(N) Ever Given proves that the best laid plans can run aground!
I was in the middle of writing my next dit and then this came across the airwaves, or more correctly across the Suez!
Now whether this excuse for a ship did manage to get blown aground or whether the pilot just cocked it up (Having sailed through this waterway, there is a knack to steerage that is required when sailing in such close proximity to banks) does not really matter, what does is that it is well and truly stuck and holding up 12% of sea going cargo on any given day.
This ship weighs in at 200000MT an incredible monster when in the water but an immovable object when grounded. " I would think lads, you will need more than a back hoe to get that off!!"
OK, enough fun at others expense; let's focus on the business impacts of such occasions, rare as they are.
We have a ship with the equivalent of 20000 x 20'FCLs on board, each capable of holding approximately 10MT of tea. That's 200000MT or 100 Billion cups of tea (@ 2grms). More than was drunk in the UK last year!
Where am I going with this? If your tea was on that ship and maybe on one of the dozens of ships lining up in the red sea at this time, you might start getting a little concerned. Then there are the dozens of ships waiting in the Med' to go south, to pick up more tea from various Indian ocean ports, we all know. So, the impact is huge, not only to physical stock positions but costs too; we already know that oil has taken an uptick due to this behemoth but now shipping schedules and container availabilities are getting moved too, who thinks freight rates will not be impacted.
All this to say, when you plan your tea biz stock holdings, there is more to it than managing cash flow and a hiccup like this can show you just how costly the skin of your teeth can become!
Yes, there are usually spot stocks to call on but not quite what you purchased. Manageable but not optimal and definitely more expensive. This may be worth the risk when managing black tea blends but what happens when we talk Speciality tea, where , on pack, we speak to seasonality, specific profiles or our direct sourcing from Farmer X, Y or Z? What when our move into health and wealth products has us specifying active ingredient content? All these values maybe undermined by an "event"
The corrective action to this risk is pre-empt it, don't wait for this to happen. Yes it's rare but it happened and it is not the first time; from bans on Indian exports (before most of you were in the trade) to increasing weather events, not to mention the impact of Covid on freight.
For older, more battle scarred companies this is old hat but for the growing number of fresh faced tea entrepreneurs this has been an interesting year of pivoting entire strategies which may have taken the focus away from the mundane risk associated with raw material supply. So, just in case, my tips are
Manage raw materials carefully, keep the lid on expanding the repertoire.
Define and approve primary and secondary suppliers for all.
Consider your "escape routes" and the compromises they may deliver; message within these where possible.
Where not possible, increase stockholdings of just those items that are uniquely important to your product offering/messaging to a level that answers all the ifs and buts you can imagine without shackling cashflow (it still needs managing).
Who do I feel most sorry for in all of this? Crews aboard ships unable to turnaround in what looks like being a long drawn out affair in one of the least prepossessing passages I can imagine.