One single ship blocked the Suez Canal —the passageway between the Red Sea and the Mediterranean— for 6 days, 3 hours, and 38 minutes. The cost to the global economy? Over 60 billion and counting. (The true cost is still unknown. It will only be revealed over the coming weeks and months.)
How one ship’s story affects businesses around the world
When we watched it on the news, it felt like the ship (the Ever Given) blocking the Suez was something distant; something that had little impact on our daily lives. That’s incorrect.
Shipping lanes are a complex, intricate ecosystem. They are tied together, each small change creating larger changes like a ripple effect. What happened at the Suez was particularly important. Here’s why: nearly 12% of global trade passes through the Suez: during the delay, over 360 ships were standing by, waiting for clearance, goods undelivered.
How a “small” delay in the global shipping economy affects everything
Let’s look at the visual impact of the situation. Here’s what the area around the Suez looked one day after the Ever Given finally moved.
This is a view of the Ever Given’s location 2 days after it was able to move again (and the backlog you can see as a result). (You can find the interactive version of this map here.)
The Suez Canal is one of the world’s primary choke points: a canal of this size is more likely to have an issue with blockage than open spaces. And as we said earlier, 12% of global trade needs to go through this choke point. That’s an estimated 9 billion dollars worth passing through there every single day. (Which means that this delay has 60 billion estimated cost.)
Now let’s talk about the Even Given. It’s not a small ship. It’s about ¼ of a mile long (approximately 4 football fields). And it’s not unusual. Cargo ships are behemoths: the enormous weight they carry means they require deep hulls and a large surface area. As a result, the shipping lanes they travel in and ports they can enter have to be carefully planned down to the last detail.
The schedules are tight. The margins of error are miniscule. Every minor delay has an oversized knock-on effect. That’s why the Ever Given’s six day delay is so much bigger than it appears at first. It affects every single ship that was scheduled to go through the Suez for the next 3-4 weeks. And it will have repercussions on virtually every step of the supply chain, from manufacturing to the end consumers.
The knock-on effect on the global supply chain
Now that it’s free, The Ever Given will move forward on her way to her scheduled ports, along with the other 360 ships that waited for her. But they won’t be on schedule.
The Suez canal can probably clear about 100 ships each day. This means that the ports expecting those ships will see a 6-10 day delay in arrival and receipt. That would be fine if the ports had extra space. However, each available slot has already been booked by other ships scheduled for arrival and receipt. That’s why one of two things has to happen. Either:
- The Suez ships have to keep waiting for their turn causing further delays OR
- The ships next in line have to yield their spots to the Suez ships (causing new delays)
Neither option is ideal.
Can pre-scheduled ships be diverted to less busy ports? Some can. But the majority won’t be able to because big ships can only enter specific ports. And these ports tend to be tightly scheduled because of the sheer volume of traffic.
Docking is just the first part of the distribution story
Docking may be the last delivery point for the ship, but the products’ journey continues. After a container ship finally docks, the workers at the port have to:
- get it unloaded (remember that the Ever Given — and other ships of its class— have up to 20,000 containers on board
- clear customs (where backlogs here can create further delays) and
- load the products into whatever transport has been booked for receipt.
And this is where a shipping delay has an impact on land transportation. Each ship needs trucks to move the load. Trucks that have their own tight schedules and places to be. Imagine trucks outside the port waiting for clearance receipt, late to get on the road to their final destinations.
Drivers are only allowed by law to drive a certain number of hours a day so the delay can’t be made up by simply driving more. (We haven’t quite reached the age of self-driving trucks yet.)
This has another knock-on effect on the warehouses expecting the cargo and ready to unload it. Not to mention all the backorders for products that piled up. This also creates issues for the final mile carriers as they suddenly need to add backlogged products onto their already full trucks for delivery to consumers or stores.
It doesn’t stop there. There’s also the matter of the empty containers. These will now get filled with the goods that were waiting for the ship to arrive, but since the ship was delayed, there are even more goods waiting for containers. Some goods will get bumped in favor of others deemed more critical. Causing more delays…
Delaying over 10 billion in cargo, per day, and the knock-on effect on businesses of all sizes
The stalled ship was holding up over 9 billion in cargo (per day!). Cargo like consumer goods, cars, oil, computers, electronics, toilet paper, livestock. If there were perishable agricultural goods on board any of those ships that went bad, those deliveries will not just be delayed but cancelled.
Think of what you’ve bought in the last month. If any of those items were delayed or cancelled from being delivered to port, the subsequent delays would have impacted your experience with that merchant. There are costs associated with each of those delays and in the end, merchants will often pass that cost through to the customer. So those apples, or sneakers or laptop could cost you more if you bought it next month vs last month. This will affect wholesalers, businesses and consumers. And it will certainly affect operations.
That’s why the Ever Given wasn’t just a sensational news story. It’s an event whose effects have only just started affective ecommerce operations.