The Ever Given has been stuck since running aground in the Suez Canal on 24 March © AFP/Getty Images
The Ever Given has been stuck since running aground in the Suez Canal on 24 March © AFP/Getty Images

Buyers urged to act on Suez Canal blockage

29 March 2021

Buyers have been urged to make contingency plans to source IT stock despite the fact the container ship has been blocking the Suez Canal has reportedly been freed.

Ian Nethercot, supply chain director at Probrand, said despite progress being made on dislodging the 400m container ship which ran aground in the Suez Canal last week, “buyers must resist the urge to simply wait and see what happens”.

Nethercot said the blockage had hit IT supply chains, which were already facing a “severe stock shortage” due to the Covid-19 pandemic, semiconductor shortages and the aftermath of Brexit. 

The ship is blocking a key trade corridor where around 10% of global trade passes, including technology goods from Asia. 

‘‘Even though the ship has now been freed from the shoreline, a huge amount of uncertainty will remain. When cargo starts moving again, we should still expect congestion and disruption as goods are unloaded at port. Products may arrive in the country but it could still take weeks to get your hands on them,” Nethercot added. 

“[Firms] need to make contingency plans now. For example, can any mission-critical equipment be sourced from the US? In unique circumstances, suppliers may also be able to locate ring-fenced stock.”

Egyptian officials reportedly confirmed that traffic is now able to move through the canal because rescure efforts to free the ship have finally worked, according to Sky News.

Paul Adams, director at management consultancy Vendigital, said: “At last, the shipping industry can breathe a sigh of relief, but the backlog of vessels could take several weeks to ease.

“Further up the chain, western companies reliant on raw materials or parts from Asia should expect some disruption to deliveries over the next few weeks. The impact will vary by sector but many manufacturers are dealing with reduced volumes at present.”

Earlier today the Suez Canal Authority (SCA) announced the container ship had been “successfully refloated”, restoring 80% of the vessel’s direction.

Rescue works had been underway since 23 March after the ship, named the Ever Given, became stuck after being reportedly caught in a sudden gust of strong wind.

Data from Lloyd's List found the ship was delaying an estimated $9.6bn of trade along the waterway each day. 

Ashray Lavsi, senior manager at Efficio Consulting, said blockage of the canal put further stress on supply chains that had already been “pushed to the limit” by Covid and Brexit, and “everything from cotton to petroleum to auto parts is currently stuck”.

“Shipping companies have to decide whether to wait it out […] or take a longer route around the Cape of Good Hope which would add a week to shipping times. While this blockage does not warrant businesses changing their strategies to more near-shore supply, it does raise the question whether they should set up separate supply chains for critical components.”

Lavsi said firms should not rush to stockpile inventory or change supplier strategy.

“Companies should begin by identifying critical components and map the tiered supply chain for them. Identifying bottlenecks and building contingency plans will also be essential. If the blockage has highlighted one thing, it is that supply chains need to be resilient and diverse enough to manage immediate challenges.”

Soren Skou, chief executive of AP Moller-Maersk, said the incident could accelerate the pace of change for global supply chains, already dealing with the fallout of the pandemic.

He told the Financial Times the virus led many firms to move away from single suppliers and to rethink their dependence on just-in-time. Instead they were opting for ‘just-in-case’ supply chains and keeping higher levels of inventory to avoid being caught short by disruptions.

“We are moving towards a just-in-case supply chain, not just-in-time. This incident [in the Suez Canal] will make people think more about their supply chains,” Skou said. 

He added a just-in-time supply chain is “great when it works but when it doesn’t, you lose sales”. 

“There’s no just-in-time cost savings that can outweigh the negative of losing sales,” Skou said.

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