Supply chain disruptions here to stay, says freight forwarder

Whether it’s geopolitical tensions, industrial disputes, piracy or climate change, supply chain disruptions have a major effect on global trade and the cost of doing business.

Amanda Bradfield, Operations Manager of WA freight forwarder EES Shipping, says businesses should factor disruptions into their planning and risk management strategy.
“Companies as a whole need to be able to adapt and be aware of the issues that are happening,” she says.

“They need to build in extra lead times for their cargo and factor in potential additional costs.”
She says operational costs for shipping lines have increased exponentially since the start of COVID, which are passed onto businesses.

Shipping lines add surcharges to help manage the implications of disruptions on their operations.
“Those additional costs are coming in thick and fast and without much notice,” Bradfield says.

Major shipping routes targeted

The weaponisation of chokepoints – narrow channels in supply chains – are becoming more frequent, most recently by the Houthi rebels which have been attacking vessels passing the Suez Canal since mid-November 2023.

This led to about 90% of container vessels diverting around the Cape of Good Hope, south of Africa, adding around two weeks to transit times. However, on March 15 the Houthis claimed responsibility for an attack on a vessel in the Indian Ocean travelling towards the Cape of Good Hope.

About 10-15% of global maritime trade passes through the Suez Canal. The volume of ships travelling through the Red Sea has fallen by more than 80%, according to the Kiel Institute for the World Economy.
Elsewhere, the Malacca Strait, between Indonesia and Malaysia, is often targeted by pirates. This channel handles about 40% of worldwide maritime trade.

Climate change is also affecting chokepoints, with the Panama Canal enduring persistent drought, leading to some of the lowest water levels in history.

Businesses diversifying supply chains

Bradfield says more importers and exporters are exploring supply and market options in Southeast Asia, especially Vietnam and Thailand.

“China is a very efficient operator for trade but we’re seeing businesses wanting to diversify their trade and risk strategies, so they are moving to a ‘China plus one strategy’, rather than having all their eggs in one basket,” she says.

“Our clients who are bringing cargo into and out of Europe are finding a lot of issues at the moment, mostly due to the Ukraine-Russia War and Red Sea issues, so they’re looking at different places and India seems to be one of the forerunners and the free trade agreement is definitely assisting with that.”
Air freight is also being considered by more businesses, Bradfield says, although it is a more costly option.

How can businesses prepare for disruptions?

While diversifying supply chains is an important aspect of building resilience, Bradfield says increasing inventory is crucial.

“Don’t wait until you’re out of stock,” she says. “Build in extra lead times for any delays that may happen along the way.

“All importers bringing cargo into Australia need to be aware that there are times when there’s going to be charges and a freight forwarder cannot always indicate what they are.”