The Suez Canal incident highlights the impact a bottleneck can have on the whole supply chain – and the need to boost contingency plans in future
More than 300 vessels were held up due to the incident. Cleaves Shipping says these included 83 container vessels queuing up on 28 March 2021.
As of mid-April, cumulative delays caused by the Suez Canal for cargo ships were expected to be 1,017 days, according to supply chain visibility company project44.
Ports are already struggling with congestion – particularly on the US west coast – as a reaction to the situation caused by the Covid-19 pandemic, making this extra challenging.
Thankfully, this type of incident is extremely rare – this is the first time the canal has been closed since the 1967-1975 Six-Day War between Egypt and Israel and the Canal has an excellent safety record.
Nevertheless, 10% of global trade passes through the Suez Canal (source: Allianz Global Corporate & Specialty). That, combined with the fact that 1.9M TEU of cargo was caught up in the Ever Given incident, plus the knock-on impact of delays and congestion, means that all elements of the supply chain should formulate plans to mitigate the impact should a similar incident happen in future.
Shippers could look at diversifying the supply chain. Not only looking at different port and sea routes, but also considering air transport and land options. A commentary from GHD Advisory’s logistics and infrastructure leaders points out a good example – the development of more container rail options from east Asia to Europe.
The need to future-proof against this happening again also highlights the role digitalisation and data can play. GHD Advisory’s logistics and infrastructure leaders underline that techno-economic models and digital twins could be used. A statement explains that models can simulate the impact of disruptive events and test multiple response scenario options.
GHD Advisory’s commentary says that in the case of the Suez Canal, “historical vessel movement data could be used to develop a simulation model which considers global shipping flows. This type of model could then be used to see how vessels would build up in the event of an incident and understand the effects of different scenarios, to facilitate decision-making and minimise the effect on global supply chains.” Importantly, it explains that these models can “quantify systemic risks across supply chains and enable us to test where, when and how we intervene to enable the lowest net-risk outcome”.
Data could be shared across the supply chain allowing a holistic approach to an incident, so that all parties can act cohesively and quickly.
As part of the development of digitalisation, real-time visibility has fast been gaining momentum within the container sector. Using technology could certainly help to mitigate the impact of an incident and allow shippers and shipping companies to respond more quickly. As project44 vice president marketing Josh Brazil says, “With real-time visibility and advanced alerting capabilities, disruptions as well as the ability to form strategies to avoid them are more manageable than ever before.”
While it is clear a re-evaluation of how large vessels pass through the Suez Canal is needed, much more is necessary. The whole supply chain needs to look at deploying data analytics, real-time visibility and diversification strategies to future-proof against another such incident.