APU Business Original

Suez Canal Logjam: A Case Study in Project Management

Three weeks. That’s the additional delay expected to deliver my new refrigerator that was already on back order. When I inquired, I was told that appliances were being delayed. The reason: international shipping delays.

Start a B.A. in transportation and logistics management at American Public University.

While I thought my refrigerator was manufactured by an American company, I later found out that the model I had ordered was on back order from an overseas distributor. In addition, recent events involving a giant container ship lodged in the Suez Canal for nearly a week exacerbated an already growing problem with international trade and deliveries.

Shipping Delays Are Increasing

As a professor in transportation and logistics and one of over one million certified project management professionals (PMP) globally, I find the shipping delays in the Suez Canal a prime example for examination into how shipping affects us on a global scale.

Shipping delays are not uncommon, especially given the events of the past four weeks. According to Statistica, about half of this nation’s appliances are imported. Over $42 billion in revenue comes from the sale of refrigerators, freezers, dishwashers, washing machines, stoves, coffee machines, irons, vacuum cleaners and ovens. So any delivery delay can affect the overall supply and demand of the appliance industry.

Effective Transport Requires Efficient Project Management

Moving goods and services requires efficient project management. A project is defined as a temporary endeavor that has a defined beginning and end in time, and therefore it is defined in scope and resources. So delivering goods and services is an effort in project management.

The Suez Canal blockage had a global impact on commerce: Countless businesses, from domestic transport providers to retailers, supermarkets, manufacturers and appliances were also affected. The Suez Canal is well trafficked with an estimated 12% of global trade, with around one million barrels of oil and roughly 8% of liquefied natural gas passing through the canal each day. According to the BBC, technical, human and environmental errors were to blame for the Suez Canal blockage, which caused a backlog of 450 ships, resulting in a loss of $15 million per day in revenue.

Why Is the Suez Canal Essential for Water Transport?

When it comes to transport by ship, there are few alternatives to the Suez Canal, an artificial channel connecting the Mediterranean and the Red Seas across Egyptian territory which opened in 1869.

According to the Suez Canal Authority, the waterway is 120 miles long and includes a 22-mile parallel channel. The canal offers the shortest sea route between Europe and Asia, handling around 10% of world trade.

An estimated 14 days’ travel is saved by cargo ships using the Suez Canal rather than circumnavigating Africa. All vessels of the world may transit the canal as long as they comply with the conditions stated in the canal’s Rules of Navigation.

Delays in Materials Affect Projects

Several challenges arose with the lag in goods. According to the BBC, the jammed container ship Ever Given, one of the largest in the world, was carrying both perishable and non-perishable goods. The perishable goods cannot be recovered, which creates a shortage and an imbalance in the supply chain.

Data from Lloyd’s List, as reported by the BBC, showed the stranded ship was holding up an estimated $9.6 billion in trade along the waterway each day. That equates to $400 million and 3.3 million tons of cargo an hour or $6.7 million a minute.

As a result, some projects and project managers will have to order more goods and have them sent by air freight, which costs at least three times as much. These costs are usually passed on to the customer, and several items have sharply increased in price as a result.

Global Supply Chains Are Fragile

Global supply chains were already stretched to the limit, and the ship accident only exacerbated an already growing problem. Delays have a domino effect on the shipping industry — increasing costs, causing diversions to longer routes resulting in container shortages, port congestion, and capacity constraints.

An Egyptian court ordered the vessel’s Japanese owner, Shoei Kisen Kaisha, to pay $900 million in compensation as a result of losses inflicted when the Panamanian-flagged Ever Given prevented marine traffic from transiting the vital global waterway. The fee included costs incurred to free the ship, including hefty tugboat bills, maintenance fees, and other costs of the rescue operation.

Thankfully, the grounding resulted in no pollution spills or reported injuries. However, according to the Suez Canal Authority, the ship’s cargo has been seized until the dispute is resolved, which could take many months.

Bigger Isn’t Always Better

As a result of global demand, cargo ships have grown in size exponentially. Ever-larger ships have been constructed over the past several decades as demand for consumer products has grown.

The 1,312-foot, Empire State Building-size Ever Given isn’t an anomaly today. There are more than 100 ships the same size currently in operation. That forced the Panama Canal to construct a second parallel waterway to handle these giant vessels.

Project Management Is Essential

How will shipping by sea be affected in the future? As a project manager with over a decade of experience, I have five project management steps to consider when planning for unexpected delays:

  1. Initiating — When starting a project, plan for the inevitable and discuss it with your customers. This includes meetings to determine budget, scope, and deliverables. This is considered a doomsday proposal, and most likely will never happen. But initiating planning will save you time from having to revisit the scope of the project for unforeseen delays.
  2. Planning — Plan for delays. Most proposals are best case scenarios to appear appealing and to secure the contract. However, disruptions and challenges almost always lead to delays beyond the original estimate.
  3. Executing — Routine check-ins with the shipping team, distributor, and stakeholder(s) are essential to ensure clear communication and to potentially prevent unexpected disruptions.
  4. Monitoring and Controlling — It’s important to routinely gather data about the project not only to make decisions, but to allocate resources, to crash the system (add resources), and to develop alternative options. Having accurate data enables more accurate decisions.
  5. Closing — This is the most important step of the project management process and is contingent on each of the previous four steps. This includes stakeholders, providing deliverables to the customer, developing best practices, and satisfying stakeholder requirements.

Now, the next time I order an appliance, I’ll definitely first check for in-stock items because there is also the potential for excessive delays if the appliance is coming from overseas. I’ll use the extra time awaiting my delivery to read the fine print.

Dr. Kandis Y. Boyd Wyatt, PMP, is an award-winning author, presenter, and professor at American Public University with nearly 30 years of experience in science, technology, engineering, arts, and math (STEAM). She is the creator of the Professor S.T.E.A.M. Childrens’ Book Series, which brings tomorrow’s concepts to future leaders today. A global speaker, STEAM advocate, and STEM communicator, she holds a B.S. in meteorology and an M.S. in meteorology and water resources from Iowa State University, as well as a D.P.A. in public administration from Nova Southeastern University.

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