Red Sea Rampage: Can Real-Time Tech be the Chemical Industry's Anchor?

The impact of Red Sea Route Disruptions on Europe’s Chemical Sector

The recent emergence of the Red Sea shipping crisis now presents a further layer of unanticipated complexity for chemical industry supply chains, serving as a stark reminder of the ever-present risk of unexpected and disruptive events on supply chain operations worldwide.

Route diversions of vessels are having significant time and cost implications as ocean shipping rates have continued to climb. According to estimates by Judah Levine, head of research at logistics firm Freightos.“All-in prices” of $5,000 to $8,000 per container for major trade routes originating in Asia are 2.5 to 4 times the “normal levels” for this time of year.” However, that is still 45% to 75% below their “pandemic peak” in late 2021, Levine noted.

Germany's chemicals sector, the country's third-biggest industry after cars and engineering with annual sales of around 260 billion euros ($282 billion), relies on Asia for around a third of its imports from outside Europe. As delayed shipments through the Red Sea begin to affect the sector, it adds to the growing concerns over supply disruptions, leading some companies to scale back production levels.

According to a Jan. 22 Reuters news release, delays in shipments are leading to production cutbacks and order fulfillment challenges, impacting European companies like Gechem GmbH & Co KG, which provides chemical mixing and bottling services for major industrial clients. Due to supply chain issues, the company is facing shortages of trisodium citrate, sulfamic acid, and citric acid, resulting in reduced production of dishwasher and toilet tablets.

Larger companies like Evonik also said it was being hit by "short notice routing changes and delays", adding some ships had changed direction as many as three times within a few days.

Amidst the prolonged conflict, Europe’s chemical firms are preparing for enduring supply chain hurdles. Some are actively exploring alternative sources and turning to emerging technologies and logistics strategies to counter the shipping delays, aware that passing on all additional costs to customers could exacerbate inflation or dampen demand.

The Crucial Role of Visibility in Chemical Supply Chains During Disruption

Amidst the challenges of the Red Sea crisis, Shippeo's Ocean Visibility solution can offer chemical shippers enhanced ocean transport data of superior quality, facilitated by a revamped tech architecture. These improvements ensure better data quality and scalability, enabling the tracking of an unlimited number of containers across various data sources. Furthermore, new dashboards provide valuable insights to facilitate contract negotiations with carriers.

The platform's “Port Insights” feature furnishes shippers with valuable insights into congestion and operational efficiency at ports worldwide. Leveraging Shippeo's extensive research into ETA algorithms and geofencing technology, users can expect superior vessel ETA accuracy compared to traditional shipping line estimates. By amalgamating historical data with real-time AIS satellite and terrestrial data, Shippeo's Port Insights engine generates precise arrival and departure events at marine ports, ensuring unparalleled visibility into shipment journeys and milestones.

In today's globalized landscape, businesses navigate increasingly intricate environments fraught with uncertainties that can arise unexpectedly. As a result, transportation visibility has ascended to the forefront of many organizations' agendas, driven by customer expectations, supply chain disruptions, and the imperative to optimize costs in inventory management decision-making.

"Real-time transportation visibility for downstream shipments isn't merely a luxury; it's an essential expectation. In today's market, consumers prioritize shipment transparency alongside delivery speed and sustainability. Says Thomas Spieker, VP Central Europe, Shippeo “For shippers having immediate insight into vessel locations and the status of affected shipments provides a significant advantage. It's crucial for companies to quickly understand which orders are affected and their updated expected arrival dates to quickly make informed decisions, so they can mitigate disruptions and provide added value for their customers”

What Chemical Shippers Can Do To Stay Alert And Plan Accordingly During Red Sea Disruptions

With market uncertainty mounting, shippers can take immediate action to bolster their supply chains, minimize delays, and meet customer needs. Here are some tangible ways you can leverage real-time visibility of your ocean shipments to navigate the turbulent months ahead.

Predict and manage exceptions efficiently

Equip operations teams with precise freight arrival and departure times, boosting productivity and cutting manual detective work by 20-50%.

Proactively engage with customers:

Utilize visibility to adopt a proactive customer support approach, elevating service differentiation, enhancing customer experience, and decreasing churn risk with an average Net Promoter Score increase of 7 points.

Utilize historical data for informed planning:

Harness historical data for informed decision-making when selecting transportation modes (air, sea, rail, road) to optimize shipping routes and reduce transit times. For instance, air transport might be preferable for time-sensitive items like raw materials, thereby cutting transit times and production line halts.

Minimize ocean freight expenses:

Mitigate additional charges such as demurrage fees, compliance violations, and expedited shipments through improved overdue container management. Expect a reduction of 10-25% in detention and demurrage expenses and a 25-30% decrease in expedited shipment fees.

Streamline buffer stock and lead time management:

Reduce buffer stock and lead times by 10-30% by leveraging information over inventory, benefiting working capital and cash flow while enhancing demand fulfillment to boost customer loyalty.

Boost operational efficiency and agility:

Combine visibility data across transport modes to gain an integrated, end-to-end view of shipments. This enhances traceability, problem identification, and freight claims handling, while minimizing waiting times and handovers at ports, improving response to ocean container schedule changes, mitigating production risks, and facilitating better production and route planning.

Expedite invoicing and optimize cash flow:

Leverage reliable and timely delivery notifications for automated invoicing, enhancing cash flow and reducing invoicing errors and delays.

Monitor carrier performance effectively:

Utilize accurate tracking data and insights to monitor supply chain key performance indicators, aiding in ocean carrier selection and contract negotiation.

Navigate Uncertainty with Clarity

Given the anticipated heightened unpredictability in the supply chain, shippers must strategize and remain vigilant in planning to overcome potential challenges in the coming months.

Shippeo works with some of the world’s leading Oil, Gas, and Chemical brands worldwide to optimize efficiency and mitigate risks associated with their shipments. Curious about how ocean visibility data can safeguard your operations from disruptions? Schedule a demo of Shippeo's Ocean Visibility platform today, or meet us in-person at LogiChem 2024 at booth #8.