Navigating Retail’s New Era of Risk #462


In the post-Covid era, retailers who rethink their supply chains will lower their exposure to risk and unlock profound competitive advantage, argues Doug Stephens.

If a single image has come to define the failure of global supply chains amid the Covid-19 crisis it’s that of the Ever Given — one of the world’s largest container ships — stuck in a diagonal death grip inside the Suez Canal, heavy with more than twenty thousand units of cargo destined for Western retailers. For almost a week, the ship jammed up worldwide shipping, halting nearly $10 billion in trade a day, before eventually being freed.

But the plight of the Ever Given was just the tip of the proverbial iceberg. Indeed, the entire global shipping industry had seemingly run aground – if only metaphorically – as dock workers at many of the world’s largest ports suffered from the effects of the virus. Soon, merchants everywhere began to see panic buying, empty shelves and bottomless backlogs to fill them: a shock to the system of western merchants and consumers who had largely operated with an assumption of unconstrained access to whatever they’ve wanted, whenever they’ve wanted it.

How could our supposedly modern supply chains be so fragile?

On closer inspection it’s clear that today’s global supply chains are the product of centuries of growth but little meaningful evolution when it comes to risk management. Indeed, Covid-19 was not the first major derailment of the global supply chain. Less than 200 years earlier, a similar breakdown brought an entire global industry to its knees.

When America Ran on Cotton

At the turn of the 19th century, the economy of the freshly constituted United States of America ran principally on cotton, which, by 1825, had found significant demand in England and Europe. While cotton could be sourced elsewhere, the US had several advantages. Boundless, fertile land, an objectively superior strain of cotton, and most significantly, slave labourers.If anything, it was the use of slave labour that made it simply impossible to compete with the United States with on the global cotton market.

By the mid-1800′s two thirds of all cotton imported by Great Britain and Europe was being sourced from America. India, Brazil and Egypt struggled to make up the remaining third. According to some historical reports, close to 80 percent of England’s cotton imports came from America. Fully half of the factories in Britain at the time were for cotton production. Goods made from cotton comprised nearly 40 percent of all British exports. And about 1 in 5 British workers relied on the cotton trade to put food on the table.

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