• Increased Public Awareness: The events of 2020-2021, including the Ever Given incident, have heightened public understanding of supply chain complexities.
• Vulnerability of Chokepoints: The recent Red Sea crisis, akin to the Suez Canal blockage, demonstrates the ongoing vulnerability of key global shipping routes.
• Need for Diversification: There is an imperative need to diversify supply chains and explore alternative routes to mitigate risks associated with chokepoints.
• Collaborative and Proactive Approach: Governments and industry leaders must collaborate to develop resilient strategies and innovative solutions to adapt to new challenges.

In the past year, significant strides were made in adapting global supply chains to be more resilient and adaptable in the face of unprecedented challenges. The industry’s response to the COVID-19 pandemic and subsequent disruptions, such as the Ever Given blockage in the Suez Canal, have been commendable. These events have elevated the general public’s awareness of the intricacies and importance of global supply chains. However, as we progress through 2023 and into 2024, new challenges have emerged, including the recent crisis in the Red Sea, posing fresh threats to the stability and efficiency of these crucial networks.

Continuing Supply Chain Vulnerabilities

Despite successes in navigating the tumultuous waters of 2020 and 2021, recent events in the Red Sea region have once again exposed the vulnerabilities in global supply chains. Similar to the Suez Canal crisis involving the Ever Given, the Red Sea crisis highlights the ongoing susceptibility of global trade to geopolitical tensions and infrastructural limitations. As reported by various sources, this crisis is causing considerable disruptions in global shipping routes, affecting the transport of essential commodities, including oil, and thereby having far-reaching economic impacts.

Learning from the Ever Given Incident

Reflecting on the Ever Given incident, it became evident that reliance on critical passageways like the Suez and Panama Canals comes with inherent risks. like the Suez and Panama Canals comes with inherent risks. The Ever Given blockage not only caused immediate logistical chaos but also resulted in significant economic repercussions. According to Lloyd’s List, the blockage held up approximately $10 billion worth of goods, underscoring the fragility of these chokepoints. The crisis pushed industry leaders to re-evaluate and seek alternatives to these vulnerable maritime routes.

Oil Chokepoints

According to the U.S. Energy Administration, “The inability of oil tankers to transit a major chokepoint, even temporarily, can lead to substantial supply delays and higher shipping costs, resulting in higher world energy prices. While most chokepoints can be circumvented by using other routes that add significantly to transit time, no practical alternatives are available in some cases. Chokepoints may also expose oil tankers to theft from pirates, terrorist attacks, political unrest, and shipping accidents.”

Though focus is currently on the Suez Canal, it must be noted that it’s transit of 4.6millionbarrels of oil daily (2018) is substantially less than other oil chokepoints leaving everyday consumers vulnerable to major price hikes.

Strait of Horm

The strategically important waterway links crude producers in the Middle East with key markets across the world. The route is particularly vulnerable due to Middle East geopolitics as it is used by Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq.

Iran has officially started building a 1,000-km (620-mile) pipeline to avoid the disputed Strait of Hormuz for its future oil exports. Abu Dhabi in 2012 launched their Habshan-Fujairah pipeline to secure supply of crude oil whilst avoiding the Straits of Hormuz.

Strait of Malacca

According to Deutsche Welle, at its narrowest point off Singapore, the strait is only 2.7 kilometers wide, creating a natural bottleneck, as well as potential for collisions, grounding or oil spills. UC Berkleye’s Political Rev iew states that China faced with a “Malacca Dilema” has taken a number of steps to reduce the country’s over-reliance on the Strait of Malacca. These include the Kazakhstan-China Pipeline which connects the country to the oil-rich Caspian region and the Myanmar-Yunnan Pipelines which siphons oil and gas from the Bay of Bengal to the Kunming region of China, avoiding the Malacca Strait for Burmese oil imports.

An Old Solution Could Help Prevent a Replay of the Ever Green Crisis

It turns out that in 1963, the USA had a plan to create an alternative route to the Suez Canal. According to the 1963 memorandum, which was declassified in 1996 and historian Alex Wellerstein, the US had plans to use 520 nuclear bombs to carve out an alternative to the Suez Canal though Israel across the Negev desert connecting the Mediterranean to the Gulf of Aqaba, opening an access to the Red Sea and the Indian Ocean.

While that plan never came to fruition, an alternative route would be useful to the current $10billion problem. This might have been a geopolitically sensitive alternative solution, but it was a viable one.

Innovative Solutions and Diversification

In response to these vulnerabilities, there is an increasing emphasis on developing diversified supply chains and exploring alternative transport routes. While unconventional ideas, such as the 1963 U.S. plan to create a canal using nuclear explosions, remain largely in the realm of historical curiosities, they represent the kind of bold thinking required to address current challenges. More viable solutions include the expansion of land-based transport options, such as rail, and the use of smaller, more maneuverable vessels for navigating bottlenecked areas.

The Role of Governments and Industry Leaders

The responsibility to address these challenges falls not only on supply chain professionals but also on governments and industry leaders. There is a growing need for a customer-centric engineering mindset, proactive risk assessment, and the development of resilient strategies that can withstand unforeseen disruptions. Such strategies might include investment in technology to enhance supply chain visibility, diversification of transport routes, and closer collaboration between governments and private sectors.

Conclusion

The experiences of 2021 and the ongoing challenges in 2023 and 2024 have underscored the need for continuous innovation and adaptability in global supply chains. As we confront the current Red Sea crisis and other emerging challenges, it is imperative to develop more robust, diversified, and resilient supply chain systems that can withstand the pressures of a rapidly changing global landscape.