlier this week, on Sunday, 2,000 workers at the UK’s main shipping port in Felixstowe began an eight-day strike over pay and working conditions: the first strike at this dock since 1989. The strike will plunge businesses into another episode of supply chain chaos and is estimated to disrupt £700 million in trade, adding additional pressure to the already struggling UK economy.
The Felixstowe docks are responsible for a third of Britain’s entire container imports and exports and handle 4 million containers a year from 2,000 ships, making it the busiest dock in the UK. The strike will cause widespread disruption to supply chains who are only just starting to recover from the impact caused by Brexit, HGV driver shortages and the pandemic. Several freight carriers including Costco and Maersk have announced they will cancel all UK routes this week, while some others are being re-routed to Southampton and London Gateway, the UK’s second and third largest docks.
The Felixstowe dock typically handles larger items from Asia such as electronics and furniture, whereas Dover handles perishable food so it’s unlikely the UK will witness bare supermarket shelves because of the strike. However, consumers may have a reduced choice when it comes to other items in the coming months, along with increased prices.
Nearly 2,000 Unite workers are involved in the strike and are made up of machine operators, crane drivers and stevedores. They are pushing for an increase to a proposed 7% pay rise, which they say is not enough amid the cost-of-living increases, particularly as the owner of the dock, CK Hutchinson, made pre-tax profits of £61 million in 2020 and paid stakeholders £100 million in dividends.
The current strike at the Felixstowe dock is another stark reminder of the fragility of supply chains and the critical need to build supply chains that are resilient and flexible. Below we’ve listed our five top tips to prepare your business for supply chain disruption:
Supply chains are long and complex and involve many moving variables and incorporate a lot more than simply sourcing your product. As we have witnessed in recent years, a whole host of scenarios at any stage of the chain can occur to cause disruption. A supply risk matrix allows you to examine where the weak links may be in your supply chain, assess all possible disruption and monitor risks to help you quickly put an emergency plan in place to overcome them if necessary.
Visibility is king! Investing in technology that can incorporate all areas of your supply chain and connect you to your production facilities, shipping, warehouses, and sales is worth every penny for the insight you will gain. Inventory management software is also beneficial to show you real-time stock levels, inventory locations and stock on order so you can identify product areas which may be affected in times of disruption.
Do you know how long your business can survive if you cannot import or export your product? Do you know the cost of lost customers if you cannot provide them with your product? Do you have enough cash to help you manage if there is a delay in getting your stock? Many businesses still rely on a just in time “stock out, cash in” process whereby they are relying on the sale of a product for cash and have a lot of capital tied up in inventory. You should assess how long it takes to turn your inventory into cash and whether you have flexibility should any delays or disruptions occur. If you can, try to have an emergency budget set aside or a plan to access emergency funds if needed.
Putting all your eggs in one basket is a risky strategy for any element of your business but especially so when it comes to suppliers. If you don’t have multiple suppliers set up then now is the time to do this, and look at suppliers in different geographic locations too, even if it does increase your costs slightly. Anything could happen overnight to one of your suppliers, or the region they are based in, putting your business in a vulnerable position, so hedge your bets and employ multiple suppliers in multiple regions so you always have a back up should a problem occur.
Whilst you don’t want to tie up capital in inventory it can be useful to have some spare stock built up for if any disruption occurs, especially if you know you are approaching a busy sales period for your business. This will help you to keep your business running in the short term if there are any disruptions like the current strikes at the Felixstowe docks.
As we have witnessed first-hand in recent years, disruption to supply chains can have significant implications for businesses, large and small, and the current strike at the Felixstowe docks is no exception. It is estimated to be costing millions in trade and will have knock on effects for some businesses for months to come. The strike comes as another reminder the importance of building a robust and flexible supply chain that can cope during times of disruption, to have as minimal impact on your business as possible. As we have explored, implementing a risk assessment, and having an emergency plan (and funds) in place is essential, along with diversifying your suppliers, forecasting your cash flow and having back up inventory for short term survival where possible to do so.
For more information about building a robust supply chain, or to learn more about our Opera 3 Supply Chain Management solution then please contact us today.
Posted On: August 24, 2022
