Tag Archives: Egypt

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.

Advertisements

Leave a comment

Filed under Current Events, Supply Chain

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!

Leave a comment

Filed under Current Events, Supply Chain