Ever Given, The Suez Canal and Catastrophic Global Supply Chain Disruption: How did it happen and what can we do to prevent this impact in the future?

By: Krypt Team - March 31st, 2021

Authored by: Vijendra Kargudri

How one ship caused catastrophic disruption to global supply chains

After a week-long effort by 14 tugboats and dredging, the giant ship ‘Ever Given’, measuring 400 mt long and standing 33 mt tall, budged from its stuck position. It was carrying 200,000 tonnes of cargo (20,000 containers) worth $1 billion through the Suez Canal before being stuck. It was travelling from China to the port of Rotterdam in the Netherlands. A single giant ship stuck in a single canal brought down the entire global trade & supply chain to its knees. Post pandemic impact, this single episode further highlighted the fragility of the supply chain and its dependence on a single canal that has been the gateway to global trade. The Suez Canal measures 193 km, connecting the Red Sea with the Mediterranean Sea. For over 150 years since its inauguration on November 17, 1869, it has been the shortest route between European and Asian continents for trading ships.

The tailback at Suez Canal was massive. A total of 425 ships were stuck at both ends of the canal. Even though the Suez Canal plans to operate 24/7 to clear this tailback, officials say it will take a minimum of 3 days to clear the backlog of ships. Once these ships reach the port, there will be further hold-up.

Colossal Loss to Businesses

Every second lost during this entire hold-up of cargo both commercial & humanitarian, has cost thousands of dollars to the global trade. The global economy has lost an estimated $9.6 billion/day, while Egypt has lost $12-14 million/day. A total of 6 days were lost, putting the modern technology to test before it could pull through.

The Suez Canal is the only way to transport as it saves time, cost, and fuel to transport cargo from Europe to Asia. It shortens the voyage by a week, which is like dog years for global trade & supply chain. The canal offers passage to 30% of global container traffic. Around 50 ships use the canal every single day. In 2020 around 19,000 ships ferrying cargo weighing 1.17 billion tonnes used it for passage to their destination. The canal serves 12% of the global trade. It was not sufficient enough to learn a lesson from the pandemic, of depending on a single source of the supply chain. This hold-up again originating from China teaches another hard lesson to the global trade & supply chain ─ the bigger the dependency on a single source of the supply chain, the harder they fall.

The stakes and the stakeholder today are bigger than before. In this era of supplying ‘Just-in-time’ goods, such hold-ups are paralyzing and unforgiving. Global oil prices rose steeply and industry experts say there will be a flood of insurance claims by cargo owners.

How Krypt can help with the Technology Upgrade?

Before the next supply chain crisis becomes a reality, many businesses around the world are now scrambling to update their crisis plans and technology.

Using technology like AI to help optimize supply chains will offer useful simulations to explore alternative routes for supply chains on land, in the sea, or air.

Also, many companies currently lag the visibility across their supply chain and mainly depend on phone calls/emails to figure out where their cargo is and whether it is impacted due to any such event. Several companies are investing in track and trace functionality to be proactive rather than reactive.

Krypt is an SAP trusted partner for Global Trade & Supply Chain and has helped global organizations successfully implement/integrate SAP TM, SAP GTS, SAP IBP, and SAP EWM.

To mitigate such challenges, we offer implementation/integration of SAP Transportation Management leveraging our innovative AI/ML solution – KAI. Krypt can help businesses to strategically, effectively, and efficiently make hard choices and prioritize the right options easily. Having Krypt as an Implementation Partner is a step in the right direction to have a robust supply chain and be future-ready.