SCM Managers warned of prolonged Panama drought

Supply Chain risk management (SCRM)

Jan-Henner TheissenSupply Chain risk management (SCRM) professionals are warned to expect prolonged negative consequences of the severe drought impacting the Panama Canal, including weight restrictions and higher rates being applied, with further increases in the cost of shipping cargo on the cards. Here Berlin-based Jan-Henner Theissen, founder and managing director of procurement advisory firm, targetP!, provides a comprehensive checklist emphasising risk culture, process integration and digital solutions.

Theissen, who visited the area himself earlier this year, said it was obvious what was to come, chiefly capacity limits and increased surcharges on most vessels, and urged SCRM specialists to be proactive in the months ahead with the following advice.

Make sure your digital risk and supply chain network monitoring solutions are fully informed of the Panama Canal drought and updates on shipping restrictions. Ensure that you take immediate countermeasures after receiving relevant information or alerts from your tools.

Recalibrate your risk management approach and procedures. Here is a checklist for SCRMs:

✅ Work on establishing a risk culture – your top priority
✅  Assess your risk maturity (tools, processes, culture, awareness, risk appetite)
✅  Develop a risk strategy in alignment with stakeholders (building your risk universe)
✅ Implement a tailored SCRM operating model
✅ Build an agile governance framework (global & divisional roles, boards, escalation procedures, etc.)
✅ Draft contingency/recovery plans
✅ Enhance process integration (e.g., sourcing, supplier management, category risk management)
✅ Conduct training on all levels to raise awareness and foster a risk culture
✅ Build a forceful Digital Ecosystem to identify risks early
✅ Connect the digital with the non-digital world, humans and machines, to be effective

The Panama Canal Authority (ACP) has announced it will reduce daily vessel transits due to the ongoing drought as from 30 July 2023, which will help conserve water.

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