Sedat Saka, energetic leader and President of MTS Logistics, a NYC-based, top U.S. logistics company.
Shipping and logistics have faced a tumultuous decade. A decade after the Hanjin Shipping bankruptcy led to industry upheaval, global events like the Covid-19 pandemic have increased uncertainty in shipping. Shipping was one of the most disrupted industries during that time, as demand dropped 7% year over year, followed by a global container shortage.
More recently, geopolitical events have highlighted vulnerabilities of supply chains worldwide. With military conflict in the Middle East, shipping routes were disrupted, with over 50% of voyages affected in the Red Sea alone. The U.S.-Iran conflict has disrupted global shipping through the Strait of Hormuz, a critical waterway located between Iran and the United Arab Emirates.
Shipping and logistics companies must ask themselves the ever-important question: How do we prepare for global turbulence with a diversified and efficient supply chain, in 2026 and beyond?
Technology Supply Chains Are Vulnerable To Consolidation And Centralization
With the AI boom, technology is becoming one of the hottest in-demand commodities for the world of shipping and logistics. However, the technological supply chain has been centralized around several key countries over the past few decades, mainly Taiwan, South Korea, Japan and China.
That’s a big problem for shippers who are wary of keeping their supply chains consolidated around one geographic area, given the supply chain disruptions of the past six years. For example, although U.S. intelligence believes China will not invade Taiwan in 2027, the possibility still exists. Shippers should assume that any conflict between China and Taiwan will disrupt shipping by roughly 20% globally, and plan accordingly.
The 2021-2022 semiconductor chip shortage showed the vulnerability of relying on technology components from a handful of countries. As a result of shortages, prices climbed and consumers and businesses paid these increased costs.
Diversification Is A Major Key To Protecting Supply Chains In All Industries
The Covid pandemic brought the problem of vulnerable supply chains—in technology and other industries—to the forefront of business leaders’ minds. After all, if one natural disaster could strain supply chains globally for years to come, shippers must do something to protect against future disruptions. Diversification is a core part of the shipping and logistics industry’s plans to make supply chains more efficient and responsive in the future.
How The U.S. Is Diversifying Its Technology Supply Chains
The U.S. took a leading role in diversifying its technology supply chains after the Covid pandemic, with the U.S. Congress passing the CHIPS and Science Act in 2022 in an attempt to diversify semiconductor manufacturing and supply chains by establishing multiple manufacturing plants and supply routes in the U.S. rather than abroad. States like New York have competed to have semiconductor plants opened there.
How Garment And Consumer Goods Manufacturers Are Diversifying Supply Chains
In the aftermath of the Covid pandemic, some consumer goods manufacturers realized that consolidating nearly all of their operations in China was problematic if any disruptions were to occur—either natural or man-made.
As a result, companies have begun shifting parts of their supply chains into neighboring countries in Southeast Asia, particularly Vietnam. AI and machine learning can help build strategies to diversify risk. By diversifying supply chains, companies are demonstrating a commitment to protecting themselves against letting one crisis disrupt their entire supply chain.
Most shippers who manufacture consumer goods abroad should consider alternative supply chain locations as well as warehouse diversification. Planning now will reduce risks for future disruptive events.
To Build Efficiency, Prepare Customers For A New Era Of Uncertainty
Global conflicts, particularly in the Middle East, have made vulnerable shipping routes such as the Strait of Hormuz household names. After all, American consumers have become all too familiar with shipments being delayed as a result of supply chain disruptions. But more efficiency is possible if shippers level with businesses and consumers on what to expect in this new era of uncertainty.
Uncertainty In Shipping Is Unlikely To End Soon
For many reasons, the supply chain will likely continue to be disrupted and affected by events outside of shippers’ control. Shipping companies must prepare themselves for a long-term period of uncertainty. They should start by telling their stakeholders the truth: Things are unlikely to return to normal any time soon, and fundamental changes in supply chain operations are needed.
Supply chain preparedness is a good starting point for shippers. If supply chains have more routing, schedule or transportation mode options, one area of geopolitical disruption likely won’t affect the industry as strongly. Take the Strait of Hormuz, for example. Ships have been avoiding the Strait of Hormuz and the Red Sea by taking alternative routes, adding as much as 3,000 to 3,500 nautical miles and higher costs. But ships are arriving at their destinations safely. The time to change shipping routes and make new routes expected as part of normal operations is now. Stakeholders will gradually accept and understand these changes as necessary, given the unsafe and uncertain nature of current Middle East-based shipping routes.
And with major shipping companies such as Maersk incorporating digital scheduling and routing software to provide diversified voyage options, it’s easier than ever for companies to plan their supply chain diversification strategies.
Customers Must Adapt, Too, For Long-Term Efficiency And More Certainty
End customers must adapt schedules and supply chain pacing to match these risks. If companies plan on longer receiving times for goods, and price in higher costs for alternative transportation options, a lower-stress environment for shippers and customers is possible.
It will better for shipping and logistics, over the long term, to be realistic with customers about the need to ship early. Customers will make those changes, because they will be necessary to achieve a new level of certainty in their businesses and lives. With AI and other technologies available today, companies can game out different scenarios and plan for the worst case easier than ever.
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