The obstruction of the Suez Canal could lead to a security risk for destination ports and the final mile of the supply chain, according to logistics insurance specialists TT Club.
The company said in a statement that global supply chain already strained by the disruption caused by the COVID-19 pandemic have been further challenged by the recent suspension of the Suez Canal.
Related threats could include theft of cargo and accidental loss of goods in storage areas, and supply chain stakeholders must be aware of where their operations at risk, according to Mike Yarwood, TT Club’s Managing Director, Loss Prevention.
“The risk of theft at ports and freight depots in this scenario is heightened and a greater focus on security is required,” Yardwood said.
“Whether it simply be at an overspill holding or storage area, or temporary warehousing, wherever and whenever cargo is not moving, it is more likely to be stolen. Those active in the supply chain should be mindful of these security risks.
“Due diligence, undertaken to ensure that any third party provider of storage is adequately resourced to meet these demands, is a prudent step to take in these circumstances.”
More than 300 vessels were held at anchor after the Ever Given ran aground in the Suez Canal and many others diverted around the Cape of Good Hope.
Yarwood said the effects of the obstruction will be felt across the logistics industry.
“Beyond the delay to cargo on board those ships affected, there will inevitably be a knock-on impact for those involved in discharging the containers at destination ports when they finally arrive, as well as the final mile delivery carriers.
“While the immediate impact may be a lack of cargo arriving when expected, presenting market supply challenges, it is when the cargo does start to turn-up that further potential risks emerge.”
In a statement, TT Club said the arrival of large volumes of laden containers, coupled with the requirements for hinterland distribution, will create disruption at ports and terminals, straining throughput and yard capacities, and creating accumulation of cargo.
It described this as “a complex risk” and one that will not only affect destination hubs but also aggravate an already widely reported imbalance of container equipment especially on the East to West trade routes as laden containers are tied up and consequently empty availability to reposition to shipment areas worsens.
Driver shortages in Europe are already expected to soar through 2021, as highlighted by a recent International Road Transport Union (IRU) survey. This will exacerbate the difficulties in delivering import cargoes and picking-up consignments for export.
The overall lack of capacity to move containers has the potential to create additional challenges.
“The last decade has witnessed many in the supply chain drive towards streamlining and operational efficiencies. Such measures have included reducing the number of suppliers and introducing ‘just in time’ principles to lessen the burden of unnecessary inventory costs,” Yarwood concluded.
“Experiences over the last twelve months through the pandemic, the Brexit transition and more recently the Suez Canal blockage, bring into question this bias towards efficiency and cost reduction.
“If such are achieved at the expense of resilience, is this policy the correct one? The new normal might see many stakeholders increase their focus on contingencies and adopt more a ‘just in case’ philosophy than a ‘just in time’ one.”
