Question 3 (Marks: 40)

Read the case study below and answer the questions that follow How the Suez Canal block could affect product supply chains Holding up traffic Carrying goods worth $10 billion, the economic fallout from the cargo ship that has been blocking the Suez Canal is massive. Clearing the logjam is key to limiting the adverse impact. Here is all you need to know about the blockage. How vital is the canal to shipping? The canal is about 193 kilometer long and about 10% all global trade flows through it. The reason why many opt for this route is because it allows ships to avoid a longer trip around the southern tip of Africa. Container ships like the blocking the way account for about 1/4th of all traffic in the canal. According to Lloyd's List, more than 50 ships take the canal everyday, carrying more than a billion tons of cargo. What effect will this have on supply chains? According to experts, there is virtually no alternative kind of transportation when it comes to shipping from Asia or Europe. The block is set to delay raw materials from India, petroleum from the Middle East and also manufacturing pieces from China. The US is set to have a relatively lesser impact directly as the country receives majority of its shipment from the West Coast. The block will also be a deterrent for empty shipping container returning to Asia.

Is the supply chain in trouble?

The situation has been double impacted as the coronavirus pandemic put an added pressure on the supply chain. With restrictions in place to avoid an outbreak, crews have been trapped on merchant ships. With ports becoming congested, many ships have not been able to unload their goods, which is also why there has been a shortage of goods that has had an adverse impact on manufacturers.

How will consumers be affected?

While consumers from the US might feel a pinch if the blockage continues for more than a few days, experts say there will not be an impact on global economies unless the situation drags on for weeks for months. Oil prices could also see a slight hike. Germany could suffer if shipment of auto parts is delayed. A few more European countries could also see higher fuel prices. What about oil shipments? About 7% of all oil transported from sea goes through the Suez canal, which amounts to 1.9 million barrels every day. Some shipments from the Mideast and Europe could be affected. According to experts, the impact on the oil market will be limited if the situation is resolved soon. If it persists, other alternatives will have to be considered, like the route around Africa

Q.3.1 List any four basic components of supply chain management. (4)

Q.3.2. Suppose you work at a clothing manufacturer based in Europe and your main fabric supplier is based in China. The organisation that you work for makes customs men's and women's clothing requiring only the finest silk from China.

Q.3.2.1 Your manager is uncertain about whether it would be beneficial to make or buy the clothing given the delays in delivery as a result of the blockage. Advise them on whether the company should make or buy your company's clothing apparel. Marks will be allocated for the following. Your stance i.e., your choice of making or outsourcing.

Three LISTED drivers or your stance i.e., three drivers of making/ outsourcing Applying these listed drivers to a clothing company's perspective. Note: you are required to paraphrase the reasons before you apply it to the scenario. You may take liberties when applying theory to the scenario as well as make relevant assumptions.

Q.3.2.2 As a result of the recent blockage, your manager approaches you to try understanding the benefits of having multiple suppliers would be. Explain five reasons favouring multiple suppliers and relate them to the scenario of a clothing manufacturer based in Europe. Note: you are required to paraphrase the reasons before you apply it to the scenario. You may take liberties when applying theory to the scenario as well as make relevant assumptions. (20)

[TOTAL MARKS: 100