How are the Suez Canal and the Red Sea Crises going to affect your logistics?

  • 2024-05-30
  • Magnus LEPASALU, CEO and co-founder of MyDello

What has happened in the Suez Canal and the Red Sea in the past few months?

If we look at the bigger picture, the last few years have been brutal for logistics, starting with COVID-19 and the devastating war in Ukraine. Now, in 2024, we face another challenge. The circumnavigation of Africa by giant cargo ships has caused massive delays because the direct route from Asia to Europe through the Suez Canal and the Red Sea is too dangerous due to attacks by Houthi rebels. These attacks are part of a more significant conflict in the region. While the detour around the Cape of Good Hope bypasses the danger, it significantly costs companies to rely on these routes. These journeys are already 5,500 to 6,500 kilometers longer, translating to roughly 9,000 kilometers extra compared to using the Suez Canal. This extra distance translates to delays of more than a week, further disrupting already strained supply chains. Traffic through the Suez Canal has plummeted by more than 50%, impacting delivery times and leading to higher prices for consumers.

This, of course, affects the other types of transportation? 

Due to their massive capacity, cargo ships remain the most economical option for shipping goods. However, the disruption caused by the Red Sea situation is pushing companies to explore alternative transportation methods depending on their needs.

Air freight: For smaller volume, high-value goods (think electronics, medicine), air freight offers a much faster alternative despite the significantly higher cost per kilogram compared to ships. 

Rail: For heavier, less time-sensitive goods (think building materials, grains), rail transport offers a more costeffective alternative to air freight, especially for overland routes. 

While generally slower than air freight, it’s significantly cheaper. The decision on which alternative to choose ultimately depends on each company’s specific needs, particularly the volume and value of the goods they need to transport and the urgency of delivery. That’s why we have also developed a tool at MyDello for smaller and bigger companies to estimate their logistics expenses immediately and compare different routes. 

How is the ongoing Suez Canal and Red Sea crisis impacting small firms without dedicated logistics departments? What challenges do small firms face in finding trustworthy logistics partners amidst the crisis? 

Small firms without dedicated logistics departments are particularly vulnerable to the disruptions caused by the crisis. The prolonged voyages and increased costs associated with avoiding the Suez Canal can strain their resources and affect their ability to fulfill orders efficiently. 

As a result, these companies may face delays in receiving essential goods and struggle to maintain customer satisfaction. Therefore, transparency and minimizing intermediaries are crucial when choosing a partner. Companies with direct control over operations in key regions can offer greater transparency and potentially reduce hidden fees. For instance, MyDello has a dedicated team in China, allowing for more oversight and potentially fewer middlemen involved in the shipping process. 

How can SME companies navigate the complexities of European logistics without a dedicated logistics department?

Small businesses can greatly benefit from partnering with trustworthy logistics providers who offer end-to-end solutions customized to meet their specific requirements. The logistics provider should automate as many processes as possible to reduce the number of emails and complicated questions the business must handle. 

One of our core principles has always been to provide customers with a seamless experience from the moment they sign up to the delivery of their goods. We understand that customers value a trustworthy partner who can assist them with questions, but we also believe that most of the work can be done with just a few clicks. 

Our extensive experience has shown us that these are the key elements customers seek. This way, small companies can focus on their core activities and utilize their expertise and resources while ensuring that their supply chain management runs smoothly.

Now, when we are returning to delays, how should companies manage them?

The first step in managing delivery delays is understanding why they happen. In my experience, the typical culprits besides crises include increased demand and lack of cargo space, weather conditions, port congestion, customs issues, strikes, and human errors. 

Each comes with unique challenges, particularly in the ever-changing Nordic and Baltic markets. Fortunately, digitalization has transformed how we manage potential delay factors. We can now forecast weather conditions, anticipate port congestion, streamline customs processes, but also prevent human errors. Adopting advanced logistics technology is not just an advantage – it’s a necessity. 

At MyDello, this is our secret weapon against delivery delays, primarily through route optimization and real-time tracking. 

What strategies do you employ when facing unavoidable delays?

Life is filled with unexpected situations, and as we discussed at the beginning, we cannot control what is going on in all parts of the world, so communication with your team and partner is the key. We know that customers appreciate transparency, and the sooner they learn about a delay, the better they can plan their operations. This doesn’t just minimize the impact of the delay; it also strengthens your relationship with the customer.

MyDello has been instrumental in my delay management strategies. We have designed features that effectively prevent, manage, and communicate delivery delays. For instance, our real-time tracking feature allows clients to monitor shipments 24/7, and advanced analytics give valuable insights into potential delay factors. 

If we look ahead, what new trends in logistics should smaller and larger companies watch out for? 

One crucial aspect is managing supply chain CO2 emissions, which involves transitioning to alternative fuels and adopting energy-efficient transportation methods. Additionally, the ability to swiftly adapt to changes in the global business landscape is paramount. Technological advancements and evolving supply chain dynamics demand agility from companies to stay competitive or gain an edge. Automating logistics processes is also gaining traction. 

This reduces human involvement and facilitates direct softwareto-software interactions, which not only enhances efficiency but also minimizes errors along the supply chain. Moreover, digital freight platforms change decision-making by connecting shippers with logistics service providers. Integration with these platforms, often achieved through API integration, enables real-time communication, speeds up processes, and ensures optimal transportation setups. 

For firms seeking a trustworthy logistics partner, visit the MyDello website to learn more about how we can support your logistics needs: