CLAREMONT, CALIFORNIA – January 25, 2024 –  Amidst escalating global supply chain challenges, LMA Consulting Group remains at the forefront of offering strategic solutions. Lisa Anderson, MBA, CSCP, CLTD, President of LMA Consulting Group Inc., highlights the critical situation: “The recent turmoil in the Red Sea, triggered by Houthi drone and missile attacks, has significantly amplified risks in global shipping, particularly affecting the Suez Canal and Red Sea routes. These complexities, combined with ongoing disruptions at the Panama Canal, underscore the urgent need for agile and robust supply chain management.”  

The Red Sea, a vital maritime artery, is now a high-risk zone due to geopolitical tensions. Houthi attacks have forced a significant rerouting of shipping lines, with many opting for the longer journey around the southern tip of Africa.  This detour, while safer, adds around ten days and 1900 nautical miles to typical Asia-North Europe services, escalating costs and prolonging delivery times.  

Additionally, the Panama Canal faces challenges from drought-induced vessel limitations, further exacerbating global supply chain disruptions. Its reduced capacity is compelling more ships to navigate through the already stressed Suez Canal.

Ms. Anderson advises, “In this volatile global context, businesses must swiftly adapt and strategically plan ahead. Exploring alternate routes, diversifying supply sources and considering nearshoring or reshoring are imperative to mitigate these emerging risks.“

LMA Consulting Group is at the forefront, aiding clients in traversing these intricate challenges. By implementing a comprehensive Sales Inventory Operations Planning (SIOP) process, businesses can boost agility, secure capacity and maintain a dependable supply chain despite these disruptions. Companies that had preemptively diversified their manufacturing and supply chain networks are now experiencing the benefits of reduced risks and enhanced customer service.

LMA Consulting specializes in guiding businesses through turbulent times with strategic planning, comprehensive supply chain transformation and resilience-building solutions. For more insights, download Ms. Anderson’s eBook SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation.  A recognized supply chain thought leader, Ms. Anderson has been named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, among the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx.  Her primer, “I’ve Been Thinking.” offers strategies for creating bold customer promises and profits. An expert on the SIOP process, advancing innovation and enhancing supply chain resilience, Ms. Anderson is regularly interviewed and quoted by leading publications. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.                 

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Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com

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The best consulting clients are razor focused on supply chain volatility, risk and capacity. The recent events in the Red Sea highlight these critical priorities. As Houthi drone and missile attacks create chaos in the Red Sea, shipping container lines play it day by day as to whether to brave an attack or sail around the southern tip of Africa. If they reroute, it adds approximately 10 days and 1900 nautical miles onto a typical Asia-North Europe service. Additionally, some ships go through the Suez Canal for the East Coast of the U.S. This route has increased with the recent reduced capacity of the Panama Canal. Read our recent article, Supply Chain Optimization Remains a Priority as the Panama Canal Worsens on those issues.

High Risk in the Red Sea

What started with an Iran-backed Houthi attack on container shipping lines sympathetic to Israel has blossomed into a volatile, risk-laden decision to sail through the Suez Canal. For example, there was an attack on an MSC ship sailing from Saudi Arabia to Pakistan. According to Freightos CEO, approximately 50% of ships have been diverted from the Suez Canal, reducing capacity (due to extended lead sailing time) and increasing rates by around 30%. Safety is top priority, and CEOs are evaluating risk on a daily basis.

Alternate Routes & Sources of Supply

Clients are starting to ship to the L.A. and Long Beach ports to transport across the country to the East Coast; however, this change cannot happen rapidly, and adds time and cost to shipments. For quicker needs, companies are sending product by air freight to quickly respond to changing customer needs. Certainly, air freight is more expensive, thus inflating prices further. More and more companies are realizing they must reshore, nearshore, and take control of their ability to serve customers. Some are finding backup sources of supply while others are expanding their manufacturing footprint. The bottom line is supply chains are on the move.

Mexico Border Closures Impact Intermodal Trains

According to the Journal of Commerce, a major intermodal rail connection between Mexico and the United States was halted after US authorities shut down border crossings at Eagle Pass and El Paso in Texas so customs officers could help US Border Patrol process a flood of migrants. The two major class 1 railroads, Union Pacific Railroad (UP) and BNSF Railway, were impacted. Unfortunately, this is the second time in three months the Eagle Pass Crossing was shut down due to a surge in migrant arrivals. Intermodal has opened up again; however, UP and BNSF have a logjam of laden containers built up that need to be transported to the US.

Again, customers waiting on this freight experienced delays and reduced capacity. It is clear that risk and volatility remains high throughout the world with goods movement.

Forward-Thinking Companies Thrive

Smart executives are thinking ahead, planning capacity and backup capacity with a SIOP (Sales Inventory Operations Planning) process and successfully navigating these ongoing disruptions. Forward-thinking companies are gaining an advantage as they have planned ahead to be agile, pivot quickly, and most importantly, are ahead of the curve in securing capacity. For example, a proactive client moved production from China to Vietnam ahead of the pandemic when China shut down production with Zero-COVID policies. Again, they are ahead of the curve by expanding capacity in Mexico and the U.S. to ensure sufficient capacity to supply key customers. While the competition struggles, they can provide rapid deliveries with increased prices and gain long-term customers.

The key is to proactively address these issues to mitigate the impacts to the customer and cost, and longer term, to revise your manufacturing and supply chain footprint and network to best support profitable growth and mitigate risk.

If you are interested in reading more on this topic:
Supply Chain Risk Has Risen to the Top with the White House Council

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Supply chain optimization must remain a priority as disruptions continue. For example, although the Panama Canal started experiencing issues in the summer (refer to our article for details), it has been worsening lately. 40% of the goods movement from Northeast Asia to the U.S. East Coast go through the Panama Canal, and so the Panama Canal issues are driving shortages, late deliveries, and re-routing of goods.

Panama Canal Issues Worsen

Drought conditions are creating a new round of disruptions:

• Reduced container ships: by > 50% (from 40 to 32 earlier in 2023 to 25 Nov, 20 Jan & 18 Feb). 
• Restrictions on ship draft: to a maximum ship draft to 44 feet (vs. 50 feet) – requiring larger ships to sail light or unload, rail across & reload 
• Capacity restrictions: Neopanamax locks (handling larger ships) restricting to capacity by 50% (from 10 to 5 per day)
• Gas container ship impacts: LNG and VLGCs (very large gas carrier) will experience the greatest impact since deprioritized 

Inflation impacts: Creating inflationary pressures, shortages and delays. Some ships paying up to $4M to go to the head of the line

The China Risk

In addition to the disruptions to the Panama Canal, there are other risks associated with the Panama Canal. Hutchison controls the terminals at both ends of the Panama Canal. Thus, if China wants to “control” the flow through the Panama Canal, they can do so via Hutchison. It is an important risk to consider.

Responses to the Panama Canal Issues

Proactive executives are not waiting to see how this turns out. They are pivoting. Several of the actions include the following:

• Alternate routes: Depending on the start and end point, companies are pursuing different routes. These include the Suez Canal and sailing around the southern tip of Africa or South America.  
• Alternate modes of transportation: Depending on urgency, and start/ end points, companies are using air freight, rail etc.
• Alternate routes & modes of transportation: Companies are also going to an alternate U.S. port and sending product via rail or truck to its destination.
• Moving and/or reallocating manufacturing: Companies are certainly pursuing reshoring, nearshoring, and expanding manufacturing to minimize risks and shorten lead times. In addition, if they have multiple facilities and/or contract manufacturers, they are proactively moving manufacturing to support customer needs and mitigate risks.
• Forward position inventory: Depending on the manufacturing and distribution network, clients are also positioning inventory close to customers so that they can absorb additional disruptions without impacting customers.
• Change distribution network: Clients are also moving and expanding their distribution networks to better support customers. They are doing this in creative ways, sometimes partnering with customers, suppliers, and competitors.

The key is to proactively address these issues to mitigate the impacts to the customer and cost, and longer term, to revise your manufacturing and supply chain footprint and network to best support profitable growth and mitigate risk.

If you are interested in reading more on this topic:
Supply Chains are on the Move

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CLAREMONT, CALIFORNIA – December 20, 2023 –  Manufacturing and Supply Chain Consultant Lisa Anderson, MBA, CSCP, CLTD and President of LMA Consulting Group Inc., emphasizes the critical necessity of prioritizing supply chain optimization as global disruptions continue. Key issues, such as the worsening conditions at the Panama Canal, have been highlighted as significant contributors to the ongoing supply chain crisis. LMA Consulting Group specializes in supporting manufacturers and distributors in strategic planning and comprehensive supply chain transformation, focusing on enhancing the customer experience and robust business growth.

The Panama Canal, a critical passage for 40% of the goods moving from Northeast Asia to the U.S. East Coast, is experiencing severe disruptions that are intensifying supply chain challenges globally:

• Drastic Reduction in Container Ship Capacity: A decrease in container ships by more than 50%.
• Draft Restrictions: Limitation of the maximum ship draft to 44 feet, necessitating larger vessels to sail light or undergo complex reloading processes.
• Capacity Cuts at Neopanamax Locks: A halving of the daily capacity, now limited to 45 ships per day.
• Impact on Gas Container Ships: LNG and VNLCs face significant operational challenges and delays.
• Inflationary Pressures: These disruptions are contributing to inflation and causing delays, with some ships incurring costs of up to $4MM for expedited transit.

In addition, the control of the Panama Canal terminals by Hutchison, a company with connections to China, presents a potential geopolitical risk. This, coupled with the most recent challenges for ships going through the Suez Canal, will impact the flow of goods, posing additional layers of risk for global supply chains.

“There are proactive measures that companies can take,” noted Ms. Anderson. “Alternate routes, diverse transportation modes, manufacturing and distribution adjustments and inventory strategies can proactively address challenges and minimize impacts on customers and costs.  In the long term, revising the manufacturing and supply chain footprint is essential for sustainable growth and risk mitigation,” she said.

For deeper insights into navigating the complex landscape of global supply chains, download Ms. Anderson’s special report The Road Ahead: Business, Supply Chain & The World Order and her eBook SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation.  Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, in the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx.  Her primer, I’ve Been Thinking, provides strategies for creating bold customer promises and profits. An expert on the SIOP process (Sales, Inventory Operations Planning), advancing innovation, and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, Bloomberg, Fox News and The Wall Street Journal. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.

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Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com

The post Lisa Anderson, Manufacturing & Supply Chain Expert Emphasizes Urgent Need for Supply Chain Optimization Amidst Ongoing Global Disruptions appeared first on LMA-Consulting Group, a supply chain consulting firm.

As originally published in ExpertClick on August 31, 2023

CLAREMONT, Calif., August 31, 2023/ExpertClick/– Manufacturing and Supply Chain Consultant Lisa Anderson, MBA, CSCP, CLTD, known as the Strongest Link in Your Supply Chain® and President of LMA Consulting Group Inc., emphasizes the critical importance for owners and business leaders to understand how current events can significantly impact their supply chains. LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth.

As the Panama Canal grapples with drought conditions causing serious delays in goods transportation, the ripple effect is being felt worldwide. “The Panama Canal’s crisis underscores just how vulnerable global supply chains are to current events,” commented Ms. Anderson. “With a 40% market share in containers moving goods from Northeast Asia to the U.S. East Coast, these disruptions reverberate worldwide.”

Due to inadequate rainfall, the Panama Canal authorities have reduced daily container ship passage by 20%, from 40 to 32 ships. The maximum allowable ship draft has also been restricted to 44 feet, compared to around 50 feet before the drought conditions. This situation has led to a backlog of 130-160 ships, creating substantial supply chain delays. An alternate route would add 8,000 miles to the journey.

While many companies have diversified their supply chain strategies in light of the pandemic, switching from just-in-time (JIT) to just-in-case inventory models, this latest disruption has far-reaching consequences. Costs are surging with $300 – $500 per container becoming increasingly common. “The shift from JIT to just-in-case inventory has buffered the impact to some extent, but we’re still facing an escalating issue that is driving up costs. A comprehensive understanding of the factors impacting the supply chain can equip companies to respond more effectively to disruptions, minimizing risks and costs. As the Panama Canal issue shows, a lack of awareness is not an option. In today’s connected world, staying informed is not just good practice – it’s a business necessity,” she concluded.

For more insights on how to navigate the complex landscape of global supply chains, download Ms. Anderson’s special report The Road Ahead: Business, Supply Chain & The World Order. She has also released: SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth to help organizations implement a proven process. Download it at: Amazon and Apple. 

The post Lisa Anderson, Manufacturing & Supply Chain Expert Advises Business Leaders to Keep a Pulse on Current Events appeared first on LMA-Consulting Group, a supply chain consulting firm.

The Panama Canal has a 40% market share for containers moving goods from Northeast Asia to the U.S. East Coast, and drought conditions are creating a new round of supply chain disruptions. There have been between 130 – 160 ships waiting, leading to supply chain delays. Supply chain risk is extreme in the global supply chain. This is simply the latest issue impacting supply chains.

Due to a lack of rainfall, the Panama Canal has reduced the number of container ships to pass through on a daily basis by 20% (from 40 to 32). Additionally, it has put restrictions on the maximum ship draft to 44 feet (vs. around 50 feet previously). The trip through the Panama Canal takes 8-10 hours. If you have to find an alternate route, it adds 8000 miles.

Luckily, many companies started to diversify their supply chain with the pandemic, and they moved from just-in-time (JIT) to just-in-case inventory, and so disruptions have been muted thus far. However, as time goes on, the supply chain impacts are increasing. Costs are escalating with surcharges of up to $300-500/ container as not uncommon.

Smart Executives Responding with Supply Chain Optimization

Smart, forward-thinking executives are responding with supply chain network optimization and risk mitigation strategies. For example:

• Alternate routes: Forward-thinking executives are finding and using alternate routes. You never know when an issue will arise, and you cannot afford to wait for the crisis to occur to use your backup plan. Thus, smart executives are using alternate routes for at least a minimum percentage of shipments so that they establish their presence. Depending on your beginning and ending point, there might be several alternatives with varying levels of benefit/ cost.
• Alternate modes of transportation: This strategy will certainly cause hefty price increases, and so it is used as a last resort. However, it makes sense to establish these options.
• Reshoring & expanding manufacturing capabilities: Several clients are planning for a resurgence of manufacturing closer to customers and ramping up in the U.S. By virtue of this strategy, shipping lanes will change and diminish.
• Nearshoring/ Friendshoring: Many clients are also searching for manufacturing capabilities closer to customers, not in the U.S. or Europe. For example, MedTech is nearshoring to Mexico, Costa Rica, and the Dominican Republic. it is critical to ensure you find a friendly country to mitigate supply chain risks.
• Forward positioning of WIP inventory: Depending on your products and customer requirements, you could change your manufacturing process to produce and ship work-in-process (WIP) so that it can be turned into multiple products based on customer need and/or it can be stored at a lower cost while mitigating risk. This concept can be called mass customization, configure to order (CTO), assemble to order, and other names. The product can be redesigned to apply this strategy in some situations.
• Distribution network design: Your distribution network can be redesigned to mitigate risk while accounting for customer requirements and cost concerns.
• Right-size inventory levels: Although moving from just-in-time (JIT) to just-in-case isn’t necessarily the best plan for profitable growth and happy customers, reevaluating your replenishment planning strategies can make good sense. By resetting your planning processes, ERP / MRP settings, and kanban strategies, you can store more of the high risk inventory while storing less of unnecessary inventory to achieve a win-win outcome. To learn more about how to right-size inventory, read our recent article.

These are a few options. The key is to reevaluate your supply chain and optimize your supply chain design and network strategy.

Deep Dive into Supply Chain Risk

The Panama Canal might seem like an ideal solution, and there is significant investment going into upgrades over the next few years. However, have you performed a deep dive risk analysis? It turns out that China can control the Panama Canal even though the U.S. built the Panama Canal and gave control to Panama.

According to the Hay-Bunau-Varilla Treaty of 1903, the United States gained a 10-mile wide strip of land for the canal and provided a one-time $10 million payment to Panama in addition to an annual annuity of $250,000. However, in 1978, the President Jimmy Carter and Panamanian dictator Omar Torrijos signed a treaty agreeing to transfer control of the Panama Canal from the United States to Panama at the end of the 20th century. Panama earns around $3 billion in revenue annually.

China in essence ‘owns’ the Panama Canal since Hutchison Ports controls both ends of the Panama Canal with a terminal at each end. If China gets into a war or conflict with the U.S. or Japan (as the top 3 users of the Panama Canal are U.S., Japan, and China), they could cut off access to both ends of the Panama Canal. Which other ports does Hutchison own? If you are concerned about supply chain risk, you better find out.

The Bottom Line

A key part of a SIOP (Sales Inventory Operations Planning) process, also known as S&OP relates to proactively evaluating supply chain risk as part of your supply chain optimization strategies. Learn more about why a SIOP process should be a key part of ensuring the successful execution of your company’s strategy and the best practices for designing and implementing in our book, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

These types of disruptions and inflationary pressures will not stop in the current volatile and uncertain global environment. Thus, be proactive and forward-thinking in your supply chain optimization and risk mitigation strategies. At a minimum, perform an assessment of your current state supply chain and begin with the top priorities for improvement. Learn more about LMA’s complimentary supply chain assessment.

Please contact us with your stories, issues, and ideas on how issues like the Panama Canal impact your company and end-to-end supply chain. And, please keep us in the loop of your situation and how we can help your organization with supply chain optimization, risk mitigation and supporting SIOP programs.

P.S. To get ahead of the curve on where to focus for the best results to build on your foundation to get ahead of the competition, download our complimentary report, and The Road Ahead: Business, Supply Chain & the World Order.

The post Panama Canal Drought Accelerating Supply Chain Optimization appeared first on LMA-Consulting Group, a supply chain consulting firm.

Five Transportation Trends

I’ve recently spoken at and participated in a few transportation industry events, and was reminded of the importance of transportation trends to the supply chain, so I thought a recap of trends was in order:

1. The importance of systems: As supply chains become more complex, leveraging systems becomes more important to optimizing supply chain networks and minimizing transportation costs.
2. Consider supply chain disruptions: As supply chain disruptions become commonplace – natural disasters, weather, strikes, etc. – it has become essential to build flexibility and agility into supply chains.
3. Alternative fuels: Certainly fuel cost is significant in transportation; thus, selecting the optimal technology is key to success. UPS is expanding its liquefied natural gas vehicle strategy.
4. Logistics trending UP: The US Logistics market grew 6% in 2012, led by growth in domestic transportation management, according to a study by Armstrong & Associates Inc.
5. Panama Canal questions: The Panama Canal expansion (adding a 3rd lane) is scheduled to be completed in 2015 – will it affect the amount of freight going directly to the East Coast? There is much disagreement on this topic.

The post Transportation Trends: Avoid Weak Links in Your Supply Chain appeared first on LMA-Consulting Group, a supply chain consulting firm.

I’ve recently spoken and participated with a few transportation industry events and was reminded of its importance to the supply chain, and so I thought a recap of trends was in order:

1. The importance of systems – As supply chains become more complex, leveraging systems becomes more important to optimizing supply chain networks and minimizing transportation costs.
2. Consider supply chain disruptions – As supply chain disruptions become commonplace (natural disasters, weather, strikes, etc.), it has become essential to build flexibility and agility into supply chains.
3. Alternative fuels – Certainly fuel cost is significant in transportation; thus, selecting the optimal technology is key to success. UPS is expanding its liquefied natural gas vehicle strategy.
4. Logistics trending UP – The US Logistics market grew 6% in 2012, led by growth in domestic transportation management according to a study by Armstrong & Associates Inc.
5. Panama Canal questions – The Panama Canal expansion (adding a 3rd lane) is scheduled to be completed in 2015 – will it affect the amount of freight going directly to the East Coast? There is much disagreement on this topic.

The post Transportation Trends appeared first on LMA-Consulting Group, a supply chain consulting firm.