The sustained attacks on commercial vessels have resulted in many shipping firms diverting to longer routes to avoid the main trouble spot in the Bad al-Mandab Strait off the coast of Yemen – one of the world’s busiest shipping lanes, with 12-15 per cent of global trade passing through it every year.
The longer journeys around South Africa’s Cape of Good Hope have added 3,500 nautical miles and around 12 days to shipping times, costing companies millions of dollars.
Another potential knock-on effect is an increase in oil prices and, with it, a rise in inflation.
The Houthi group has been launching the attacks in support of terrorist group Hamas since the start of the Israel-Hamas war in October, initially claiming it was targeting ships travelling to Israel. However, the attacks have intensified and become more widespread in recent weeks, with UK and US naval forces launching air strikes in response. Currently, there is no immediate end to the troubles in sight.
Darren Garland, MD of ProVu Communications, said that lead times have been extended by two to three weeks as a direct result of freight liners being diverted by the Cape of Good Hope. As a result of the longer shipping route and the protection required, he expects there to be a rise in shipping prices. He also anticipates that the disruption will have a knock-on effect on air freight costs as demand increases.
However, Garland added that his company was well stocked so he didn’t anticipate the current problems would cause any imminent disruption. Yet, the longer the situation continues, he said, the greater co-ordination ProVu will need to have with its partners to effectively forecast demand for certain product lines.
“We have made our customers aware of the potential delays and advised them to make us aware of any large projects they may be working on so we can minimise any potential disruption,” said Garland. “We always take a customer-first approach. Since the disruptions began, we have worked closely with our suppliers to identify the potential impact on our supply chain and the costs in receiving stock.
“We have also been very open with our customer base and shared updates about the situation and the parameters we are monitoring. Our door is always open, and we like to be as transparent as possible, welcoming our partners to raise any queries or concerns they may have.”
James Reed, MD, endpoint solutions, UK and Ireland, TD Synnex, said that his company plans its inventory requirements over the long-term, sometimes by as much as up to 120 days in advance. Therefore, events, such as those in the Red Sea, will have less of an immediate impact on its ability to supply products to customers, he said. But he added that, if shipments are held up or diverted for an extended period, that could affect availability and pricing.
“While no-one can predict the future, we can try to provide a degree of stability for our partners,” said Reed. “We are always planning ahead, trying to anticipate demand levels and placing orders as far in advance as we can.
“That gives us and our partners a degree of protection, and with the close and well-established relationships we have with major vendors, we are always kept well-informed of the situation with respect to future supplies.”
Mike Barron, UK managing director, Synaxon, said that his company hadn’t incurred any price increases or delays as a direct result of the situation in the Red Sea. But he added that if there was any change, the company would do its best to support its reseller partners, as it has done with previous challenges.
Rachel Rothwell, senior regional director, UK and Ireland at Zyxel Networks, said, “We’ve not seen any delays or changes to on pricing as yet but clearly, if the situation develops, there could well be some kind of impact. However, even then, we are not expecting it to be too serious. I think there would be a real concern if the situation starts to escalate on a wider front.
“As we have clearly seen since the early part of start of 2020, global events can have all kinds of impacts and influences on markets. Here in the UK, we can only focus on what we can change or influence, and we’ll continue to work with our colleagues at our Taiwan HQ to make sure we have the supplies our partners need.”
An HPE spokesperson said, “HPE is not experiencing impacts due to the Red Sea blockade at this time. We are closely monitoring the situation and have a diversified supply chain footprint to help mitigate the effects of regional disruptions.”
Brexit problems
ProVu’s Garland said that his company has had to overcome several barriers to protect its supply chain over the past five years. One of biggest challenges, he said, was Brexit, which added a host of complexities with customs charges and shipping items to partners in Ireland and the EU. However, he added ProVu has worked hard to ensure that these new rules had no effect on the end user in terms of both delivery times and costs due to changes in taxation.
Through the Covid-19 pandemic, Garland said that the company undertook some careful consideration and planning to mitigate against the global component shortage and ensure minimal disruption to its supply chain and partners’ businesses. It has also had to contend with increased fuel surcharges from its couriers since the war in Ukraine began, he said.
“These have all been things to overcome, but with good management they have caused little disruption to our supply chain as a whole,” said Garland. “We have consciously invested in higher levels of stock in order to ensure we do not run out. This investment, combined with the volatile currency markets that tend to accompany these types of events do increase our risk, however the good news is that there have been so many of these events in the past few years that our ability to manage these risks is always improving.
“The current situation in the Red Sea won’t really change our business processes; we will continue to work with our partners to forecast orders and maintain high stock levels to alleviate any disruption the situation may cause.”
Synaxon’s Barron said, “The events of the last few years have each affected the channel and the supply chain differently, but the cumulative net effect was to make buyers more cautious. As a result, the market shrank in 2023, and while we expect to see a return to growth in 2024, major global events could slow down the pace of any recovery.
“During these times, resellers have wanted more information on what products and options are available and we’ve seen much higher usage of our EGIS stock checking system, which provides live pricing and availability from more than 40 distributors with over two million SKUs listed. We also keep a close eye on the market and on stock positions and try to make sure that we always have the most popular products available in the warehouse of our hub business.”
TD Synnex’s Reed said that part of his company’s role as a channel distributor, enabler and aggregator is to provide stability for its partners. By adopting this approach, he said that it has been able to support its partners in meeting the various challenges brought about by such unforeseen events, while continuing to develop and meet its customer needs.
“From a broader perspective, our approach is very much one of following a steady and consistent course,” said Reed. “We see it as part of our role to help partners navigate their way through the constant cycle of change, while continuing to develop their capabilities and deliver good levels of customer satisfaction.”