“Can’t our supply chain just have a normal year?” While 2023 seemed to mark a degree of post-Covid normality, 2024 has started with a sharp reminder about how important #supplychain #resilience is. Reduced cost and inventory levels alone don’t make the Panama Canal any fuller or the Red Sea any more navigable. Long-term questions haven’t gone away either. A recent report by the McKinsey Global Institute (MGI) looks at shifting global trade flows, considering potential reconfigurations based on developing economies and #geopolitical distance. It flags that businesses will need to plan for disruptions.
Our colleagues in McKinsey’s Travel, Logistics, and Infrastructure practice have commented on the cost and delay implications of low water levels in the #PanamaCanal, which normally carries around 8% of global container volume. Extreme drought has reduced maximum ship crossings, resulting in prolonged waiting times. Consequently, several carriers have already announced new fees for Panama transits. In addition to costs incurred by #shipping companies and their clients, costs for the Panama Canal itself are estimated to rise to between $500 million - $700 million in 2024, compared with previous estimates of $200 million.
At the same time, conflict in the #RedSea and reduced access to the #Suez Canal are leading companies to reroute shipping around the Cape of Good Hope, adding about two weeks to shipping time while raising costs for resources such as fuel for the vessel and food for the crew. While this delay is relatively short if a supply chain is prepared accordingly, there have been reports of automotive companies implementing line stoppages in response to material shortages. The direct impact on business revenue illustrates the need to invest in resilient supply chains.
#disruption #procurement #cost #materials
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