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Logistics experts say the problems affecting global trade, particularly the Houthi attacks in the Red Sea and the Panama Canal drought, are far more serious than many realize.
The disruption could be widespread and could lead to further product delays in the U.S. over the coming months as consumers turn to spring and summer shopping and businesses scramble to make up for losses. , further problems with shrinkflation may arise.
Diego Panjoa Navajas, vice president of supply chain at Amazon Web Services, told FOX Business that the two situations at the Suez Canal and Panama Canal are “drastically impacting supply chains,” and at the same time connecting Asia and Europe. , and impeding trade between North America and the United States. Asia.
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“These are both choke points that are subject to external pressure,” Panjoa Navajas said.
Trade through the Suez Canal, which connects the Mediterranean Sea and the Red Sea, has been suppressed. supported by Iran Houthi militants continue to attack cargo ships.
A cargo ship sails through the Suez Canal in Ismailia Governorate, Egypt, January 13, 2024. (Ahmed Gomaa/Xinhua News Agency via Getty Images/Getty Images)
The attack is an attempt to disrupt trade in the region and effectively halt Israeli trade. war with hamas It began after the latter’s attack on Ysael on October 7.
The Suez Canal is the shortest shipping route between Europe and Asia. It is estimated that approximately 15% of the world’s shipping traffic passes through waterways.
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At the same time, the Panama Canal is experiencing an “unprecedented drought that is impacting the water table and the ability of ships to pass,” Panjoa Navajas said.
According to McKinsey, more than 14,000 ships were passing through the Panama Canal in 2023.
The problem is that “both situations require solutions that don’t currently exist,” Panjoa-Navajas said.
“The consequences of this double whammy are already reverberating through global trade networks and are already causing delays in the arrival of goods,” he said.
At the very least, he said, that means everything from electronics and appliances to furniture and oil will be in short supply and costs will rise for customers.
Intel IKEA Group had already warned in December that the situation in the Suez Canal “could result in delays and restrictions on the availability of certain IKEA products.”
A cargo ship crosses the Suez Canal, one of the most important man-made waterways, in Ismailia, Egypt, December 29, 2023. (Photo by Fareed Kotb/Anadolu, Getty Images/Getty Images)
Anne-Marie Jonkman, senior director of global industrial strategy at supply chain management firm Blue Yonder, said the impact will start to take shape in the coming weeks.
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“The impact on North America will be even greater over the next month,” he told FOX Business. “Product delays will become more prevalent and U.S. retailers will be unable to ship consumer goods in the coming weeks. They will start announcing delays,” he added.
Additionally, she expects “further shrinkflation” (where companies reduce the unit size or weight of products to increase their profit per package) to occur in the coming months.
View of the Miraflores Locks on the Panama Canal in Panama City on January 10, 2024. The drought affecting the Panama Canal is limiting the number of ships passing through the waterway amid fears that El Niño conditions will worsen. (Martin Burnetti/AFP via Getty Images/Getty Images)
“U.S. consumers have high expectations for in-store availability and delivery times,” Jonkman said. “To comply with the standards consumers expect, retailers will need to address stock availability issues by reducing package sizes while maintaining prices to offset losses to revenue. .”
Jonkman said people are starting to experience delays in shipping finished goods, but raw materials are also being affected. This could delay the production of finished products that are expected to hit store shelves in the coming months.
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According to Panjoa Navajas, this problem will continue as long as the Red Sea continues to be attacked and as long as it rains in Panama.
However, the supply chain engineer and expert argued that people should “adopt advanced technology and strengthen supply chain management processes to foster growth and reduce risk.”
In fact, he believes there will be technological changes that will lead to “the emergence and adoption of digital supply chains to increase agility in an uncertain world.” This helps companies respond to environmental, economic and geopolitical challenges.
