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Suez Canal crisis 2021 How To Recover From Suez Canal Debacle And Prevent Another .

Suez Canal crisis 2021 How To Recover From Suez Canal Debacle And Prevent Another .
Ever Given, ever given suez, suez canal ship

Suez Canal crisis 2021 How To Recover From Suez Canal Debacle And Prevent Another .

Suez Canal crisis Suez Canal crisis Suez Debacle And … Canal Recover To From Prevent How Another

Mon, 29 Mar 2021 07:00:00 -0700

Now that the mega cargo ship that blocked the Suez Canal for several days has been freed, the recovery part of the crisis begins

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But how companies recover 

SUEZ, EGYPT – MARCH 29: The container ship ‘Ever Given’ is refloated, unblocking the Suez Canal on

[+] March 29, 2021 in Suez, Egypt.

This morning the container ship came partly unstuck from the shoreline, where it ran aground in the canal last Tuesday, and later resumed its course shortly after 3pm local time.

The Suez Canal is one of the world’s busiest shipping lanes and the blockage had created a backlog of vessels at either end, raising concerns over the impact on global shipping and supply chains.

(Photo by Mahmoud Khaled/Getty Images)

Now that the mega container ship that blocked the Suez Canal for several days has been freed, the recovery part of the crisis begins.

The blockage of the international waterway focused attention on the vulnerabilities of supply chains, the importance of having crisis management and contingency plans, and how similar crisis situations could be prevented or managed more effectively.

But before worrying about the next crisis, many business executives are focusing on bouncing back from this one.

How companies recover from a crisis is just as important as how they prepare and manage it.

A detailed written recovery plan can serve as a roadmap that enables your organization to return to normal as fast as possible.

It should include the following major provisions:

Just as companies should test their crisis and contingency plans to ensure they work when needed, businesses should hold table top, simulations, and other exercises to stress-test their recovery plans ahead of time and on a regular basis.

It does not take long for a crisis to have a negative impact on companies and organizations.

Peter Deans is a risk and strategy consultant and founder of 52 Risks.

He observed that, “For many companies, the damage [from the Suez Canal crisis] has already been done, with costly delays arising from delays in receiving supply inputs or finished goods, either directly or indirectly via their suppliers.

“These delays will have resulted in lost sales and/or additional supply costs and freight charges.

It will be important to reach out to those customers that will be impacted in the coming months.” He predicted that, “…supply chains will take at least several weeks if not months to return to normal.”

Deans noted, “These type of events highlight the need for companies [to] have a deep understanding of their supply chains, understand ‘what can go wrong’ and have contingency plans for these scenarios.

This includes having the financial resources to see through these incidents.

Scenario planning workshops can be helpful in thinking about the specific events that can impact a business’ operations. 

“As the Covid-19 pandemic has shown, it is critically important to have sufficient supplies of production inputs…

to withstand any extended, external shocks and business disruptions,” he counseled.

Depending on the nature of a crisis, there may not be too many alternatives on how to bounce back.

In the aftermath of the Suez Canal crisis, the options may be very limited.

Mark Dohnalek is the president and CEO of Pivot International, a global manufacturing, engineering, technology, product development company.

“For companies to recover as quickly as possible from the backlog of ships in the Suez, they will have no choice but to seek sourcing that uses transit routes outside of this area — either domestic or Asian,” he said.

“However, if they are sourcing products from Europe that originate from Asia, it is likely they would come via the Suez route.

Therefore, they would be doubling down on procurement commitments, but if they have timeline urgencies, it would seem they have no choice.

This transit route will suffer delays for likely weeks to come, due to the enormous backup caused from the blockage.”

Dohnalek said in order to avoid another Suez Canal-type crisis, “…

every company needs to have multiple sourcing options in place, as we learned during the pandemic.

Another element of this recommendation would be to do business with one preferred vendor that has multiple operations across many regions of the world. This will avoid the massive impact a single location event would have on their business.

This is by far the key toward mitigating exposure to these types of events in the future.”

Some crisis situations can be prevented by steering clear of certain known risk factors.

According to experts, the vulnerabilities associated with supply chains are readily apparent.

Usha Haley is the W.

Frank Barton Distinguished Chair in International Business at Wichita State University and an expert on international production and international risk management.

She said the crisis, “…

demonstrated the choke points in our systems of international trade and production.” It showed, Haley said,”…

that even our evolved supply chains have acute vulnerabilities to which companies and government will have to pay preemptive, rather than reactive attention.

“Both groups will need to plan for, budget and implement plans that circumvent these single points of failure, so that transportation, energy and communication networks can weather the crises without bringing the global trading system to a standstill. This will require systemic redundancies rather than efficiencies; organizational decentralization rather than centralization; production diversification rather than specialization,” she advised.

“Companies single handedly will have difficulties remedying these infrastructural choke points without partnering with governments,” Witchita State University’s Haley said.

“The U.S.

government is cognizant of the political and economic power of choke points in emerging technologies. View the concerns attending Huawei’s control of 5G networks. These established transportation and shipping technologies have equal strategic and national importance.

[And] how Iran has frequently used the Strait of Hormuz as a pressure point,” she noted.

“Unfortunately, world trade and its various constituencies have not supported back-up water and transportation routes.

For example, Nicaragua’s proposal to link the Pacific and Caribbean Seas fizzled as world governments and companies saw the $50 billion price tag as prohibitively expensive. As a lesson, the cost of the present Suez crisis may exceed that price tag within a few weeks,” Haley predicted.

A best practice for responding to and managing a crisis is to always be prepared for the unexpected.

Aleksandar Tomic is the associate dean for strategy, innovation, and technology at Boston College.

He said that, “…

as with any disruption, companies simply have to be ready.

To do this, they need to assess which part of disruption is temporary, and which is permanent.

Then, they need to be clear about the tradeoff of keeping extra inventory vs.

delaying delivery.  

“Do the customers care more about price or the delivery time? Once a company knows this, they can plan better.

To deal with delays, companies need to introduce slack in their system namely in form of higher inventories both of inputs and finished goods,” Tomic recommended.

“Of course, the cost of doing this must be balanced with penalties for late delivery.

Companies also must have alternative sources of their critical inputs and try to understand each source’s supply chain so that the company can diversify its supplier base relative to this particular risk.

In other words, in this case it does you no good to have multiple suppliers if they are all sourcing from Asia through [the] Eastern Seaboard,” he said.

Tomic advised that, “…companies must communicate openly and clearly [with customers].

In spot markets, such as oil/gasoline, there is not much to do.

Prices rise bringing demand in line with supply, and everyone suffers a temporary pinch at the pump.

In a more complicated situation where a company might not be able to meet a deadline, communication with the customer is the key with as clear as possible message surrounding delays, impacts, etc.”

I’m the author of Crisis Ahead — 101 Ways to Prepare for and Bounce Back from Disasters, Scandals, and Other Emergencies (Nicholas Brealey) which was rated one of best

I’m the author of Crisis Ahead — 101 Ways to Prepare for and Bounce Back from Disasters, Scandals, and Other Emergencies (Nicholas Brealey) which was rated one of best new crisis management books to read in 2020 and 2021 — and one of the best crisis management books of all time —  by BookAuthority.org.

The advice and observations in this blog and my “Crisis Ahead” podcast are based on my extensive experience helping companies, organizations, and individuals prevent, manage, and recover from a variety of crisis situations.

I’ve been the CEO of two trade associations, a PR consultant to hundreds of clients, and press secretary for Democratic and Republican members of Congress and political candidates.

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Suez Canal crisis Suez Canal crisis

Mon, 29 Mar 2021 07:00:00 -0700

Countries and companies should wake up to new political risks to shipping and supply chains

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Countries and companies should wake up to new political risks to shipping and supply chains.

Countries and companies should wake up to new political risks to shipping and supply chains.

Watch out for new dangers to global shipping.

Watch out for new dangers to global shipping.

The Suez Canal Crisis of 2021 is upon us.

The canal is closed, and maritime traffic jams extend into the Mediterranean and Red Seas.

The reopening date is uncertain, supply chains are stressing, and executives are nervous.

“Crisis” may strike some as the wrong word.

After all, there are no Cold War tensions as there were during the 1956 Suez Crisis, which closed the canal for six months, as the USSR simultaneously crushed the Hungarian Revolution.

Nor are there Arab-Israeli military hostilities as during 1967’s Six-Day War, which (along with the 1973 Yom Kippur War) closed the Suez Canal for eight years.

The current blockage apparently arose from adverse weather conditions.

But no one should underestimate the geostrategic warning it sends about the potential for political sabotage.

As nature inspires art, so too does it inspire malevolence.

This is not merely about geography, but also about today’s broader political risks to world commerce, ranging from one errant ship at Suez to confronting China’s enormous political, military and economic challenge.

Indisputably, political risks are now rising from sources not previously perceived.

The coronavirus pandemic, for one, has alerted terrorist groups, rogue states and major powers alike that biological (and chemical) weapons have far more coercive power than once recognized.

Such weapons are comparatively easier to make than nuclear devices.

New political risks have come on little cat feet, almost unnoticed.

For decades, foreign investment in and reliance on supply sources in China expanded as if political risk were irrelevant.

No longer.

Former President Donald Trump’s tussle with Beijing, hardly amounting to a “trade war,” simply underscored the emerging political risks of dealing with China.

Looking to hedge their bets, some foreign companies were already shifting capital allocations and supply chains to Southeast Asian countries, India and elsewhere.

That trend is accelerating.

And the aggregate China risk factor will only increase.

Beijing’s crackdown in Hong Kong and the city’s melancholy demise as a “rule-of-law” international enclave in China is all but certain.

Computer-driven industrial and financial espionage, outright theft of intellectual property, discrimination against foreign firms, and internal political and religious oppression all make China an increasingly risky place to be.

And as political conflicts between China and the West continue to escalate, it becomes more dangerous to rely on Chinese supply sources.

Many Europeans, favored Wall Street investors and well-paid pundits argue that rising tensions are not inevitable.

Perhaps.

Certainly, the risks of relying on China don’t rule out having any presence whatever in the country.

There are innumerable intermediate options.

Yet in virtually every line of business, the intermediate options cry out for estimating a higher risk to any material supply-chain investment in China.

Moreover, China is creating its own geostrategic choke points, by building naval and air bases on islands, rocks and reefs it claims in the South China Sea, and declaring the region a Chinese province.

In the East China Sea, Beijing is threatening Taiwan and challenging Japan on the sovereignty of the islands called the Senkaku in Japan and the Diaoyus in China.

This menacing behavior leaves the economies of Japan, South Korea, Taiwan and Southeast Asian countries in danger.

Clearly, geopolitical risks are rising sharply.

And to mitigate disruption, governments and businesses must diversify their supply chains and methods of shipping, and avoid geographic or political chokepoints, man-made or natural.

The United Arab Emirates has shown foresight by building an oil pipeline bypassing the Strait of Hormuz.

The East-West Petroline, running from Saudi Arabia’s Eastern Province to Yanbu on the Red Sea, was also designed to avoid the Strait of Hormuz.

Nevertheless, shipments must traverse either the Suez Canal or the Bab el-Mandeb Strait at the Red Sea’s southern end, now threatened by Yemen’s Houthi rebels (who have also attacked the Petroline itself).

Today’s Middle East might consider building pipelines and other shipment methods through Jordan to Israel’s Mediterranean coast.

Iran may well have had such an alternative route in mind for its (and Iraq’s) oil in extending its military dominance through Lebanon and Syria to the Mediterranean.

By the same token, why shouldn’t American and European companies concentrate more investment and manufacturing in the Western Hemisphere (or at home) rather than in China? As long as they avoid the likes of Cuba, Nicaragua and Venezuela, their political risk would be drastically lower, not to mention their transportation costs and possible losses during shipping.

Perhaps the 2021 Suez Canal Crisis will have a silver lining after all, impelling governments and companies to come to terms with the new global security dangers they face.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
John Bolton at John.Bolton@FASFreedom.com

To contact the editor responsible for this story:
Mary Duenwald at mduenwald@bloomberg.net

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– March 29, 2021
Ever Given, ever given suez, suez canal ship

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