Why your supply chain needs to be concerned about Egypt

Many in the West expressed some irrational expectations when the “Arab spring” was happening. To many, it was looked upon as a wave of democracy that was about to sweep through much of the Arab world. And with it the promise of greater cooperation with the West? At least that is what the pundits expected…or hoped for. I will not dive into the politics of the revolutions, maybe another time. One thing we can take out of the Arab spring is that the region remains volatile. All one has to do is watch what is currently taking place in Egypt. After the election of Morsi, there was an uneasy tension in the nation. The recent actions of the military to both over throw Morsi and now crush any protests, has made Egypt the focus of much hand wringing. Clearly this has become a very unstable and dangerous situation.

And your supply chain needs to be concerned. Why? Two reasons.

  • The most obvious one is that 8% of global trade, and probably a piece of your supply chain, passes through the Suez Canal. Any historians will remind us that the Suez has been shut down in the past due to conflict, nationalized by Egypt, attacked by Franco-British troops and blockaded by the Egyptians themselves. By no meanSuez_Canal-600x0s do I believe this will happen any time soon…but who is to say the violence and turmoil does not impact the operations of the canal. What if it gets shut down for a week, or a month? In our world of lean supply chains what if goods cannot pass through the canal?
  • The second is the potential spill over the violence may have in the region. Egypt has always been one of the Arab nations that has steadied relations in the area with Israel, okay not always but recently. Yes I am aware of the Yom Kippur and Six Day wars. If Egypt spins too far out of control what will this mean for the region? Will the turmoil carry over, destabilize the region. Oh and let’s not forget this region provides the bulk of global oil. That could have an impact on your supply chain.

So what can one do? Not much when it comes to what is happening on the ground. That is in the hands if governments and the international community. What this does remind us and our supply chains, is that we are still at the mercy of physical choke points – the Suez. As well as geopolitical events. These factors must be part of any risk management scenario. When it comes to supply chains we think about a promotion that does not work, or inventory misplaced, or not having the right tanker truck at the terminal – all variables we have some control over. Yet it is these types of events – geopolitical or acts of God – that also have to be taken into account. While we cannot control them, we must plan for contingency plans to deal with them. If and when they happen.

All the software, big data, in memory computing etc etc have made supply chains more nimble and more powerful. But do not neglect your history, political science and geography when it comes to your supply chain.


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Filed under Current Events, Supply Chain

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