Many challenges have been faced in recent years. Disruptive global events that have affected international logistics management, such as the covid-19 health crisis, posed major challenges in terms of the intensity of bottlenecks.
Other conflicts such as the Russian-Ukrainian conflict affected not only logistics management, but also the cost of products such as energy and agricultural products. Now we are once again facing a major crisis, the consequences of which seem to be directly affecting our sector.
The predictions of the Bank of Spain are clear: the Red Sea crisis will have a slight impact on the Spanish economy and logistics. This is indicated by the most recent data obtained from this entity, which states that this crisis will represent a significant disruption.
Despite high transport costs and route diversion, the Bank of Spain maintains that, although the bottleneck rate has increased - especially in the euro area - it has remained stable since mid-December. well below record highs during the pandemic.
But let's start at the beginning, what are bottlenecks?
Bottlenecks in logistics are critical points where congestion or limitation occurs in the smooth flow of goods and services along a supply chain. These points can arise at various stages of the logistics process, from the production and sourcing of raw materials to the transportation and final distribution of finished products.
Bottlenecks can manifest themselves in different forms, such as production delays, warehouse congestion, transportation problems, or even poor coordination between different trading partners within the supply chain. These disruptions can have a significant impact on operational efficiency, costs and customer satisfaction, thus affecting the competitiveness and profitability of companies.
How congestion impacts on logistics activity
Despite the fact that logistics activity is carried out in an environment of constant change and adaptation, many companies or entities cannot deal with all the consequences of having to face peaks in demand at times when bottlenecks maintain a high impact on the activity.
Among all the areas where they are most affected, the following stand out:
- Delivery delays
Bottlenecks in logistics often lead to delays in the transport of goods. These delays can be due to a variety of reasons, such as port or road congestion, order processing problems, or even production delays. When goods do not arrive on time, delivery times promised to customers are not met, which can lead to customer dissatisfaction and frustration. In addition, late delivery can affect companies' production planning and inventory operations, leading to additional problems in supply chain management.
- Cost increase
Delays are not the only consequences of bottlenecks; bottlenecks can also increase companies' operational costs. For example, transport delays may require additional storage of products in warehouses, leading to additional storage costs. In addition, the need to seek alternative routes or contract express services to avoid bottlenecks can significantly increase transport costs. Also, delivery delays can lead to inefficient inventory management, resulting in additional costs associated with inventory management, such as holding higher inventory levels than necessary.
- Operational inefficiency
Transport delays can affect production scheduling and storage capacity planning. When resources such as transport fleets or warehouses are not used optimally due to bottlenecks, this can result in additional costs and lower overall efficiency. Operational inefficiency can affect the profitability and competitiveness of companies by increasing costs and reducing responsiveness to market demands.
Impact of the tensions of the Red Sea in Spain
Inevitably, there are a series of negative consequences that are affecting Spanish logistics, including price rises. Tensions in the Suez Canal have been affecting international maritime transport since mid-December 2023.
With around 30% of the world's container traffic transiting this route, as a result of Yemeni rebel attacks on ships, traffic has now been diverted to other routes. The consequence? A substantial increase in delivery times and costs. As a result, the volume of traffic through this channel has been reduced - by 40% since its inception - and many countries are affected by this measure.
Despite this, institutions such as the Bank of Spain have analysed the situation and tried to reassure the public that the consequences of this crisis are substantially milder than in other crises.
The uncertain future that accompanies situations like this leaves us with a world of possibilities as to how the economy and management of operations will react to this crisis, yet the learning gained through the many conflicts already overcome in recent years affirms the possibility of sending major consequences to the sector.
