“The measure of a person’s strength is not his muscular power or strength, but it is his flexibility and adaptability.” Same holds true for businesses and supply chains. Hanjin Shipping Co. filing for bankruptcy last month is a big news for logistics world. Hanjin Shipping the seventh largest shipping firm in world, and largest shipping firm South Korea. So how does sinking of titanic of logistic world impact the sea of global shipping and supply chain and send Tsunami waves to global conglomerates?? Hanjin has a total of about 2.9% of shipping market share. Big Companies like LG Electronics, Amazon, Walmart etc. depend a great deal on Hanjin to get their products from Asian market. Let us analyze the impact of largest shipping company bankruptcy impact on big companies. Implications of Bankruptcy –
- Stock-outs – With the holiday season right around the corner retailers would like to start filling their shelves with products for biggest shopping season of the year. With about approx. $14bn in cargo stranded at sea retailers are concerned about stock-outs in the short term. But the stock outs in the peak holiday season is any company’s biggest nightmare. Companies like LG Electronics are trying to find a new carriers to bring its deliveries from Asia to America. Success of this effort relies on available shipping capacity and capabilities of other shipping companies to handle Hanjin’s share of volume.
- Higher freight rates – Hanjin’s bankruptcy has created a big void in ownership of international availability of shipping capacity leading to supply demand imbalance of logistics needs. This is going to lead to increased freight charges that other shipping and trucking companies are going to charge their customers to cope up with extra demand. The freight charges on Hanjin’s shipping routes have already increased by 50-55%
- Competitor’s Flourish – Shipping companies that are flexible to provide or arrange for more shipping capacity in a short span of time will be the ones to gain from this. Maersk Line, world’s largest shipping group has immediately come to rescue to such big companies looking for other shipping options to meet their product shipping needs. Hyundai Merchant Marine, another shipping giant, plans to add another 13 more vessels to absorb increased demand.
- Shipping Industry as a whole – Shipping industry is facing overcapacity as a whole since the latest expansions in capacity in 2015 leading to reduced freight charges. Shipping companies are able to charge less cost to their customers to move containers. This would be a chance for smart companies to make a quick buck out of Hanjin’s misery till the ripples of bankruptcy phase out.