Since it was built in 1914, the Panama Canal has been a symbol of human engineering and global commerce. Very recently, it has also become a symbol of the challenges posed by climate change. The ongoing drought surrounding the canal isn't an isolated event; it's another small alarm bell from climate change.

To conserve water, the Panama Canal Authority has implemented reduced limits on the maximum ship weight and a cap on the daily number of ship crossings. This substantially affects ships that depend on the canal and serves as a wake-up call for many supply chain leaders. It's no longer enough to simply react to such events; being proactive is now essential to the resilience of supply chains everywhere. The tool to get there is end-to-end visibility.

Climate Impacts Across the Globe

In 2020, global management consulting firm McKinsey and Company published a case study on the climate's risks to supply chain operations. In it, they analyzed semiconductor supply chains and predicted that between now and 2040, the event of a hurricane causing major disruptions to these supply chains will become two to four times more likely to occur.

According to McKinsey: “There are three drivers of near-term losses for suppliers that are hit by such events, potentially leading to losses of up to 200 percent of annual profit and 35 percent of revenues: physical damages to assets, including facilities, production equipment, and inventories; reduced sales, either because production is disrupted or because goods cannot be shipped to the market; and higher costs in the reconstruction phase and after the plant is back in production, as market prices of labor, energy, and logistics may spike following a disaster.”

Those numbers—losses of up to 200% of annual profit and 35% of revenues—are staggeringly high, and one of the three drivers includes reduced sales from limitations in shipping products to market.

While McKinsey was analyzing the potential for hypothetical disruptions, there have been plenty of global examples of extreme weather in 2022 alone:

1. Floods in Pakistan and South Asia
2. Heatwave in South and Central Asia
3. Heatwave and drought in China
4. Heatwave in Europe
5. Floods in Malaysia
6. Tropical storms and typhoons in the Philippines
7. Hurricane Ian in the United States
8. Sandstorms in the Middle East
9. Drought in the Horn of Africa
10. Extreme floods in West Africa

And for the U.S. specifically, the top five years with the most separate billion-dollar climate disasters have all occurred since 2011. In 2022, there were 18 of these billion-dollar climate disasters:

• Central/eastern U.S. winter storm
• Western U.S. and Alaska wildfire
• West and Central U.S. drought and heat wave
• Missouri and Kentucky flood
• 2 Southern and Southeastern U.S. tornado outbreaks
• 3 Hurricanes: Fiona, Ian, and Nicole
• 9 Severe weather/hail events across the U.S.

Taking in some of the Panama Canal’s numbers, it’s easy to see the disruptive potential the drought brings for supply chains:

• 14,000 ships cross the canal each year.
• 40% of all cargo ship traffic depends on the canal.
• Two-thirds of all canal traffic is bound for or leaving the U.S.

With Climate Disasters on the Rise, Shippers Turn to End-to-End Supply Chain Visibility

What does this mean for shippers, BCOs, and freight forwarders? They are recognizing their vulnerabilities and the potential for operational impacts. Company leaders hold up a magnifying glass to try to understand where they can do better. They are re-evaluating their current practices and tools and implementing more strategic risk management. Designs that were once seen as sufficient now appear vulnerable in the face of the unexpected. This realization prompts a critical rethinking of transportation routes, supplier networks, and even product designs. The opportunity is for businesses to prepare, adapt, and mitigate. Scenario planning is more critical than ever for responsive supply chains.

To inform these strategies, companies are leaning on end-to-end supply chain visibility. This is how they can seamlessly oversee every segment of the chain and understand how one piece will affect another. Real-time tracking technology can provide the location status and any other shipment updates, including delays. Still, more than that, it also involves using analytics to detect potential weak points in the chain, like bottlenecks. Companies can also get an early warning of events like port congestion, so they can reroute or make other adjustments to lessen the impacts.

How End-to-End Visibility Helps Companies Reduce Risk

While carriers use data from weather conditions and tides to inform their schedules, companies that rely on carrier updates are unlikely to get the complete scope of information. To fully understand the goings-on of their shipments, they need their own source of visibility.

When shippers and freight forwarders can access real-time data, they get a vantage point of detail that can inform their decisions. Think about a snowball rolling just along the edge of a downslope. At first, it might not be noticeable when the snowball has tipped over the edge and started rolling downhill, but it becomes obvious as it gains momentum. Real-time data analytics helps companies detect shifts in the global movement of vessels sooner, like having a sensor on the snowball to tell when it has started to accelerate before the human eye can detect it. This awareness enables faster interventions when it comes to supply chain disruptions.

Essentially, end-to-end visibility through a technology provider like Vizion means the ability to make proactive decisions, optimize routes, and get data-driven insights for better strategies.

Proactive Decision-Making in the Face of Disasters

Rather than reacting to unforeseen events or disasters, shippers can make decisions in anticipation of or during the early stages of such events, effectively mitigating risk through:

• Real-time monitoring – Advanced visibility platforms track vessels, containers, and outside factors. For example, if there's increasing port congestion, this data allows shippers to foresee potential disruptions.
• Predictive analytics – Visibility solutions also incorporate advanced analytics to predict future disruptions based on patterns in the data. By analyzing past events, these tools can anticipate future delays or issues.
• Immediate notification – With updates pushed to the shipper via API, users don’t have to wait for the carrier's information. These earlier alerts allow for faster response times.

Route Optimization for Resilience to Disruptions

Shippers can adjust shipping routes based on current conditions and data to ensure goods arrive on time and in the most efficient manner, even when disruptions occur. This is possible through:

• Real-time route conditions — Visibility tools can show real-time data on current conditions, such as bottlenecks caused by weather or port congestion.
• Alternative route options — Shippers can get data on alternate routes that might be quicker or more reliable, based on real-time and historical data.
• Performance analytics — Over time, shippers can see which routes consistently have issues and which are more consistent.

Data-Driven Insights for Adaptation Strategies

With data to understand broader trends and insights, companies can then inform their long-term strategic decisions with:

• Trend analysis – Shippers can identify larger trends by examining data over long periods. If a particular port consistently shows delays during a specific month, shippers can adapt their shipping strategy accordingly.
• Capacity planning – If the data shows consistent increases in shipment volumes or frequent capacity bottlenecks, shippers can be aware to adjust their capacity planning strategies to avoid getting caught in a challenging situation.
• Performance benchmarking – Shippers can gauge their performance data and identify areas for improvement, for example, improving their planning to decrease the number of days containers remain at the port until they are moved.

Take a Proactive Approach to Disruptions with Vizion

Revisiting the McKinsey study, it notes that “A well-prepared player… may only lose about 5 percent of revenue,” compared to the 35% previously mentioned on account of the same type of disruptive event.

Vizion exists to enable this level of preparedness. With visibility data coming from diverse sources, which is then standardized, Vizion offers a comprehensive view of the shipping landscape at any given moment. Shippers and freight forwarders can get detailed updates pushed via API directly to their existing systems for a single, reliable data stream they can utilize for proactive planning, even as they face climate-change disruptions.

Book a demo with Vizion to discover the power of end-to-end visibility for your supply chain.