Why the Global Supply Chain is One Suez Canal Blockage Away from Wasting $400M Per Hour in Lost Trade

Why the Global Supply Chain is One Suez Canal Blockage Away from Wasting $400M Per Hour in Lost Trade

It might seem unthinkable that something as vast and complex as the global supply chain could be ground to halt by something as simple as a strip of water that's barely the width of two football fields. No matter how large and intricate a house of cards might be, though, removing a single card can lead to big problems — and the Suez Canal happens to be one very important card.

In fact, 12% of all international trade and 30% of all global container traffic passes through the Suez Canal. Losing access to this vital throughway costs an estimated $400 million an hour in lost trade. But why is this small stretch of water so important to our global supply chain? This article explores the history and importance of the Suez Canal, what we've learned from past experiences when the canal became impassable, and what supply chain managers can do to prepare for such disruptions.

The Significance of the Suez Canal

To understand the importance of the Suez Canal, we first have to look at how global trade transpired before its construction. Before the Suez Canal officially opened on November 17, 1869, companies needing to transport goods between Europe and India/the Far East faced a difficult choice. Carriers could transport goods via land across the Asian continent, but this route was long and dangerous. Without the invention of steam engines, this was not an efficient way to transport large quantities of goods. The other option was to transport goods by ships — the much-preferred mode of transport at the time. However, the entire African continent stood in the way. Getting goods from India to London, for example, meant sailing down the Indian Ocean around the tip of South Africa before traversing the Atlantic Ocean up Africa's west coast into European waters — nearly a 20,000-kilometer journey that was by no means ideal.

The solution was easy to envision; all that separated the Indian Ocean from the Mediterranean Sea and the lucrative markets of Europe was the Red Sea and a 193-kilometer stretch of land in Egypt. Simply turn this stretch of land into a canal, creating a much more efficient path between the East and West.

While attempts to create this canal date back to the Sixth Dynasty of Egypt, it wasn't until 1858, when Ferdinand de Lesseps formed the Suez Canal Company, that construction of the canal began. The project took more than a decade to complete, but in 1869 the Suez Canal opened for business. Since then, the Suez Canal has remained one of the essential pillars of global trade. Unfortunately, as we've learned from recent events, this strategic waterway is not immune to massive disruption.

What We've Learned From the 2021 Suez Canal Blockage

In March 2021, the Ever Given, a 20,000 TEU container ship, attempted to traverse the Suez Canal when strong winds buffeted the vessel and turned it sideways, wedging it across the waterway, completely blocking passage. It took a multinational effort and six days to clear this blockage before trade through the Suez Canal resumed. By the time the blockage cleared, over 369 ships were waiting to pass through the canal, accounting for an estimated $9.6 billion worth of delayed trade.

The lesson learned from the 2021 Suez Canal blockage is one that most supply chain managers already know: Disruption can come from the most unexpected sources and can often prove more costly than ever imagined.

How VIZION Helps Global Supply Chain Managers Prepare for Disruption

Companies relying on the Suez Canal for trade could not have done much to prevent its blockage. Who could foresee such an epic event, let alone predict it? At VIZION, we are committed to helping supply chain managers prepare for and respond to supply chain disruption through an API-driven container tracking solution that provides real-time alerts on container status and location. When you know where your cargo is at all times, when it will arrive, and why it was delayed, responding to disruptions and quickly pivoting to alternative options becomes much more manageable. To learn more about how VIZION API can help your company develop a more reliable and disruption-proof supply chain, contact us today!

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