A Volcano Melts World Operations
OM Blog: April 24, 2010
By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University
Authors: Operations and Supply Chain Management for the 21st Century, 2009, Southwestern Cengage Publishing
What percentage of the world had ever heard of the Eyjafjallajokull volcano in Iceland on April 13? One percent? I am guessing much less than that number. But we have all heard of it now.
On April 14, this Icelandinc volcano with an extremely hard to pronounce name began erupting and spewing ash up to 9,000 meters in the air. By April 15, the enormous clods of ash over Europe led to the cancellation of between 5,000 and 6,000 flights. By April 17, air traffic in 21 European countries remains paralysed. Almost 17,000 out of 22,000 scheduled flights are cancelled in Europe, an unprecedented situation.
Fast forward to April 24, airlines and travelers around the world are trying to “get back to normal”, but struggling with the aftermath of the worst disruption of air traffic since the September 11 terrorist attacks in the United States in 2001. At its peak, the crisis affected 1.2 million passengers a day and 29 percent of all global aviation, according to the International Air Transport Association. The International Air Transport Association estimated earlier this week that the Icelandic volcano crisis cost airlines more than $1.7 billion in lost revenue through Tuesday.
But air travel and stranded passengers are not the only victims of the Iceland volcano. Over 1,000 tons of produce and flowers are sent daily from Kenya to Europe. The continent accounts for 82% of Kenya’s exports in this perishable industry, but with air travel clogged by ash, farmers were faced with piles of wilted flowers and rotten produce. The eruption was estimated to have cost Kenyan farmers up to $3 million a day.
Workers push cart loaded with discarded fresh roses at a flower exporter's farm in Naivasha, 19 Apr 2010
Other industries buried by the ash:
- “I do not have any more scallops,” seafood supplier Christophe Malysse said in a Friday report by GlobalPost. He normally would be flying them in to European restaurants, providing revenue for the fishing industry in the US and Canada.
- The flight disruptions also grounded about half of the daily cargo volume between Asia and Europe, according to an Asia-based aviation analyst. About 7,000 tons of goods are flown daily on average from Asia to Europe and an additional 4,000 tons from Europe to Asia, the analyst estimated, involving mostly electronics, luxury items and perishable goods such as fruits, vegetables and meat— raising concerns about possible shortages of some products if disruptions continued.
- John Cleese spent 30,000 Norwegian krone (£3,300) on a taxi from Oslo to Brussels. He was then hoping to hop on a Eurostar train from Belgium to London. And Northampton cab firm Amber Cars got the ‘fare of a lifetime’ when they were contacted by seven executives who wanted to get to a meeting in Geneva. The cost? £1,700. And three-day eventer Oliver Townend paid £1,600 for a taxi from Paris to Madrid in an attempt to catch a flight to the US to compete in the Rolex Grand Slam event in Kentucky.
Stories of industries losing millions of dollars, euros, pounds etc. abound. This was a huge, unintended and unplanned for event. It is an apt illustration of the increased probability of supply chain disruption in an increasingly interconnected world system. Experts have increasingly been researching and examining ways to manage risk and react promptly to supply chain disruptions over the past few years. Yet, it is a huge challenge. The following article offers an interesting discussion on risk:
Discussion questions:
- What would you have done if you were a stranded passenger?
- Did the European airlines and air control agencies react appropriately? Were they too conservative in shutting down all flights? What are the costs of being right/wrong on this decision?
- Are their businesses that actually may benefit from this event?
Sources:
- http://www1.voanews.com/english/news/africa/east/Kenya-Losing-Millions-as-Volcano-Grounds-Flights-91522474.html
