Supply Chains are not only hurting, they are breaking, and they have been since the US and Israel renewed the conflict with Iran and more-or-less brought the Strait of Hormuz to a close for pretty much every western country that is associated with the US.

A Strait that is critical not only for

• global energy (as it normally sees 20% to 25% of global oil passing through it daily)

but also for

• natural gas (up to 25%, at least it will further delay the AI Data Centers)
• fertilizer (as it saw up to 50% of urea, ammonia, and sulphur supply passing through it daily, with the former a key fertilizer component)
• methanol (but at least bootleggers will have to use real grain alcohol now) and petrochemicals
• etc.

In other words, the Strait being close off is not just a logistics nightmare for the shipments you were expecting that needed to pass through the Strait on time, it’s a nightmare across your entire supply chain as all of your suppliers dependent on the oil, natural gas, chemicals, gasses, etc. that normally pass through the Strait daily are also suffering their own nightmares. Delays will compound through the chain for the lucky ones, and the rest will see shipments just stop.

And articles that tell you this is a leadership moment are missing the point.

Where it was critical, you should already have known your exposure, had monitoring in place, and been alerted the day the conflict started that an issue was coming your way.

Where supplier Force Majeure was unacceptable, you should already have had the flexibility in your contract to shift, pause, or end the contract immediately upon supplier failure.

Where supply was critical, you should have been geographically dual-or-tri sourcing with order escalation clauses built into the contracts so you can quickly secure supply when potential shortages are detected.

Where margins are tight or costs can vary widely based upon external events, your cost models should already be taking this into account, should be monitoring for market price changes, and should be updated upon such changes with immediate alerts if prices shift beyond typical market fluctuations.

And strategic and critical suppliers will already be treated as such. They will be given fair margins, access to buyer expertise that will help them with efficiency and negotiating their own raw material contracts, and placed in a financial position where they too can dual or tri-source and explore optionality in their own supply chains.

Because, as Paul Martyn commented on one of the many articles on why the conflict is apparently time to pay attention and step up (even though, as we stated in our opening, it’s already too late):

If you:

• defer supplier investment –> you pay in disruption
• squeeze supplier margin –> you pay in resilience loss
• ignore (supply chain) optionality –> you pay in constrained decisions and lack of supply

The answer, of course, is to be paying attention to any high risk or high impact category from the day you identify it to the day you end the last product line that uses it. And to use the Busch-Lamoureux Exact Purchasing model to properly place your category, determine which cost factors and risks you need to track, how often, when alerts should be triggered, what mitigations can be taken up front, and what actions need to be taken when an issue likely to cause a disruption arises.