Some shipping companies are altering their shipping routes as we speak.
As concerns rise over attacks on shipping in the Red Sea, we might witness a very unstable and difficult year ahead in terms of goods shipments from Asia to Europe that could go through the Suez Canal.
How important is Suez Canal overall to the existing Supply Chain traffic?
It is worth to mention that all capacity works in a connected system sort of a way. If there is a problem in one place, the other chokepoints experience a higher traffic as well as longer queues.
It is not certain that the situation will be resolved soon. We have the Navy entering the waters to provide protection, but there is no guarantee of safety as these are difficult waters and terrain favours attackers there. The costs of shipping and going through the canal may increase in the short to mid-term as the extra protection will require financing. The insurance costs will also change, impacting the prices of getting containers.
What does it all mean for European manufacturers who rely on shipments from Asia?
What is the impact for a shipment if it needs to take a longer route?
The journey is prolonged by about 30%, for each mile you of course need to pay more - so the shipment cost is also higher.
When there's less supply, prices tend to climb, and the potential disruption in the usual shipping routes could be a major contributor. This change might even push some businesses to consider air freight as an alternative. However, it's essential to realize that air freight has its limits. A modern container ship can carry over 10,000 containers, while a typical Boeing 747 used for air freight can only handle about 7 containers at a time. So, even if a small amount of cargo switches from sea to air, it could put a strain on the already tight air freight capacity, especially with the booming e-commerce volumes we're experiencing. The past few years have shown us that even slight shifts in the supply or demand for freight services can lead to significant jumps in prices. The world of global logistics is balancing on this fine line, responding to changes in shipping routes and their potential impact on our economy.
SAP Solutions that offer valuable insights into your logistical status:
You can use SAP Business Network for Logistics solutions to quickly learn what is happening with your shipment. You can do it for your Purchase Orders or Sales Orders (item by item in the document). One of the key features that is relevant to the current situation in the Suez Canal is Monitoring of Ocean Transportation:
Another functionality SAP released this year is insight-to-action for in-transit shipment risks and threats. Thanks to it, supply chain experts can currently assess the status of all their shipments in transit, enhanced by third-party risk data sourced from Everstream. This enables the early detection of potential disruptions in the supply chain and the proactive mitigation of associated risks before they escalate:
Interested to learn more?
Talk directly to one of certified SAP Partners they can quickly implement Logistic solutions for you. These are available on SAP Partner finder platform right here.
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