Global supply chains were disrupted to an unprecedented level during the COVID-19 crisis. While the cargo and freight businesses such as AtoZ India Courier are recovering from the backlog, a new supply chain crisis is looming. If you would like to send a parcel to India then you must know that the shipping route now being used takes a route that is way longer than what it used to just a few months ago. The culprits for this looming crisis include geopolitical tensions, rising costs, droughts, and shifting consumer expectations. Shipping lines are dealing with life-threatening situations such as attacks on vessels in the Red Sea and escalating conflict between Russia and Ukraine, further exacerbating the challenges and disrupting logistics networks.
We now understand the full scale impact of the previous supply chain crisis and the importance of addressing these current vulnerabilities cannot be overstated. There is a strong chance that those issues will persist and intensify, eventually leading to increased shipping costs and delays. Following is a detailed analysis of the key factors that could contribute to the potential supply chain crisis in 2024.
Shipping routes worldwide provide safe passage for ships to facilitate the smooth movement of goods globally. However, the currently increasing instability by the actions of Houthi rebels in the Red Sea and the conflict between Russia and Ukraine is threatening maritime security and affecting global supply chains profoundly. Those factors are affecting some of the busiest shipping routes and inflating insurance and energy costs.
In retaliation to the unjust war waged by Israel against Gaza residents, Houthi rebels in Yemen have started to attack the vessels associated with Israel or their trading partners. They also progressed their agenda by including commercial ships associated with Western allies. Those rebels are well funded and have access to ballistic missiles, drones, speedboats and even choppers.
It’s not as straightforward to tackle this problem as it was first thought. The United States have sent destroyers in the area to protect commercial shipping but it’s not easy when the rebels do not represent a government and are non-state actors. Despite destroying Houthi missile and drone launch sites, rebels have remained resilient. This has increased the insurance premiums based on the heightened danger which will ultimately play a vital part in the supply chain crisis we are anticipating.
Ukraine is called the bread basket of the world due to its ability to produce huge amounts of grains and export them to the rest of the world. Since the war between Russia and Ukraine broke out, grain exports have halted which has threatened the commodity crisis in the world by disrupting the supply chain. This will result in increased prices for essential goods worldwide and an increase in inflation.
Another byproduct of this war is the sanctions being imposed on Russia for being the aggressor in the conflict. Russia is the largest producer of oil and natural gas and military actions by Russia have led to impose sanctions against the regime. The implication for these sanctions is profound as Russia exports oil and energy to most of the Western countries who now have to scramble to replace those energy sources.
It’s not easy to cap the shipping costs when fuel prices are surging at an alarming rate. Ultimately the rising fuel prices are passed on to consumers who end up paying more. A ripple effect is created due to this practice and every commodity feels the effect of inflation. Industries that are reliant on transportation such as retail and manufacturing face increased operational costs that can lead to higher prices for end consumers.
Inflation has reared its ugly head again after we last saw it in 1965. The worst thing about inflation is that it takes away your purchasing power which forces consumers to adjust their spending habits significantly. They tend to cook at home more often, buy cheaper products instead of quality ones, and shop at discount shops.
For shipping companies, inflation is not good news either. It raises operational costs for shipping companies which means higher freight rates that ultimately affect consumers. Interestingly, the effects of rising shipping rates on consumer prices typically manifest with a delay, peaking about a year later. Shipping companies are no exception and they struggle with inflation as any other business would.
The logistics and shipping sector in particular has been hard hit by labour shortages. With rising inflation, the shipping industry is unable to increase the wages proportionately and the workers at the dock are feeling deserted and would rather do easy jobs that pay well instead. This creates a cascading effect throughout the supply chain. Increasing the costs and paying penalties for lost promises.
In addition to labour shortages, port congestion and container shortages are playing a huge part in the looming supply chain crisis. Overwhelmed ports around the world are finding it difficult to clear the backlog after the COVID-19 pandemic. Delays and increased freight costs complicate the situation and add to the fear of an oncoming crisis. The impact of these logistical challenges is felt across the supply chain. Delays in receiving products lead to stock shortages at retail locations, frustrating consumers and driving up prices as businesses attempt to recoup lost revenue from inefficiencies.
Since Trump’s first presidency in the United States, protectionism and tariff wars have seen a notable resurgence. Targeting China especially, the US imposed huge tariffs on goods from China worth around 50 billion dollars and in retaliatory measures, China imposed a 25% duty on US and European products.
These measures have increased problems for businesses that rely on shipping solutions as those businesses have to diversify their supply chains away from countries that are involved in tariff wars and have to source their products from nations with favourable trade agreements. Those measures directly affect globalization and disrupt the shipping industry as a whole.
The ongoing geopolitical instability, rising fuel costs and geographical catastrophes are clear signs of the turbulent waters ahead. It is more than likely that we may have to face an ever more impactful supply chain crisis shortly. As an individual or a business owner, there are certain steps that we can take to safeguard ourselves and navigate away from the harmful effects.
Never rely completely on a sole supplier to mitigate risks associated with bottlenecks or disruptions. By having such flexibility in choosing your supplier or shipping partner, you can adjust quickly to changing circumstances in the supply chain. You can partner with more experienced freight forwarders who are experienced and expert in handling unforeseen obstacles during any crisis.
When facing delays or seasonal rush and congestion, it is always beneficial to identify alternative ways to move your cargo. You can send your cargo through a different route that may take longer but would eventually deliver the cargo at destination. You can send it to a different port from where you can shift the cargo by ground. These methods may cost you extra or take extra time but they surely guarantee the delivery of your cargo at its destination.
In today’s fast-moving world, you can never compete without implementing digital solutions that can help you track shipments, inform about availability and suggest new routes for your cargo. Similar tools can also provide efficient communication with suppliers and logistics partners.
As we have discussed above, multiple factors can affect the global supply chain including geopolitical events, trade policies and economic conditions and keeping an eye on the current events can help you deal with it effectively. You must stay agile in your operations so you can respond effectively to sudden changes in the supply chain landscape.
