Yo Ho Ho and a bag of cement?
A relatively glib title for what is actually a deadly problem. I read an article this week in SupplyChainBrain.com about pirates. (No, I haven’t been spending too much time watching the Pirates of the Caribbean.) What I’m talking about are modern pirates.
Unlike traditional pirates, today’s pirates don’t want the cargo…in most cases they don’t even care what the cargo is. The purpose of the attack is to hold the cargo and crew hostage. For example, in January 2010, somewhere between 5.5 and 7 million dollars was paid to release an oil tanker containing 28 crew and 2 million barrels of oil. More recently, pirates struck a Panamanian freighter, the MV Suez carrying…you guessed it…bags of cement. The goal again was ransom, not the cargo.
It seems that piracy even has a well defined business model, which includes staffing levels, equipment requirements, supplies, investor profiles and profit distribution plans. Those guys are organized…which means you need to be too. The SupplyChainBrain article describes several best practices for ship owners to avoid the risk of shipments being attacked;
- When travelling through the Golf of Aden (the region notorious for piracy) travel the Internationally Recommended Transit Corridor
- Maintain lookouts to provide warning of approaching small boats
- Use of non-lethal deterrents such as water sprays and horns
- Protect logical boarding points with plywood and razor wire.
These best practices are not fool proof, however. The MV Suez had employed all of the above and was still boarded.
While the protection of a ship from pirates is not directly applicable to the readers of this blog, I found it interesting to see what shipping companies were doing to avoid this risk. What is applicable, is how you can protect your supply chain from the impact of one of these attacks. If a ship carrying your cargo is attacked, the best of possible outcome is that your shipment is recovered with no loss of life. However, your shipment will still likely be tied up for weeks, possibly months. That can be a disaster for a lean supply chain. What can you do to reduce this risk? Back to the SupplyChainBrain article…
The article points out that a supplier in poor financial shape may be tempted to route shipments through dangerous waters to minimize cost. Further, insurance companies are starting to respond to the additional risk by doing what insurance companies always do in these situations; charge more. These additional costs could be enough to sink (pardon the pun) a struggling supplier.
So it really comes down to a supplier management issue; identify the suppliers at risk. Look at the parts they supply. If the part is critical to your business, make sure that you have mitigation strategies in place. If you have options with respect to suppliers and routes, identify those sources and routes that avoid high risk areas.
Funny titles and supply chain issues aside, the real tragedy is the risk to the lives of the brave crew members of these ships. As I write this post, the crew of the MV Suez has still not been released, crews from other ships are also missing and some crews have been killed. Our hopes and prayers go out to them and their families.Google+