Frank Kenney, director of Industry Solutions at Cleo, a supply chain connectivity and integration solution provider, spoke to Container News about the significant impact of geopolitical events in the Red Sea on global trade.
The disruptions are reshaping the logistics landscape. Kenney explained the need for companies to embrace agility and resilience, as the new normal involves anticipating and adapting to supply chain disruptions.
Considering the historical significance of the Red Sea as a vital maritime route and the recent disruptions, could you provide insights into the anticipated economic and logistical impact on global trade in the coming months? Are there any projections or data indicating how quickly shipping routes in the Red Sea may normalize?
The pandemic and maritime logistics are getting a lot of love! As with the Ukrainian War,
instability in Middle East, Africa and South America, supply chains are pulling the “levers” they implemented in 2020 and 2021, to keep the goods flowing. The additional expenses: increased fuel spent to travel the extra thousands of miles, increased freight rates due to strained shipping capacity, and the cost of delayed goods and fees from delayed deliveries, were expected. Given the consistent and constant coverage of everything supply chain from the worldwide media, consumers have visibility and proper expectations, even when those expectations are higher prices. While a resolution of the situation on the Red Sea still remains uncertain, the idea of “normalized” shipping is here: this is the new normal. Companies have been operating in anticipation of the next inevitable disruption. And only organizations that achieve agility and resilience will be prepared for the next inevitable supply chain crisis or major shipping disruption.
Are there specific industries that are experiencing more difficulties and challenges due to the Red Sea crisis?
Most industries will be deeply impacted by the geopolitical events in the Red Sea. According to the White House, nearly “15% of global seaborne trade” passes through the Red Sea, including global grain trade (8%), seaborne-traded oil (12%) and liquefied natural gas (8%). However, 15% of world shipping and 30% of global container trade passing through the Suez Canal will also be impacted, as many shippers through the Red Sea are rerouting their courses causing increased bottlenecks in other shipping routes. Some examples of businesses that will see pronounced impacts include manufacturing and retail businesses that rely on just-in-time delivery of parts and material through the Red Sea and other impacted routes will be delayed. Remember, a ship delayed from travelling around Africa is a ship that isn’t being used someplace else.
What lessons have logistics and supply chain professionals learned from the Ever Given incident in the Suez Canal,? Have these lessons been implemented to mitigate the current challenges in the Red Sea?
½ a billion dollars in lost revenue for seven days. That’s a huge hit to profitability. Someone had to pay. A major key learning for organizations in the supply chain was the need for agility and visibility. While supply chain disruptions are inevitable, organizations learned they can prepare for any circumstances by investing in agile, modernized systems and strategies. By proactively anticipating change through traceable supply chains and forward-looking planning, companies have the power to identify innovative solutions that will keep operations running even during difficult times – helping them maintain business continuity no matter what comes their way.
In light of the recent disruptions, do you see a growing need for companies to diversify their shipping routes and transportation methods? What strategies can carriers adopt to reduce reliance on specific maritime routes and minimize the impact of such disruptions?
Water routes are vital to global trade. They are used in conjunction with other methods of
travel. It really isn’t water or rail, it’s water AND rail. In the United States, we saw ships leverage the Panama Canal, Port Savannah and Port Elizabeth to bypass busy ports at Long Beach and Los Angeles. However, switching ports may not be practical for some European and Middle Eastern countries. For a myriad of geopolitical and social reasons, rail and road may not be available.
In the face of ongoing disruptions, how crucial is collaboration among different stakeholders in the supply chain sector? What measures can companies take to enhance communication and coordination with suppliers, carriers, and other partners to proactively address potential disruptions?
Communication and collaboration among stakeholders are critical. Having a comprehensive
platform that ties together the disparate assets in your ecosystem in place can help companies improve transparency, connectivity and efficiency across the ecosystem. An ecosystem integration platform can also help businesses bridge gaps between operational silos and processes, allowing key data and information to flow seamlessly between partners and stakeholders.
This transparency is integral to ensuring the resilience of the supply chain and allowing
transported goods to arrive on time. On-time delivery also eliminates costly late fees and
penalties related to SLAs, allowing businesses to better capitalize on resources while promoting positive connections between customers and trading partners.
By leveraging real-time technologies that allow for clear communication across the enterprise and ecosystem, alongside tried-and-true methods of transport, air freight and rail systems, businesses can have full visibility and agility into their supply chains to mitigate the next major disruption.