By Simon Thompson (pictured) , VP Sales Northern Europe at JAGGAER
The current conflict in Sudan was triggered on 15th April 2023 when Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF) violently clashed. Since then 10.2 million people have been displaced, the Famine Review Committee has officially confirmed famine in the Darfur region and around half the population (25.6 million) are facing acute food insecurity. In addition to the staggering toll on human lives the region is in a strategic location and a further escalation in violence could well have impacts that reach far beyond, most specifically on the global supply chain.
Sudan’s coastline borders with the Red Sea for around 800km, threatening an already thoroughly volatile situation in this key route that accounts for 15% of global sea trade. Since October 2023, Houthi missiles and drones have been targeting cargo ships transiting through the Red Sea and more specifically through the strait of Bab al-Mandab – a 20-mile-wide channel that splits Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula, severely disrupting trade and driving many commercial ship operators to opt for alternative routes. These routes, however, are usually much longer and diverting ships around Africa’s Cape of Good Hope can add days onto an already lengthy journey.
The effects of longer shipping times are numerous: angry buyers, customer churn, more expensive journeys and an increase in Co2 emissions. Maersk reports it is experiencing an average 40% increase in fuel costs due to longer routes. Reuters confirms the trend revealing that freight rates more than doubled from around $1,200 per trip in 2023 to a January peak of $3,400. Although prices dropped a little in early spring 2024, since May they’ve rebounded to hit a staggering $4,500.
Rerouting around the Cape of Good Hope is estimated to have extended voyages by approximately 3,500 nautical miles (equivalent to 6,482 km) and increased shipping times by a minimum of 14 days. Trade between Europe and Asia, which ships primarily through the Suez Canal, has been particularly affected; however, the long diversion is still a better option than air freight which would increase costs, create more Co2 and risk overloading the supply chain further.
In this bleak picture, there is however the indication that some companies have paid attention to the hard lessons of the past four years and have put in place systems and solutions to help de-risk the supply chain. Specifically, the COVID-19 pandemic, the Suez Canal blockage in 2021, a rise in protectionism, the Ukraine conflict and other localised strikes and infrastructure outages had already highlighted potential threats in this area. Businesses that took note and prepared to rapidly pivot to alternative routes are seeing lower-scale issues.
With no indication that the Middle Eastern conflict will recede and Houthi attacks will diminish, forecasts now are looking with concern to Sudan as another conflict that may feed the fire of an already troubled area. Businesses that have not already done so need to rapidly assess their supply chain and their risk modelling to ensure that they are identifying low-cost and efficient alternative transport options in good time. Procurement teams specifically will need to rethink how their existing technology supports them in building resilience, mitigating risks, optimizing costs and efficiencies to help their companies react flexibly to changes in global trade.
The geopolitical landscape is fragile and, in a global economy, its impacts are far and wide. To help plan, manage and minimize the impact of unexpected events, businesses at all stages of the production process need to leverage technology to protect their trade flows.
Through digitalization it is possible, for example, to establish real-time collaboration with direct material suppliers, enabling greater transparency so that potential bottlenecks are communicated early on. Similarly, automation helps process huge volumes of data from suppliers and the market, helping analyse and even predict changes when it is still possible to intervene effectively. In addition to this, to help contain risk, businesses also need to ensure that they are managing a diverse portfolio of suppliers, a task that can become complex and time consuming without the support of AI technology.
In procurement, specifically, the application of AI in predictive analytics could involve the deployment of machine learning and algorithms to make the optimum buying decisions based on pricing, market trends, the risk of disruptions to supply chains and other factors. Until recently, this technology was still limited to the performance of tasks clearly outlined and directed by human beings. Now, however, generative artificial intelligence (such as the popular ChatGPT) has expanded its abilities and can be used to create intelligent and dynamic suggestions.
It is now possible to rapidly conduct dynamic analysis of supplier proposals, identifying key parameters including cost-effectiveness, quality, delivery performance, alignment with organizational goals such as sustainability or social value, together with critical geo-political risk factors in just a few minutes. This could have taken a human team hours if not days, not to mention the risk of introducing human error in such extensive data analysis.
The speedy processing of huge numbers of proposals based on a wide and ever-changing set of criteria, enables the software to generate supplier rankings and make dynamic recommendations in real-time helping businesses pivot without taking on unnecessary risk. Technology can also support by analysing market supply and demand, historical pricing trends, cost structures, risk alerts, news items etc., to help optimize pricing strategies. These in turn will maximize cost savings while maintaining high quality and security standards in combination with flexibility and agility in face of changing conditions.
As one of the major arteries for world trade faces yet another destabilising threat, it’s high time to move away from obsolete, closed-loop systems and paper records that rely on human intervention to provide insights. Intelligent, predictive, data-led decision-making is possible and can be largely automated, saving businesses precious time in an emergency and unburdening teams from repetitive and unrewarding manual tasks.
The Sudan war is sadly just another in a lengthening series of disruptive global conflicts that put the international supply chain at risk. Among other things, it highlights the need for companies to embrace automation and equip themselves with tools that promote agility and transparency. With solutions that support teams in their prediction and analysis of risk, as well as propose intelligent, dynamic solutions to issues when they do occur, businesses will remain well-placed to navigate the choppy waters that lie ahead in international trade.
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