What supply chains can learn from Lebanon

The huge explo­sion that destroyed so much of the Port of Beirut in August left Lebanon with­out its main trad­ing gate­way, exac­er­bat­ing eco­nom­ic prob­lems in a coun­try already beset by spi­ralling infla­tion and grow­ing lev­els of pover­ty and unem­ploy­ment.

The blast killed 190 peo­ple and injured thou­sands when 2,750 tonnes of ammo­ni­um nitrate, which had been stored with­out the cor­rect safe­ty mea­sures for the past six years, ignit­ed.

The port is pri­mar­i­ly an import hub for much of Lebanon’s goods, food and fuel, han­dling one mil­lion con­tain­ers and near­ly six mil­lion tonnes of car­go from 3,000 ships a year. Its loss will have sig­nif­i­cant con­se­quences for Lebanon’s domes­tic sup­ply chains and deprive ship­pers of a major Mediter­ranean and Mid­dle-East trade hub. 

Adaptability crucial in a crisis

“The Port of Beirut is sig­nif­i­cant for the region and its destruc­tion will inevitably have an impact on the local econ­o­my in a myr­i­ad of ways,” says Antony Lovell, vice pres­i­dent of appli­ca­tions at plan­ning con­sul­tants Vueal­ta.

One of the main con­cerns is that the dis­as­ter will dis­rupt the deliv­ery of con­struc­tion and oth­er recov­ery-relat­ed mate­ri­als. But giv­en that busi­ness­es can’t plan in advance for such an unex­pect­ed human­i­tar­i­an dis­as­ter, he says, the only way to avoid this is if sup­ply chains are adapt­able and quick to respond.

This agili­ty could mean flex­ing process­es so oper­a­tions can resume at undam­aged areas of the port or poten­tial­ly divert­ing ships to Tripoli and then truck­ing the freight back to Beirut, he explains.

“Hav­ing achieved agili­ty, the mea­sure of resilience is defined by how all the links in the sup­ply chain can adapt and respond to the new sit­u­a­tion,” says Lovell, but this requires co-ordi­nat­ed plan­ning, across mul­ti­ple com­pa­nies in close to real time. “Any defi­cien­cies in plan­ning agili­ty will reduce the net­work resilience and at a time of a nat­ur­al dis­as­ter there will be human­i­tar­i­an con­se­quences,” he warns. 

How AI can safeguard supply chains

While the explo­sion in Beirut was both unex­pect­ed and unprece­dent­ed, says Philip Ash­ton, chief exec­u­tive of logis­tics spe­cial­ists 7 Bridges, trans­port hubs are con­stant­ly shut­ting down across the world. This can be a con­se­quence of any num­ber of events, from health crises and cyber­at­tacks, to weath­er pat­terns and civ­il unrest.

To deal with what he dubs black swan events, Ash­ton believes arti­fi­cial intel­li­gence (AI) is now a fun­da­men­tal tech­nol­o­gy for sup­ply chains, espe­cial­ly as fac­tors such as out­sourc­ing, sub-con­tract­ing and glob­al­i­sa­tion add to their com­plex­i­ty.

In the past, com­pa­nies have tried to stay on top of sit­u­a­tions with huge teams work­ing on sprawl­ing spread­sheets, but now, he says: “You have to be able to build a sys­tem that is adap­tive with­out your inter­ven­tion,” allow­ing you to seam­less­ly re-route, shift capac­i­ty and keep sup­ply chains mov­ing.

Data-dri­ven sys­tems allow you to approach prob­lems in a more sys­tem­at­ic way, so you can sim­u­late what’s going to hap­pen and run through all the dif­fer­ent sce­nar­ios.

In essence, a hub should be able to go down with­out you even notic­ing and the sys­tem just adapts. “That’s how you can move sys­tem­at­i­cal­ly from frag­ile to robust sup­ply chains,” says Ash­ton.

“Ulti­mate­ly we believe AI is the only prac­ti­cal way to approach this prob­lem because the com­pu­ta­tion­al pow­er required to assess all the dif­fer­ent ways you can get your prod­ucts to a cus­tomer, and how to do that effi­cient­ly, is extreme­ly com­plex and sim­ply can’t be processed by a per­son.”

In Beirut, for instance, the extra data pro­cess­ing pow­er would have enabled ship­pers and freight com­pa­nies to han­dle a lot more infor­ma­tion, scale up oper­a­tions at Tripoli and re-route freight once it was land­ed. “What you want is inter-oper­abil­i­ty between mul­ti­ple dif­fer­ent ports, air freight hubs and road routes,” says Ash­ton. “Rather than sim­ply queu­ing up, AI can show ship­pers a faster route.”

Companies left unprepared for disasters

A recent sur­vey of 200 sup­ply chain and finance pro­fes­sion­als by pro­cure­ment spe­cial­ists Ival­ua looked at how organ­i­sa­tions plan for sup­ply chain risk. But despite the fact that three quar­ters (74 per cent) of UK busi­ness­es have encoun­tered some form of risk, includ­ing sup­pli­er fail­ure and sup­ply short­ages, it found more than half don’t have any con­tin­gency plans in place.

It’s some­thing that wor­ries Jay Muel­hoe­fer, chief growth offi­cer at sup­ply chain man­age­ment com­pa­ny Kinax­is. “The most dan­ger­ous thing a com­pa­ny can do in man­ag­ing sup­ply chain risks, is to do noth­ing at all,” he says. “Even in these uncer­tain times, man­u­fac­tur­ers can’t be paral­ysed by fear of change and must start mov­ing on their dig­i­tal trans­for­ma­tion jour­ney.

“Well-worn sequen­tial sup­ply chain plan­ning approach­es have proven unfit for this pur­pose. They’re too slow and inac­cu­rate. That’s unsur­pris­ing when you con­sid­er they’re based on teams work­ing inde­pen­dent­ly in silos, gath­er­ing data in dis­con­nect­ed spread­sheets before pass­ing results down the chain.”

In con­trast, con­cur­rent plan­ning, which can be pow­ered by AI, cre­ates and man­ages syn­chro­nised plans across the sup­ply chain. Each node in the chain is con­nect­ed to the next, and each team shares data with the oth­ers and has the abil­i­ty to run mul­ti­ple “what if?” sce­nar­ios.

“If some­one makes a change, it’s instant­ly reflect­ed up and down the rest of the net­work. Every­one stays strate­gi­cal­ly aligned, informed and con­fi­dent,” says Muel­hoe­fer.

Con­cur­rent plan­ning is already being deployed by major play­ers such as P&G and Mer­ck, and has become essen­tial to many oper­a­tions because it’s fast, con­nect­ed and reli­able. “It dri­ves agili­ty, enabling deci­sion-mak­ers to analyse and deter­mine the best course of action hourly or even by the minute, for the entire sup­ply chain,” he says.

“This makes con­cur­rent plan­ning par­tic­u­lar­ly well suit­ed to help­ing sup­ply chains cope with, plan for and respond to dis­as­ters, which by their nature require a rapid response.”