65bc0909acae4 Case Study Advectius Impulse Mdi

A BRIEF TIMELINE OF VARIOUS EVENTS CAUSING SUPPLY CHAIN
DISRUPTION
2021 – COVID-19: The lockdowns across the world disrupted the global supply chain,
sending shockwaves across the globe.
2022 – Ukraine Conflict: Barely had the world started recovering from the disruptions
caused by COVID-19, the Russian invasion imposed further blockades around critical
sea routes.
2023 – Israel-Hamas Conflict: The Israel-Hamas war, is threatening a wider disruption
of trade and supplies battering the already ravaged global supply chain.
2023 – 24 – Houthi Rebels: Attacks on commercial ships in the Red Sea & by extension
Suez Canal by Iran-backed Houthi rebels have rerouted most of the trade normally
flowing through the crucial maritime artery for consumer goods and energy supplies.
Global Supply Chain Disruptions
As observed, the Global supply chain has witnessed unprecedented and unforeseen
global shocks since the onset of the COVID-19 pandemic. The pandemic halted the
transhipment of goods and products with the global oil trading prices touching negative
value for some time.
As soon as trade worldwide started recovering and flowing, supply chains and
businesses were again marred by the effects of the Russia-Ukraine conflict in early
2022.
Sliding away from 2023 into 2024, when the world assumed there would be some
respite in terms of rekindled economic growth, the resilience of supply chains and
businesses, the world stands at the cusp of another regional conflict in the form of Israel
– Hamas war in the West, which is now not limited to the war zone and its effects have
spilt over to the oceans and seas, thus disrupting the trade flow and supply chain yet
again.
Disruptions due to the Current Geopolitical Situation
Transporting items via sea is usually more cost-effective than moving via air, meaning
that the shipping industry is essential for transporting nearly every imported product we
use—from clothing and cars to oil and gas. The current geopolitical tensions in the West
have affected one of the most important trade routes that connects the West to the East
– the Red Sea & Suez Canal.
The Red Sea directly feeds into the Suez Canal, the only water route available for ships
travelling from Asia to Europe without having to sail around the African continent. The
route faces an imminent threat as the ships and containers on the route are being targeted
by the Iran-backed Houthis.
The series of attacks first began with Israeli ships and containers being targeted by the
Houthi rebels. The Houthis argue that they are acting in solidarity with Palestinians and
have threatened to expand attacks to include U.S. ships in response to American and
British strikes on their sites in Yemen. Hence the effects of the Israel – Hamas conflict
seemed to have split to a wider region, threatening the global trade of the world.
This disruption has pushed major shipping giants such as Mediterranean Shipping
Company and Maersk, to the route around Africa's Cape of Good Hope and then up the
west side of the continent effectively increasing the distance of the route by 3500
nautical miles and 10 days for an average container. Owing to this development Tesla
has suspended manufacturing at its only European electric car factory.
SIGNIFICANCE OF RED SEA ROUTE
Roughly 12% of the annual global trade passes through the Red Sea, this equates to
almost $1 Trillion worth of goods passing through the route. Around $200 billion of
trade has already been disrupted because of Houthi Rebels with the global oil price
rising by 1% over the news of the recent U.S. airstrike killing 5 Houthi troops on 12th
January.
ROUTE USING RED SEA USING ALTERNATE

ROUTE
Nautical Miles 10019 (18555 kms) 13422 (24858 kms)
Days 25.4 days 34 days
Average speed 16.43 knots 16.43 knots

Implications for Suppliers and Businesses across the World
Supply chain shocks have scared businesses and traders since COVID–19. This is
because their effect is not limited to the production, inventories and shortage of material
but also to drive the customer and the market sentiment to negative.
A recent KPMG survey report titled “Global Supply Chains” points out that 7/10 of
businesses are wary of geopolitical tensions across the world and 6/10 of Businesses
feel that the tensions have a domino effect on initiating a negative sentiment in the
market.
Increase in Container Costs: The cost of a standard 40-foot container from China to
northern Europe has jumped from $1,500 to $4,000. This increase in costs has resulted
in a dip in consumer goods being transported through the route.
Reduction in Trade Volume: The number of containers passing through the Red Sea
fell by more than half in December, to around 200,000 from 500,000 in November. That
is 66% lower than the pre-pandemic 2017-2019 average. This could have a multi-fold
effect by deepening the demand and supply gap further.
Effect on Oil Prices: Crude prices rose around 4% on news of the U.S.-led air strikes.
International benchmark Brent traded at just over $80 per barrel on 12th January. This
could further deteriorate and have massive implications for global energy markets
which could deteriorate the situation further.
Policy Rates: Central Banks around the world are contemplating - reducing the interest
rates but the domino effect of a disrupted supply chain could fuel inflation thus negating
the bank’s considerations of slashing rates. The shipping costs could further put
inflationary pressures on the economies of the world, thus leading to a prolonged stage
of high interest rates and curtailed growth worldwide.
Investor’s Confidence: The overall disturbance in West Asia and troubled Sea-Routes
could dampen investor confidence across the globe and thus hurt businesses and start-
ups.
Global Response to Tackle the Crisis
Apart from the political course of action that the countries will decide to take or in this
case have taken in the form of US mobilizing the Operation Prosperity Guardian to
tackle the crisis, the businesses and suppliers need to be vigilant of the consequences
and adjustments that need to be made to tackle the effects of the crisis.
This could be in the form of finding new alternate routes and keeping inventories for
the delay caused by shipments taking alternative options. To sum it up the situation is
different from the pandemic slump and could be navigated by minimal chaos and loss
to the economy of the world.
Problem Statement
You are an Indian envoy to Israel. Assess the situation in the context of its effects on
India’s economy and the GDP and what could be your suggestion to the Indian
Government to keep India’s economic growth intact.
Deliverables
1. Prepare a PowerPoint presentation of a maximum of 3 slides (excluding the cover
and, thank you slide) with your assessment of the situation, its impact on the Indian
economy and businesses, and suggest the steps that can be taken by the government to
mitigate the risks of Indian traders and businesses
2. Provide an implementation plan for the government to mitigate the risks.
3. In the case of quoting data from external sources, please mention references in the
footer.
4. The solution will be evaluated based on the assessment and feasibility of your
solution.

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A BRIEF TIMELINE OF VARIOUS EVENTS CAUSING SUPPLY CHAIN

ROUTE USING RED SEA USING ALTERNATE

Nautical Miles 10019 (18555 kms) 13422 (24858 kms)

Days 25.4 days 34 days

Average speed 16.43 knots 16.43 knots

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