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Op-Ed: The Hanjin Hemorrhoid and What it Means for Your Business

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Hanjin

We have learned a lot of this current Hanjin Shipping Co. fiasco, but the fall-out is causing many apparel and footwear companies to re-think their entire supply chain strategies.

The first questions you should ask yourself are: Is my supply chain officer acting a bit “uncomfortable?”; Is that supply chain officer squirming in their seat? Hanjin hemorrhoids perhaps?

Unfortunately, “too big to fail” was coined for banks and isn’t transferable to international shipping lines.

The fact is that the major Korean shipper Hanjin hit the rocks and is sinkingbringing containers laden with holiday items down with itis dragging product to the bottom of the retail ocean, so to speak.

It’s common (in the apparel and textile industry at least) to talk about how brilliant we are at running our supply chains. However, how much do we really know? Certainly, it’s logical to believe that the absolute length of the supply chain is directly proportionate to the risk. In the case of Hanjin, with the disruption coming so close to the end of the year, the damage could (unfortunately) be fatal to your business.

As a serious manager, you’ve probably read the “where’s Waldo” articles describing the exact location of the Hanjinians.

In recent days, a vessel like the Hanjin Miami was in Savannah, Georgia,  Hanjin Marine was in Seattle, Hanjin Switzerland was headed to New Jersey and Hanjin Baltimore was put in jail. The ship geography continues to remains difficult to understand and it is even harder to determine exactly when your cargo will be released. But, the key question is whether we could have visualized this terrible itch, long before it became a full blown hemorrhoid. The answer is, unfortunately, yes.

Hanjin has been in trouble for years. It’s the seventh largest container company and a part of Korea’s tenth largest conglomerate. But logic was defied when the banks decided not to bail Hanjin out. Some risk avoidance (by balancing container loading between carriers) could possibly have mitigated the issue, but our Novocaine was working, and we were all lulled to sleep.

The bottom line is, the industry now realizes the glory days of international shipping have come to an end. Maybe that’s a good thingin terms of carriers having too much capacitybut (as far as you are concerned) it’s only good if your containers weren’t on a Hanjin vessel.

In general, Americans are optimistic about our respective businesses. We decide we can innovate, we can make product better, we can deliver it faster, we can cut the cost, we can add new technology, and we can increase retail traffic. How many times do we attend a meeting and hear all this dribble?

That said, however, what we really need is for our supply chain officer to call a down-to-earth doom and gloom meeting. Stop thinking about all the “right” things, and focus on what can go wrong. Time and time again we become too complacent. We were stumped by Kathy Lee, horrified by Tazreen and Rana Plaza. We gathered strength from Alliance and Accord, but after this current Hanjin disaster, we need to sit down again and take a serious look at the quote from the author Peter Benchley: “Just when you thought it was safe to go back in the water.”

Keep in mind that Benchley never ran an apparel company or monitored a supply chain. He was just a superb author, who knew how to elevate fear. Unfortunately, the Hanjin debacle is another reminder that nearly every new supply chain crisis can be anticipated or possibly avoided, if we just dig deeper.

Retailers, brands and manufacturers will tell you the current economic climate remains tepid. Product needs to be styled right, delivered right and free from any complaints that millennials might have about the organic origin of manufactured products.

Besides the usual corporate and social responsibilities, awareness must now expand well beyond the horizon.

We work hard to eliminate troublesome issues, manage complex problems and deal with international complications caused by the use of forced labor, child labor, chemical management, building structure, and fire safety (to name only a few). But millennials are demanding we travel even further down the road of responsibility. Where does the waste water go? What chemicals do we use in the dye process? Is the cotton organic?

Anyone in our industry who thinks this trend isn’t real, may be delusional. The doubters should just spend a few hours in Trader Joe’s or Whole Foods to see where millennials are headed. Our world has changed; the supply chain is under a microscope. It’s no longer enough to be compliant. Our customers are well beyond that.

Hanjin is simply another bump in the supply chain road. Your supply chain officer requires your help and understanding to keep the train on the tracks. The SCO was tasked with managing the present, and now simultaneously must anticipate the future.

The message is simple. It’s no longer about the health and wellbeing of your current partners. It’s about the systemic health of your entire supply chain. It’s about our retail economy that remains difficult and percolating on the edge of abyss.

Remember, as we go forward, one additional crack in your tight supply chain, could be your last.

But let’s not get depressed. Instead, we should all prep for the next supply chain disaster in the post-Hanjin era. Think about a line from the 2006 Rocky Balboa film: “It ain’t about how hard you hit; it’s about how hard you can get hit and keep moving forward.”

 

Rick Helfenbein is president and CEO of the American Apparel & Footwear Association and is a strong advocate for a robust U.S. trade agenda and for “Made in USA.” He lectures frequently on the subjects of politics and international trade. Follow him on Twitter @rhelfen.

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