Case Study : Suez Canal: Ship blockage may be due to 'human errors' The Suez Canal, one of the world's most important trading routes, was opened in 1869.[3] By 2021 approximately fifty ships per day travelled through the canal, About 12% of global trade passes through the Suez Canal, which connects the Mediterranean to the Red Sea and provides the shortest sea link between Asia and Europe. For much of its length, however, the canal is not wide enough to allow traffic to travel in both directions at once; convoys of ships must take turns transiting these segments of the waterway. An expansion project is underway, but significant portions of the canal remain single-lane On 23 March 2021, at 07:40 EGY (05:40 UTC), a huge container ship- Ever Given was travelling through the Suez Canal, when it was caught in a sandstorm. The strong winds, which exceeded 40 kn (74 km/h; 46 mph),[33] resulted in the "loss of the ability to steer the ship", causing the hull to deviate and ultimately block the Suez Canal to travel for 6 days. Biden- the US President said that we could help Egypt to release ship as we had capacity and equipment. Russia promoted its Northern Sea Route amid jam and blockage. Russia redoubled the efforts to promote Arctic Route. The head of Egypt's Suez Canal Authority, Osama Rabie, said Saturday that "technical or human errors" may be to blame for the grounding of a giant container ship in the crucial waterway The rescue operation was not a piece of cake. Multiple options were considered. 1- Moving containers from ship to lightened the weight but found it very complicated 2- Use of helicopter to lift the container from ship but no helicopter was capable to carry such heavy containers. 3- As per close investigation the shipping company found no sign of damage on vessel, engine and equipment than the focus on making ship to refloat could resolve the issue. 1- 10 tugboats were assigned for pushing the ship. 2-Heavy digging to be made to remove mud and sand from the bow of the ship. Excavating machinetechnically called as Backhoe was used for this. 3- Dredger ships were also used to dig in water The ship was made to refloat after diggers reportedly removed 27,000 cubic meters of sand, going deep into the banks of the canal. A cursory analysis throws up possible decreased engine power exacerbated by high velocity winds which used the resistance offered by the wall of containers (surface of roughly 14,000 sq m) virtually converting it into an effective sail, as probable causes for driving the ship aground. Was this a freak occurrence? Or, a stochastic event that can only be analysed and not predicted? Regardless, it ended up causing a massive disruption to the global maritime supply chains, with 422 ships waiting due to this blockade. The Suez Canal last year handled almost 25,000 vessels averaging 55-75 vessels a day and this seven-day interruption hugely impacted the throughput of world trade. Estimates by analysts, including Lloyds, put the cost at $9.6 billion for each day. Allianz, the insurer of the ship, pegged the cost to global trade between $6 billion and $10 billion. The accident is expected to affect negatively the global maritime trade by 0.2 to 0.4 per cent. The Suez incident shows how woefully unprepared the industry is in its response or alternatives to this crisis. First, crisis forecasting, where every foreseeable risk should be itemized and the extent and depth delineated in terms of hours of disruption, human and commercial losses. In the Suez blockage case, it would not only include the breadth and depth and weather of the canal but also the characteristics of the ships that pass through it. This should be followed up by a probability analysis of such risks. A Swiss cheese model analysis is a must. Did the Suez Canal Authority exhaustively list the risks? The Heinrich Triangle, which says that any major catastrophe is preceded by a number of minor ones, should also be used to red flag such events Hundreds of ships delayed The blockage has caused a huge traffic jam of more than 300 ships along the 193- kilometer (120-mile) canal, and caused major delays in the delivery of oil and other products. Some companies have even been forced to consider re-routing vessels around the southern tip of Africa. Over 300 vessels at both ends of the canal were obstructed by Ever Given, including five other container ships of similar size.[44] These included 41 bulk carriers and 24 crude oil tankers. [45] The affected vessels represented roughly 16.9 million tonnes (37 billion pounds) of deadweight. [44] Some docked at ports and anchorages in the area, while many remained in place. The Ever Given's sister ship, Ever Greet, was affected by the disruption,[46] as were two Russian Navy vessels: Steregushchiy-class corvette Stoikiy and Altay-class oiler Kola. These two vessels, believed to have been the only military vessels affected by the blockage, were conducting naval exercises in the area at the time. Kola had been involved in a minor collision with bulk carrier Ark Royal earlier that day; the two were anchored roughly 11 km (5.9 nmi) away from each other for the duration of the incident.[47][48] The incident exposed a need to investigate issues of supply chain resilience and disruption to just-in-time manufacturing already facing shortages from COVID-19 pandemic impacts. [66] The "complete disconnect of ship size development from developments in the actual economy" (OECD report, 2015[67]), and the corresponding limitations of existing infrastructure to handle them a process evident in the Suez, where expansion work on the northern end of the canal has been ongoing led to the incident being described by Michael Safi in The Guardian as a "worst-case scenario that many saw coming".[68] Events during the several days the canal was blocked highlighted the difficulties of saving larger ships, which requires more time and more equipment. If Ever Given had required intervention of floating cranes to remove some containers (assuming crane ships of sufficient capacity would have been available within any realistic time-frame), the process would have required larger equipment working for longer, and would have been likely to prolong the blockage by "days, even weeks".[68][69] Economic impact Rise in prices Maritime and logistics experts warned that the incident would likely result in shipping delays of everyday items for customers around the world.[97] Maritime historian Sal Mercogliano told the Associated Press: "Every day the canal is closed container ships and tankers are not delivering food, fuel and manufactured goods to Europe and goods are not being exported from Europe to the Far East."[35][3] Lloyd's List estimated during the blockage the value of the goods delayed each hour at US$400 million,[98][99] and that every day it takes to clear the obstruction would disrupt an additional US$9 billion worth of goods.[44][100] Rabie estimated that Egypt lost $1214 million per day due to the closure.[101] The SCA calculated it lost approximately US$15 million per day in transit fees.[85] Michael Lynch, president of Strategic Energy and Economic Research, attributed a rise in oil prices to "people buying in after recent declines in oil prices, with the Suez closing the trigger factor". James Williams, energy economist at WTRG Economics, said that in light of existing stocks "a few days of slowdown in [oil] delivery is not critical to the market".[102] On the contrary, the oil prices had plummeted after the Suez Canal became unblocked on 29 March 2021, as a result of delayed supply of oil from other cargo ships.[103] Knock-on delays The event delayed goods, which impacted industries with existing shortages, such as with semiconductors, thereby influencing markets already at risk of collapsing. To mitigate shortages of goods in the long term, future shipments could be ordered earlier than normal until the difference has been made up.[102][104] However, a consultant at another firm noted that even a short-term disruption at the Suez Canal would have a domino effect for several months along the supply chain,[105] an effect already apparent in the weeks following the incident.[106] This kind of disruption is not unique to the incident: the historical trend for shipping rates to rise after interruptions in the supply chain is well documented, and analysists such as Ioannis Theotokas, professor of maritime studies at the University of Piraeus, noted that the crisis "led to a lot of losses for freight owners and charterers", and that a prolonged closure could have had impacts similar to the 1967 Arab-Israeli War. [107] Some freight forwarders noted that demand for alternative means of transportation was expected to rise within the next few weeks on Europe to Asia routes, as a consequence of shippers seeking to avoid the disruption and uncertainty caused by the blockage of the canal.[108] Following the resolution of the incident, forwarders in India noted difficulties with securing shipments to Europe or Africa, with many prior bookings cancelled and increased freight rates hitting small and medium sized exporters particularly harshly.[109] In England and across Europe, supply chain disruption from the canal incident, coupled with an already increased interest in gardening due to COVID-19 lockdowns, led to a shortage of garden gnomes. [110] Knock-on effects were equally noticeable in several European ports: despite ports anticipating delays and using the week-long lull of the Ever Given blockage to prepare, many had difficulties meeting-up with the demand of the resulting sudden spike in traffic. Shipping lines often discharged containers wherever possible, to be able to return to ports in Asia where several weeks of cargo were available at inflated rates, often prioritising the back-loading of empty containers and leaving urgent deliveries on the quay. Importers were advised of many cases where cargo was discharged, but at a port other than the expected destination, and that there were no schedules for further transport of said cargo, creating a "perfect storm" with no time nor capacity to spare for the delayed shipments. Congestion at Antwerp and Rotterdam was also delaying hinterland barge operations. The quick turn-around of ships in Europe was expected to have an overall positive impact on carrier's ability to recover their schedules, with disruption expected to be cleared up by early June, more than two months after Ever Given had been freed.[111] Alternative routes The default alternative route for maritime traffic between Asia and Europe is to go around Africa via the Cape of Good Hope, a trip which can add up to two weeks to journey time,[46] with this alternative having already been taken by some ships as of 26 March.[112][113][114] Russia used the incident to promote its Arctic shipping routes as a shorter alternative to carrying goods around Africa.[115][116] Concerns about piracy, due to the unprecedented concentration of valuable shipping in such a small area, prompted shipping companies to make inquiries[when?] to the Bahrainbased United States Fifth Fleet about security.[117] The incident highlights the fragility of the global supply chain: the incident caused tangible damage to businesses across the globe. Rising political tensions raise fears that ill-intentioned actors could similarly disrupt a tightly interconnected economy by weaponising its chokepoints in the future, and this despite the prohibition of waterway blockades under the 1888 Constantinople Convention, or the well known fact that keeping chokepoints open is "essential for global trade".[118] Livestock Concern was raised about livestock transported through the route, with 130,000 sheep being transported to Romania alone; Gabi Paun of Animals International stated "Every hour counts for the sheep and the fatality rate will only grow ... even if the law was respected and the ships were carrying 25% more food ... it would nonetheless have been finished by now". A previous 2020 report by the European Commission discovered many ships used for transporting animals were not fit for that purpose, and that oversight was lacking aboard ships of several member states, including Romania, France and Spain.[119] Loading of livestock ships for exportation was temporarily suspended by the Romanian and Spanish authorities until the canal cleared.[103] Q2- a] Keeping in mind the rescue operations in the blockage situation, fill in the blanks about 3 steps of Strategic Fit Solution. 1- Demand Uncertainty? ____________ 2- Implied Demand Uncertainty?__________ 3- Do you think that Suez Canal Authority created a best fit solution? ____________________ b] Explain the effects of unsmooth operations of Logistics Supply Chain on Multiple Supply Chains