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Procurement & Supply Chain

Navigating Supply Chain Disruption During Global Instability

5 min read

The impact on global shipping and worldwide trade caused by conflict in the Red Sea highlights the need for resilient supply chains and strong leadership, as Odgers Berndtson’s Lucy Harding and Paul Butterworth consider.

90% of global trade, including finished goods, raw materials and energy, travel across the oceans, with around 12% transiting the Red Sea to pass through the Suez Canal. Of the container ships that would normally use this route from Asia to Europe, 90% have rerouted around the Cape of Good Hope, on the southern tip of Africa, adding over 3,000 miles and 10 days’ worth of delays per shipment since the disruption in the region started. Geopolitics and supply chain agility is being tested like never before. 

Not only does this length of delay disrupt ‘just in time’ supply chain management, but considerable shipping capacity is removed from a finely balanced sector, container availability is restricted, and insurance costs and shipping rates have increased. Shipping companies are having to pay up to $1,000,000 (USD) in extra fuel per container ship to cover this additional mileage, further increasing the overall environmental impact. It is an unfortunate inevitability that these added costs will be passed onto the consumer. 

Instability and unpredictability of events are now the ‘new normal’ and the modern Supply Chain Director needs to plan for contingencies like never before. Crucially, bigger geopolitical events now need to be taken into account for supply chain management and planning to ensure resilience. 

While every eventuality cannot be predicted or considered, senior supply chain executives must now expect the unexpected. For many logistics professionals, crisis response is becoming an increasingly important aspect of the role.

Lucy Harding Partner, Head of Supply Chain & Procurement

The area particularly affected by these shipping delays is consumer products with the short-term implications being that ‘fast fashion’ misses its season or retailing window. Not all consumer goods have seasonal time pressures, but a delay of three weeks will certainly cause a multitude of problems in the fashion industry and wider retail space; if the window is missed, stock cannot be sold and will become defunct. How long the conflict lasts will dictate the timing and duration of shortages in product availability. 

The same applies to furniture and electronic components; in manufacturing terms, companies relying on parts or raw materials coming from Asia into their factories for European production could experience their schedules shifted further out of alignment. These disruptions, coupled with semiconductor shortages, are posing particular concern in the automotive industry, with the expected fallout being increased consumer prices. 

To illustrate the significance of the current situation, in 2021, the Ever Given container ship which ran aground in the Suez Canal, blocked the waterway for six days after it became lodged sideways. The resulting damages to the worldwide economy from this single incident are estimated to be up to 2.5 billion EUR. This event serves as a baseline for the repercussions of a relatively short period of shipping disruption and sends a loud warning of the potential impact of the Red Sea issues. 

Longer term, events such as this will reveal the Supply Chain Directors who have embedded agility and resilience into their supply chains. This ultimately is down to the right leader with the expertise and vision to redesign the global supply chain map, increase inventory holdings and consider nearshoring or reshoring to mitigate potential future disruption. 

In the current climate of instability, it has never been more crucial for businesses to consider long term investment in agile and resilient supply chains. At Odgers Berndtson, we connect global organizations with the right leaders to address supply chain issues with innovative and creative problem-solving abilities. 

Our executive search reach is global and cross-sector. If your organization has procurement difficulties or your existing supply chain carries excessive risk, the right leadership is key. Through our global networks, we identify, attract and assess the most talented executives to lead your business through change, disruption and transformation.  

Follow the links below to discover more about our expertise or to contact your local Odgers Berndtson office.




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