Knowing the Unknown - Identifying, Not Ignoring Supply Chain Risks

THOUGHT LEADERS

KNOWING THE UNKNOWN

IDENTIFYING, NOT IGNORING SUPPLY CHAIN RISKS

Dennis Devlin, Director - IP USA & Houston Branch, Industrial Projects, GEODIS

BY DENNIS DEVLIN GEODIS

IF YOU WAIT FOR PEOPLE TO COME TO YOU, YOU’LL ONLY GET SMALL PROBLEMS. YOU MUST GO AND FIND THEM. THE BIG PROBLEMS ARE WHERE PEOPLE DON’T REALIZE THEY HAVE ONE IN THE FIRST PLACE.”

– W. Edwards Deming

Everyone involved in large industrial projects wants to avoid and prevent problems associated with Health, Safety, Security and Environment, or HSSE, issues, cargo damage, financial loss, schedule, regulatory and trade compliance, and the reputational issues such problems could pose. Avoiding those problems is vital and recognizing them is the first step.

And as Donald Rumsfeld famously said: “There are also unknown unknowns – the ones we don’t know we don’t know … it is the latter category that tend to be the difficult ones.” We can try, but we cannot necessarily list all the risks which we cannot foresee; those “unknown unknowns.”

Let’s focus instead on understanding and mitigating risks we can foresee, but which we might not consider. Sometimes, the risks inherent in project logistics can be understood and mitigated, but they are not recognized, or they are ignored. Slavoj Žižek, the Slovenian philosopher (far less famously than Donald Rumsfeld) calls these the “unknown knowns,” things that we know, but which we ignore. Many risks in project logistics fall into this category: things people should consider – risks people understand – but risks which they ignore.

POTENTIAL PITFALLS IN PROJECT LOGISTICS

The list of things that can go wrong in project logistics is long. One must consider many potential risks in planning and executing project logistics, from the obvious technical aspects of lifting, lashing and transporting large and heavy cargo, to weather, route feasibility, pier, road and bridge strength, traffic and transport permits, the impact on the public, as well as financial risks, including the financial strength of subcontractors. Regulatory compliance risks must be considered too. And one must not ignore the reputational risk associated with potential safety concerns or (avoidable) accidents, technical failures or other problems. And there are many other risks not mentioned here. The list is very long.

Consider the famous case of large modules

being transported on small roads from the U.S. Pacific Northwest to Alberta, Canada, for an oil sands project for one of the oil majors. The public opposition to that module transport program through which the cargo was to pass in the U.S. northwestern states was, arguably, very predictable: People don’t like their only road home to be blocked for hours, even at night. John Q. Public is concerned when emergency services such as fire trucks and ambulances are blocked from passing on the small, two-lane roads because of large cargo transports. Public concern to that module transport program had a major impact on the project. The cost of the delays associated with reducing the size of the modules is said to have been about US$2 billion.

Why would anyone ignore those type of risks? There are many possible reasons. Organizational dysfunction and the lack of collaboration between engineering and logistics may sometimes be responsible.

IDENTIFYING ‘UNKNOWN KNOWNS’

Consider some of the obvious “unknown knowns” that can cause major problems and costs for project logistics. There is the classic case of designing and fabricating cargo that is too large to physically move to its destination due to physical route constraints such as low overhead bridges and/or other obstructions; building a “boat in the basement.”

In many cases, the route constraints were there when the cargo was designed, and were known, if anyone bothered to do a route study before designing the cargo. Many of us have horror stories of this, but it continues to occur. People need to consider route surveys. LIDAR technology has significantly reduced this risk. Another “unknown known” is when lifting fixtures on large, heavy equipment like tanks and vessels are designed, but the need for lashing fixtures is ignored. This can result in lifting fixtures, flanges, valves and other projections being used (sometimes unsafely) to lash cargo on board barges or ships, putting stress on these fixtures for which they were not designed.

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THOUGHT LEADERS

The same applies for lashing plans. There is a strong focus on developing detailed method statements for lifting cargo, and for detailed packing specifications. But even when detailed stowage plans are developed, how often is cargo lashing done on an ad hoc basis without regard for the plans?

And how often are cargoes unlashed and stowage plans revised during a voyage?

And what about the risk of financial insolvency? In the not-so-distant past when some major ocean carriers went bankrupt, ships were arrested, and shippers had problems getting their cargo, or cargo was discharged in the first available port. The fact that these carriers were in financial dire

CREDIT: GEODIS straits was public information, and well

known. Yet many people kept booking cargo with them.

Also, consider the smaller but still important issue of saddle placement on large tanks and vessels. Often, saddles are placed with a view to the trailer configuration at origin, but not the trailer configuration at destination.

This can cause delays and extra, unnecessary lifts to adjust saddle positions at destination. Yet it’s likely that the trailer configuration at destination was already known.

What can be done to avoid these problems? The cliché that communication is the key is a cliché because it’s true. Close coordination between those involved in engineering and design, fabrication, and logistics functions can help to identify hazards and avoid some of the potential problems which are known. Having detailed procedures and then following those procedures is another important tool, as is understanding Incoterms thoroughly, and using them correctly. But it all starts with understanding that there are “unknown knowns” right in front of us and trying hard to recognize them. BB

Dennis Devlin is director – IP business development, capital projects North America for GEODIS, based in Houston. Devlin is also a member of Breakbulk’s editorial board.

Credit: GEODIS

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