Disruption in the Red Sea highlights the need for greater contingency planning

Published: Friday, 5 January 2024

Recent attacks on shipping in the Red Sea are having a significant impact on the global flow of goods and the ramifications are being felt by manufacturers, supply chains and – according to the latest reports – consumers too.

On 4 January, the BBC outlined that: “…the strait of Bab al-Mandab – a 20-mile wide channel that splits Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula – has seen repeated attacks [which has] resulted in many firms deciding to avoid one of the world’s busiest shipping lanes.” It continued: “Ships usually take this route from the south to reach Egypt’s Suez Canal further north. But because of the attacks and the threat of future assaults, several of the world’s largest shipping firms, including Mediterranean Shipping Company and Maersk, have diverted vessels away to a much longer route around Africa’s Cape of Good Hope and then up the west side of the continent.”

The ripples are being felt throughout the global economy, with UK retail businesses now flagging that it will ultimately influence the prices that consumers pay at the till (https://www.bbc.co.uk/news/business-67879640).

Ongoing global geopolitical tensions – sometimes escalating into full-blown conflict – have made disruption to established trading routes increasingly likely. It’s a concerning backdrop to international trade that has the potential to continue through much of 2024, and it seems that the only certainty is that significant supply chain interruptions could occur with little or no notice.

So, what can companies do? Individual manufacturers can mitigate some of the risk by adapting procurement strategies – for example by sourcing from multiple suppliers, onshoring and operating with a higher inventory. Building new regional supply chains takes money, time, and human talent. These issues may have accelerated changes which have already been predicted for many industries, but it will be a gradual transition dictated by the speed at which viable alternatives can be established.

The unpredictability and increasing regularity of supply chain interruptions increases the need for comprehensive scenario planning and contingency planning at all levels. It means that companies need to consider a wide range of potential solutions, ensuring goods can reach their destination when established options are no longer viable, or when delivery schedules become stretched. Having different options will be key. We currently have a number of strategically-located control centres across Europe and a global network of agents, allowing us to quickly provide bespoke, global solutions for even the most complex and diverse logistics challenges – including those that have not been planned for.

Speed of response in logistics will become increasingly pivotal for maintaining the integrity of supply chains – something we have a keen insight into, given that we have a proven reaction time of under 15 minutes and an on-time delivery rate of 99.6%. Providing supply chain certainty is what we do; if you require support or advice, please contact us.