SUPPLEMENT


The Strait of Hormuz The Strait of Hormuz is a critical chokepoint for global oil trade and sees approximately 90 ships per day. The prolonged closure of this strategically important passage would likely cause an energy crisis. However, the Gulf nations that are reliant on oil revenues have a strong vested interest


in ensuring ships


carrying their oil to the rest of the world can pass through it safely. But a history of conflict in the region means this risk should not be too heavily discounted.


Lessons in supply chain risk management When you operate a global supply chain, geopolitical


risk can’t be completely avoided. But its impact on your business can be managed.


Control the controllables Geopolitical conflict sits far outside the sphere of influence of supply chain and logistics operators. While geopolitical risk cannot be completely


avoided, the best way to protect your supply chain against it is to reduce reliance on trade routes that pass through vulnerable passages by diversifying supplier and transportation networks. By doing this, you can reduce your dependency on single chokepoints that can grind your supply chain to a halt. Near-shoring is the most common example of this type of risk control in practice and the Red Sea crisis is likely to accelerate the shift away from globalisation


that was already underway. Safety stock levels can also be increased


to protect against disrupted supply networks, although the cost associated with carrying excess inventory means this is more of a stop- gap than a long term solution.


Invest in supply chain visibility In times of crisis, knowledge is power. Real- time supply chain visibility delivers on-demand situational awareness and serves as a form of insurance by enabling immediate insight


into


risk exposure. With less time spent identifying problems,


supply chain and logistics teams can shift focus


to the implementation of response


plans, minimizing disruptions and maintaining operational stability. A good visibility solution will also ensure that the other actors in your supply chain have real-time access to the same information that you do, making it easier to coordinate responses across stakeholders.


Make contingency planning a priority Where de-risking your supply chain network isn’t possible, contingency planning is your next best alternative. Engaging


in scenario planning ACW Comment:


It’s an ill wind that blows nobody any good It is fair to say that airfreight often benefits from supply chain crises, including maritime disruptions like the Red Sea crisis, because it provides an alternative mode of transportation when sea routes are congested or blocked. Here’s how:


1. Urgency of Goods: When shipping delays occur due to a crisis, businesses may shift to airfreight to ensure timely delivery of high-value or time- sensitive goods.


2. Shortened Delivery Times: Airfreight is much faster than sea freight,


making it a preferred option when maritime delays significantly impact supply chain schedules.


3. Capacity Challenges: Crises like the Red Sea blockage (e.g., the Ever Given incident in the Suez Canal) can disrupt global shipping lanes, creating a ripple effect that reduces sea freight capacity. This often pushes companies to use airfreight despite higher costs.


4. Market Pricing: During supply chain disruptions, airfreight demand can surge, leading to higher rates, which benefit air cargo carriers.


5.Critical Goods Priority: For industries reliant on just-in-time inventory or essential goods (e.g., pharmaceuticals, electronics), airfreight becomes the fallback option during shipping crises.


exercises


and building crisis playbooks allows you to proactively identify potential risks and debate the best approaches before you find yourself in the depths of a crisis scenario.


While airfreight provides an immediate alternative, the downside is its higher cost and lower capacity compared to maritime shipping. However, in crises, businesses often accept these trade-offs to maintain supply chain continuity.


15


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16