Managing supply chain risk in today’s environment is an increasingly difficult task. Globalization, natural disasters, geopolitical concerns, and more can all strain supply chains.

With the recent financial collapse of Hanjin, we asked folks on social media if supply chains can prepare for such disruptions. The results were mixed with no clear answer as 38 percent said yes, 38 percent said no and 23 percent were not sure.

The Hanjin Collapse

The Hanjin collapse is going to cause disruption in many supply chains for a while. The U.S. Department of Agriculture has stated that Hanjin’s bankruptcy would cause shipping difficulties for the next two to three months. “The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets,” said Gerry Wang, CEO of Seaspan.

Indeed, the North Carolina State University’s College of Management notes that the Hanjin collapse should not have come as a surprise. The ocean cargo market has been suffering for some time with overcapacity, low rates and a flat global market. In addition, the school notes on its blog post that “many ship builders and ocean carriers overextended themselves while the economy was growing, and these expectations resulted in a huge amount of investment that has resulted in too many ships and carriers competing for too little cargo”.

Managing Risks

Still, one cannot manage all risks 100 percent; but, instead one should strive to mitigate as much of the risk as possible. Dr. Madhav Durbha, Vice President of Industry Strategy at Kinaxis, has penned a thoughtful blog post concerning steps that businesses should take to manage supply chain risk.

“Identify – Collaborate with teams to identify risks that could potentially affect your supply chain.

“Quantify and Mitigate – Assess the probability of each risk occurring and build them into your business justification as you make outsourcing decisions.

“Monitor – Utilize technology and big data to monitor potential threats.

“Respond – Establish processes and systems that support the speed of response and collaboration.

“Learn and Improve – It is important to understand how one respond to risks. Take these learnings and add to your risk recovery playbooks or contingency processes.”

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

Hanjin’s big bump in the road has made for some interesting reading and writing for bloggers and press. As a company focused on the ups and downs of ocean freight rates, we can only but speculate what effect Hanjin’s drama can have on prices. So, naturally we went to our community to check the overall feeling on the topic.

We asked the social media community their thoughts on how Hanjin’s collapse will affect ocean shipping rates. Fifty percent of the respondents indicated that rates would indeed go up while 36 percent did not expect any change. A small percentage, seven percent, expects a decline while another seven percent of respondents were not sure.

As the news of Hanjin’s collapse sunk in, spot rates settled down the following week barely inching upwards for Asia to U.S. West Coast and East Coast ports. This may indicate that U.S. importers are finding space on other carriers during the peak season. Indeed, Maersk announced that it would open a new service from Asia to the U.S. west coast to soak up Hanjin’s customers. Similarly, MSC announced the introduction of a new transpacific service called Maple that started September 15.

According to Maersk, it is seeing a short-term rise in freight rates and new clients after the collapse of Hanjin Shipping Co. “The question is what will happen with the rates in the longer term. In the short term, the effect is positive, but there are many factors that can influence rates in the medium and in the long term,” a company representative said.

Indeed, the Chinese New Year holiday is January 28, so not only could vessel space tighten more in the next month or so but rates could likely increase even more as retailers look to book space before Asian factories close during the Chinese New Year festivities.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

By golly, it looks like Santa may just not make his rounds everywhere this holiday season. This is no joke. Shippers are reporting that Hanjin has had huge effects on their inventory with their goods stuck in a container at sea and they haven’t been able to get them all out. Well, they can get them out, but not without paying hefty costs to whoever is posing themselves in an advantageous position to help. Everyone is jumping at an opportunity to make money off Hanjin’s demise.

That said, the once starving carriers are having a heyday, though it may be temporary. Shippers are reporting globally that carriers have been breaking contracts and now claiming there is no available capacity, with the prices, you guessed it, being jacked up.

Wait, wasn’t the talk up to last month all about overcapacity? The seventh largest liner’s downfall has affected global trade with a flip of the switch. The struggle is real.

The once safe locking-in-long-term-contracts strategy at a ridiculously low price, doesn’t seem is going to hold any longer. Shippers are now being forced, in many cases, to go on the spot market with one to three months quotes not being contracted.

As the year comes to and end, the tendering/bidding season starts for many European shippers. Large-volume shippers who were once basking in their long-term contracts low rates, will get a reality check when carriers will deny renewing contracts at the same low prices as last term. Ouch.

With Golden Week (the first week of October) nearing, Chinese travelers will be ready to bust out for seven days abroad and have a shopping frenzy. That’s the expectation, at least. However, with delayed cargo, Golden Week 2016 will have enormous impact on European importers, and it may not turn out to be too golden after all.

However, the fall of Hanjin is more of wake-up call for other carriers and the industry as a whole. I would even bet that the Hanjin crisis could be just the beginning, before some real shake up in the industry starts to happen and carriers can dig themselves out of their graves.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.