The Egyptian crisis – supply chain reality

Unless you have been living in a cave the past few days you are aware of the political unrest that is currently hanging over Egypt and other north African nations. Of course to the casual observer this might just seem like another upheaval in a nation that many might not be able to identify on a map…I jest…but I fear I might be closer to the truth in that statement! For this reason I am sure the typical American consumer may not see what is happening as much of an issue to their every day activities. I would argue that they need to be concerned about the unrest in Egypt just as much as we worry about unrest in nations such as Afghanistan. Why?

The global supply chain, that’s why. Least we forget that the Egypt controls the Suez canal (I will not get into the other geopolitical aspects such as Egypt’s role as a bridge between Africa and the Middle East, the fact Egypt is one of the only Arab nations with normal relations with Israel or the fact it is a very large domino in the region). Some figures on the Suez:

Year No
( Vessel )
Net Ton
( 1000 )
Cargo Ton
( 1000 )
Tolls
( Million $ )
2000 14,142 439,041 367,981 1,926.9
2001 13,986 456,113 372,428 1,897.3
2002 13,447 444,786 368,846 1,947.7
2003 15,667 549,381 457,882 2,576.2
2004 16,850 621,230 521,219 3,077.5
2005 18,224 671,951 571,105 3,453.7
2006 18,664 742,708 628,635 3,815.8
2007 20,384 848,162 710,098 4,601.7
2008 21,415 910,059 722,984 5,381.9
2009 17,228 734,450 559,245 4,289.5

It represents 8% of global shipping relies on the Suez. Much of the oil that come out of the Middle East has to pass through the Suez. We all know how crude impacts all aspects of our lives from driving our SUVs to the cost of toys because of raw material costs associated to oil production. If there is any problem with the Suez, look to add another 12 days to the transit for ships coming from the Middle East to the West. Not an insignificant increase in transit…think about how that will impact supply chains across all industries.

So next time you are at Target, Shaws, Barneys or Shell to name a few, remember that unrest in a far away nation will impact your wallet impact store selves and impact supply chains. We still live in a world that has political unrest, and in places that are crucial to our B2B and B2C lives. What if Pakistan falls into revolution and impacts India? Or if China decides to steam roll Taiwan? Or North Korea looks to unify the Korean peninsula through force? Or Russia falls to political corruption and impacts all Eastern Europe? What about the problems with Mexican drug cartels? All geo-political issues that can have drastic repercussions on our supply chains.

Our supply chains have become global and because of this we have enjoyed tremendous growth in terms of depth in offerings, efficiencies in production and price competitiveness to name few. However with this new “flat” world, these supply chains also become vulnerable to political unrest in places that we would otherwise not worry too much about…at least as non political scientists!

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Filed under Current Events, Supply Chain

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