Volcanic ash is no threat to global supply chains, if the right systems are in place

The ash clouds from Iceland’s Eyjafjallajokull volcano slowed down the pace of trade and had a significant impact on business supply chains, with revenues lost and costs mounting for storing unshipped products. 

Clearly the volcano has the potential to severely disrupt the global economy – after all, its previous eruptions lasted from 1821 to 1823. How can companies prepare themselves for the worst case scenario and minimise the damage?

The good news is that international trade relies more heavily on road, rail and sea than it does on air freight. However, many companies depend upon air travel to shorten lead times. With flight restrictions in place due to the volcanic ash clouds, companies suddenly needed to take longer lead times associated with transporting goods by other means into account and look at sourcing products from other areas.

Some companies were disproportionately affected by this, particularly those trading perishable goods, such as food and flowers that depend on air freight. Other sectors also faced difficulties – carmaker Nissan, for example, had to temporarily suspend production of three of its models in Japan because it was unable to import parts from the Irish Republic.

So what lessons can be learned from the problems created by the volcanic ash cloud? Very often global supply chains do not provide the transparency required to ensure a continuous flow of goods or parts under changing circumstances. 

It is important that companies are able to view all of their warehouses in a single system, and to manage all logistics processes outside of those warehouses – whether relating to the inbound or the outbound supply chain. Any modern supply chain management solution has to offer large firms visibility and control beyond the individual warehouse.

Luckily there is software available that does exactly that – even proactively alerting a company when delays and disruptions occur. This can be very useful, for example when inbound flights from the US are cancelled and users can look at sourcing the same product via their Scandinavian supply chain route using road and ferry transport.

The right software can also quickly calculate the costs and duration of available alternative transport options and proactively inform users accordingly to make a timely and informed decision.

There is, of course, no telling what catastrophe might next befall the aviation industry, but supply chain managers would do well to prepare a contingency plan for air shipment disruptions, be they due to an Icelandic volcano or other natural disasters.

What we can learn from Eyjafjallajokull is that supply chain risk can’t be anticipated, but it can be managed. That’s more than can be said about the 130 volcanic mountains in Iceland. 

Mark Brannan is General Manager, AEB (International)