In comparison to the Africa-circumventing route, the Suez Canal is 8900 Km shorter and nine days faster. As a vital shortcut between East and West, it carries 12% of the yearly global trade and around 1 million oil barrels on a daily basis. Given just-in-time global supply chains, shipping companies charge a premium for speedy delivery.
✓ Its highest daily transited tonnage reached 5.8M tons on the 6th of February 2019.
✓ Lloyd’s estimates the hourly cost of its blockage at $400M; its westbound traffic value at roughly $5.1 billion a day; and its eastbound traffic at around $4.5B a day.
Over-dependency on the Suez Canal generates significant supply chain and logistics vulnerabilities.
✓ The only current Suez- alternative is the China-Central Asia-West Asia Economic Corridor (CCAWEC) running from Western China to Europe, a component of China’s One Belt One Road (OBOR) project.
- Transporting goods by train at an average speed of 40Km/h requires 18 days to reach Prague, the Czech Republic, from Xi-an, China. CCAWEC transits goods from the Bosporus via the Marmaray Tunnel.
- Alternative northern routes avoid the political unstable Central Asia and the single point of failure of the Marmaray Tunnel.
- Both routes heavily rely on the existing rail; however, rail is more expensive and, in some instances, slower than sea transport. In that respect: not a pound-for-pound alternative.
✓ Northern Sea Route (NSR): The melting of the Arctic promises year-round East-West sea transport is a potential Suez-alternative.
- NSR weather and sea ice conditions are hardly predictable and not the only problem.
- Port operations are an essential component of shipping. Port modernization studies are only in their beginning.
- Potentially: a very viable Suez alternative.
- Besides decreasing supply-chain risk, permanent Arctic warming may also significantly increase the systemic risk associated with climate change.
Route alternatives notwithstanding, the technology to boost the supply chain plays an equally significant role as well.
Less Than load (LTL) management, supplier consolidation, and the distribution and delivery of re-supplies are significant new supply-chain differentiators, potentially impacting supply chain efficiencies.
Ultra-reliable low latency communications (URLLC is a key pillar of 5G networks)
✓ Its support of dense IoT-endpoint sensor grids is the prime enabler for just-in-time delivery and in-transit quality-control of perishable goods.
✓ Its IoT support has the potential to generate enormous quantities and types of previously unavailable supply-chain specific-data; it opens the very concrete possibility of instant, real-time M2M communications between the carrier, its containers, the departing and arriving destinations.
✓ Adequately processed by emerging AI, the data may help generate actionable, efficiency-increasing supply-chain insights such as ship stall avoidance.
In addition, in the long run:
✓ The advent of autonomous driving has the potential to lower typical human error of truck-based transportation.
✓ Overdue advances in battery technology and the adjunct electricity-management software systems may position electric trucks and planes as a viable alternative to vessel-shipping.
✓ When this data is analyzed to improve the efficiency of supply chain management. Through artificial intelligence or machine learning (AI/ML), these millions of data can be used to tackle the critical questions in supply chain management.
✓ Blockchain technology may result in significant increases in the transparency of the supply chain.
- A decentralized network, blockchain definitively records IoT and non-IoT data of every cargo.
- Data certify the legality of the shipment as well as signal potential ethical conflicts.
· Digital Twin modeling attempts to predict the direction and magnitude of the following stages of complex systems by maintaining a continuously updated virtual representation of the analyzed system – in this case: a supply-chain representation.
- The value of DTM rests with predictive maintenance capabilities; it may conceivably point, ahead of time, to bottlenecks and potential failures.
The modern business environment is fluid and highly dynamic. Astute investors must keep abreast of all relevant geopolitical and technological changes as they usher in both foreseeable opportunities and considerable risks. As an independent adviser, Cubri Services may help devise growth strategies above and beyond the short-term implications of daily operations. We will help you achieve a competitive advantage, break down barriers to productivity and plan your expansion, whether geographically or into new products and services.
References:
Russon, M.-A., 2021. The cost of the Suez Canal blockage. BBC News. Available at: https://www.bbc.com/news/business-56559073 [Accessed April 3, 2021].
Anon, On the Road to Shared Prosperity. Bloomberg.com. Available at: https://sponsored.bloomberg.com/news/sponsors/features/standard-chartered/the-road-to-shared-prosperity/?adv=18283&prx_t=u-YDAm5InAYikPA§ion=belt-and-road-by-numbers [Accessed April 3, 2021].
China Pakistan Economic Corridor Council, China-Pakistan Economic Corridor Council. Available at: http://c-pecc.com/en/about/about-47.html [Accessed April 3, 2021].
Banker, S., 2020. 2021 Supply Chain Technology Trends To Watch. Forbes. Available at: https://www.forbes.com/sites/stevebanker/2020/12/21/2021-supply-chain-technology-trends-to-watch/?sh=1887f7833ad6 [Accessed April 3, 2021].
Get in touch Stephen Laaper Principal | Smart Factory Leader slaaper@deloitte.com, 2020. Using Blockchain to Drive Supply Chain Transparency and Innovation. Deloitte United States. Available at: https://www2.deloitte.com/us/en/pages/operations/articles/blockchain-supply-chain-innovation.html [Accessed April 3, 2021].
