March 8, 2024 The Red Sea Crisis: A Call to Action for Supply Chains

How organizations can respond to the ongoing ship attacks and future disruptions.

By Tony Pelli, Practice Director for Security and Resilience, BSI

The frequency of disruption to global supply chains, such as the recent cargo ship attacks in the Red Sea¹, emphasizes the need for businesses to consider proactive preparedness and resiliency in their global supply chains. These incidents not only disrupt trade routes² but can also pose significant safety concerns for cargo shippers globally. With several elements contributing to these disruptions, including geopolitical tensions and other unforeseen events, organizations can embrace a forward-thinking approach to mitigate challenges and maintain operational continuity.

When faced with these trials, organizations are met with pressure to respond swiftly and appropriately. Conducting a comprehensive supply chain mapping exercise, working across procurement, supply chain, logistics and other functions, can support in determining next steps, coupled with ongoing efforts to anticipate and prepare for potential disruptions before they become imminent. Another tactic is for organizations to utilize data-based insights derived from technology to manage risk more effectively. While specific incidents like the Red Sea crisis serve as valuable examples, the strategies outlined are applicable to future supply chain disruptions.

An internal audit unveils appropriate next steps

By navigating potential disruptions through comprehensively assessing supply chains, logistics partners and budgets, companies can stay on the front foot. Understanding the supply chain map is a valuable first step for determining practical solutions.

Looking at the Red Sea crisis, ships traveling in the region can consider alternative paths based on schedules, available detours and budget. For those reliant on the Suez Canal, additional safety measures onboard may be necessary, potentially leading to increased insurance premiums and transportation costs. Further from the site of actual disruption, some parts of the supply chain should consider keeping more material on hand as a buffer against potential disruption. This example outlines the importance of supply chain mapping, enabling companies to uncover logistical details to modify existing supply chain plans promptly.

Following a comprehensive internal audit and mapping exercise, organizations may also consider supportive strategies, including collaborating with logistics partners to track freight movements and evaluating insurance implications for shipping costs. Additionally, companies can bolster warehouse or manufacturing site supplies to counteract delays, secure ample fuel reserves to offset rising prices due to potential disruptions and reserve container space to prevent potential shortages. Exploring alternative transportation modes while considering costs, time factors and other considerations is also an option. Embracing proactive considerations based on each circumstance can help organizations maintain operational continuity amid challenges.

Prior preparation and harnessing data-driven insights are the keys to success

To further support during times of uncertainty, companies can establish an ongoing comprehensive view of their supply chains to improve their ability to react effectively. Understanding how the supply chain operates in advance allows for preparation to begin before potential disruption emerges.

In tandem with prior preparation, a key opportunity can be embedding relevant data-based insights into risk preparedness plans. In 2024, BSI reviewed³ key insights to help confidence grow amid continuing global disruption and found harnessing data to manage risk was a trend in 2023.

Data-based insights derived from technology can be a tool to identify the vulnerability of risks, uncover ways to mitigate them and highlight how to improve the supply chain and drive competitive advantage. Example modifications that companies can make based on data insights include shifting suppliers, production schedules or inventory management. More specifically, BSI found in 2023 that AI could further improve supply chains by enhancing the industry’s ability to identify and combat particularly difficult issues such as forced labor. In BSI research, 18 percent of respondents identified an opportunity for AI to help ensure transparent supply chains⁴.

As for management, data offers an opportunity to evolve reactive strategies into a systematic approach utilizing potentially overlooked insights. It is expected that data and insight usage will continue to grow, so embracing and transforming these technologies into valuable assets can help businesses improve.

Charting a course forward

A proactive approach to supply chain management can support a smoother global trade experience, despite the uncontrollable factors contributing to disruptions we see today, whether these are from adverse weather or geopolitical events. The Red Sea crisis, for example, highlights the value of conducting a thorough internal audit and supply chain mapping exercise, preparing in advance when able and using technology to upgrade preparedness strategies.

As we navigate the complexities of these ongoing threats, the lessons learned can provide valuable insights for future events. Companies can choose to view these challenges as opportunities to enhance their resilience and continue reassessing its strategies to remain competitive while facing global uncertainties.

By continuously auditing, preparing and embracing data-driven insights, organizations can better safeguard their supply chains, maintain operational continuity and navigate geopolitical uncertainties and other considerations safely and effectively.

Tony Pelli has extensive experience conducting enterprise-level supply chain and physical security risk assessments for global companies and their supply chain partners. As the practice director of BSI’s Security and Resilience consulting team, he helps their clients design, implement and refine their risk mitigation programs, reduce loss, diversion and counterfeiting, ensure continuity of their operations and decrease security risk to their global operations.

Tony has also designed loss prevention, security, continuity and inventory assessments, mapped and assessed security and business continuity risk in supply chains for Fortune 500 companies covering over $50 billion worth of product and assisted in the successful implementation of risk and inventory management plans, policies and procedures. He has performed security and supply chain work in over 30 countries throughout the Americas, Europe and Asia-Pacific.

¹ Exporters scramble for options amid Red Sea crisis, Reuters, December 2023

² ITS Logistics January Port Rail Ramp Index, Industry Today, January 2024

³ BSI 2024 Supply chain risk and opportunities (SCREEN) report, February 2024

⁴ Harnessing the emerging power of AI to strengthen supply chains and help eradicate modern slavery, BSI, October 2023

Subscribe to Industry Today