Building resilience: Mitigating geopolitical tensions in supply chains

Source: Supplied

Recent major disruptions in shipping, like the Baltimore Bridge disaster and the Red Sea crisis, severely impact global supply chains. Houthi rebel attacks on vessels in the Red Sea have necessitated longer routes around South Africa’s Cape of Good Hope, leading to extensive cargo delays and substantial increases in sea freight rates.

In the wake of a ship’s collision with Baltimore’s Francis Scott Key Bridge in March, supply chains on the US East Coast are not expected to stabilise until at least next year.

Global shipping challenges

The South African Association of Freight Forwarders Cargo Movement Update of 24 May notes that the global shipping industry continues grappling with geopolitical tensions, climate change and pandemic aftermaths.

“Conflicts in Ukraine and Gaza, alongside US-China economic disputes, threaten maritime trade routes, while climate impacts exacerbate port congestion. Notable disruptions, such as the Ever Given Suez

"Canal blockage and the collapse of the Baltimore bridge underline the fragility and vulnerability of critical choke points, significantly affecting global trade flows," the report says.

Current issues include persistent port congestion, which affects 5.3% of the global fleet. This is primarily due to geopolitical crises like the Red Sea conflict, which has increased transit times on Asia-Mediterranean routes by 39%, SAAFF adds.

Operational challenges in Europe

According to Mark Janse Van Rensburg, trade lane manager for airfreight at Bidvest International Logistics, ongoing economic uncertainty and multiple airline strikes have also caused significant delays in Europe.

Furthermore, he points out that delays in ocean freight are leading to higher air freight rates and lower capacity in China and India.

BIL colleague and the company’s trade lane manager for ocean, Nicoleen Nielson, says the Red Sea conflict is causing extended lead times for cargo moving from Europe to China, sometimes up to 30 days.

"These longer transit times are impacting South Africa in the form of equipment and vessel shortages," she says.

"Equipment is also failing at South African ports. Compounding the problem is that MSC, the largest carrier out of the Far East to South Africa, has decided to allocate its bigger vessels to trade between the Far East and Europe.

"This has cut about 4,000 TEU of volume from the Far East to South Africa. Suddenly, people are trying to find space on smaller vessels for equipment."

The question is how local players like BIL, for example, respond when such situations arise.

Janse Van Rensburg says it is essential to monitor developments and keep in regular contact with overseas partners, but alternative ports should also be used to avoid delays.

Case study: Mitigating challenges

In another instance, BIL urgently needed to transport a 26-tonne shipment from China, facing capacity challenges and soaring air freight rates. They successfully rerouted the cargo via Phuket, Thailand, achieving a 30% cost reduction compared to shipping directly from China.

"This ensured timely delivery and demonstrated our ability to navigate challenges, optimizing our supply chain solutions," remarked Nielson, underscoring the value added to their operations.

"Moreover, BIL advises clients to plan by extending lead times and notifying us four weeks in advance. This proactive approach helps us manage delays and ensure on-time deliveries,” added Nielson.

“We enhance our client’s value by advising them to diversify suppliers and routes, minimising dependency on a single source or trade lane. We also recommend maintaining buffer stocks of critical materials, developing and implementing contingency plans for various disruptions, and staying informed about global developments.”