Lessons Learned from Ever Given and the Suez Canal
For years, insurers warned that the increasing size of vessels leads to a higher accumulation of risk. These fears came true when the MS Ever Given blocked the Suez Canal for several days.
While the good news is that the giant vessel was refloated and freed, the global shipping and logistics industry is still reeling from the effects. They are not alone, as manufacturers impacted by this incident also had to solve problems on the go and find ways to avert future challenges.
Reports suggested that the vessel was caught in strong winds and ran aground in a sandstorm. Weak engine power may have also contributed to the grounding. As we are all aware now, the disruption to the global maritime supply chains was enormous.
With over 400 ships stranded due to the blockade and given the fact that 55-75 vessels make the journey daily, the costs added up to about $9.6 billion per day.
So, what lessons have we learned from Ever Given’s grounding in the Suez Canal?
1. Choke Points Have a Far-Reaching Impact
The maritime industry offers a highly efficient link that ensures just-in-time deliveries. However, this invisible link is at risk when choke points, like the Suez Canal, are blocked. While the benefits of these shortcuts are undeniable, you also must manage your risk effectively.
Although trade didn’t come to a complete standstill, the impact of a blockage was felt across industries. For example, manufacturers had to wait longer for raw materials. This makes it important for everyone within the supply chain, including manufacturers, to have a contingency plan ready.
2. Larger the Vessel, the Higher the Risk
While nature always poses a risk, the sheer size of these fully-loaded extra-large container ships also had a role in the disruption. In this scenario, the bigger the vessel, the smaller the margin for error.
Whenever huge container ships like the Ever Given get stuck, vessels that are loading also have to wait. The cascading costs of these delays are then passed down to the end customer. This is not always the best solution when you’re trying to maintain a particular price point.
The Suez Canal incident highlighted how unprepared the industry was for such an event, and plans to release the ship were made on an ad hoc basis. This makes it critical to work with a shipping company with all these plans in place before the ship sets sail.
3. Build Redundancies to Minimize the Impact of Disruptions
In the Ever Given crisis, the only alternative other ships had was to take another route which added thousands of miles between the vessel and the destination. For most, this wasn’t a viable option. It was cheaper and took less time to wait for a solution.
This incident highlighted poor planning. It didn’t look like the company performed a risk analysis or made an effort to mitigate those risks. This makes it vital to work with shipping partners who go the extra mile to cover all bases and keep your deliveries on time and within budget.
When shipping raw materials, components, or finished products across the seas, it’s crucial to assess the inherent risks like geopolitical tensions, natural disasters, operational errors, and so on.
It’s vital to ask your shipping partner about their contingency plans to mitigate these risks. Unexpected and long lead times can create chaos in an otherwise well-oiled machine. So, planning and efficiently managing risk is vital.
At MMI, we pride ourselves in working with our customers to mitigate their risks. Our strong relationships with global partners combined with our manufacturing facilities help ensure that production and deliveries continue without disruption.
To learn more about our manufacturing and our supply chain management experience, reach out to our in-house expert, Connor!
Sales Manager (Midwest)