Suez Canal incident emphasizes need for supply chain resiliency

While the 1,300-foot-long container ship Ever Given is now floating freely, its weeklong blockage of the Suez Canal is highlighting once again the importance of having a clear line of sight into your supply chain and being prepared for possible supply chain interruptions.

The Suez Canal handles about 40 ships per day, according to Statista. The 1,300-foot-long Ever Given blocked the canal for a week, from March 23 to March 29. At the peak of the blockage, about 400 vessels were prevented from sailing through the canal. Some ships diverted to sail around the Cape of Good Hope, adding about two weeks to shipping schedules.

Media reports noted that shipping rates are already skyrocketing, with the cost to ship a 40-foot container from China to Europe climbing to about $8,000, four times the cost a year ago. In addition, the incident exacerbated worldwide shortages of both shipping carriers and oil tankers.

While the Suez Canal incident lasted only days, delays in shipping will have ripple effects across world economies for weeks. On top of significant recent events affecting supply chains, such as tariffs, trade disagreements with China, and the COVID-19 pandemic, the Ever Given event highlights key questions manufacturers and distributors should consider and be prepared to answer.

• Do you know if the Ever Given or any ship delayed in the Suez Canal carried supplies or goods needed for your organization?
• Do you have alternative suppliers for any key goods that may be delayed?
• Have you investigated Dynamic Costing® approaches to enhance your company’s ability to have line of sight into the true costs associated with a particular product, and if so are you using that knowledge to determine the best price and ultimately desired profit?
• Have you initiated a project to nearshore key supplies or components to mitigate the effects of delays out of the business’ control (like tariffs, pandemic or shipping route blockages)?
• Are you prepared to change manufacturing schedules to account for possible delays in key components and minimize shop floor downtime?
• Do you have insurance related to delays in key supplies?
• Are there sound communication and risk mitigation plans in place to communicate shipping impacts to your end consumers?

With supply chain turmoil becoming more frequent in volume and more significant in impact, manufacturing and distribution companies have to become increasingly nimble and knowledgeable about their supply chains, not just to thrive and grow – but often, to survive.