Sifting through the ashes

What can supply chain executives learn from the Iceland volcano?
In late March, reports of minor volcanic eruptions in Iceland were buried in the news. Talk was limited to thrill-seekers getting too close and the impact of flooding on farmland in the immediate vicinity. After all, how could a volcano in Iceland impact countries thousands of miles away? That all changed when a major eruption of the Eyjafjallajokull volcano sent a stream of ash into the sky, shutting down British airspace within 24 hours. Within 48 hours, a major part of European airspace was closed. The world watched as air travel chaos unfolded.
Stories of stranded travelers immediately made the front pages, and the scientific community struggled to say exactly how long the event might last. Some now suggest, based on historic data, that the eruption may continue for months, causing periodic problems in European airspace. But one thing is clear—there is great uncertainty about flights in the near future.

The Deeper Issue: The Impact On Commerce
While stories of stranded vacationers and business travelers grab headlines, the deeper issue of how the event will affect commerce is emerging. With the grounding of more than 60,000 flights in the first week, companies suddenly found themselves unable to ship goods by air. In today’s global economy, the results are being felt far from Europe—from rose farms in Kenya, to auto assembly plants in the US, to manufacturers around the world that rely on emergency spare parts for equipment. The worst hit businesses are those with extended supply chains, short life cycle products or high cost, lightweight goods such as electronics and pharmaceuticals. By volume, only two percent of freight is shipped via air; by value, that’s 35 percent.

Two trends that have developed over the past two decades are compounding the resulting