As the Israel-Iran conflict continues to simmer through a fragile ceasefire agreement, chief supply chain officers (CSCOs) can implement three critical priorities to secure their operations, according to an analysis by Gartner.
In response to the ongoing impacts from the conflict, Gartner advises that CSCOs should:
- Assess and mitigate their exposure to new global transportation bottlenecks
- Prepare CFOs for continued supply chain cost volatility
- Review supply chain resilience strategies
“As the conflict between Israel and Iran oscillates, CSCOs must leverage the resilience they have built in recent years, recognizing that the global significance of this region makes it nearly impossible to avoid adverse impacts, even if only indirect,” David Gonzalez VP analyst in Gartner’s Supply Chain practice said in a release.
The impact of flurries of U.S. and Israeli missiles striking targets in Iran has already forced several air and sea cargo carriers to change their routes. And the new violence compounds significant regional bottlenecks across the region’s key shipping routes and logistics hubs, including:
- Red Sea and Suez Canal: Container traffic remains well below pre-crisis levels, with major shipping lines avoiding the Suez Canal. Organizations must monitor transit times and adjust expectations for longer lead times and higher costs.
- Strait of Hormuz: Heightened risk of disruption is causing delays and congestion as companies seek alternative routes. Supply chain leaders should engage partners to identify and manage new shipping options.
- Regional Ports: High-volume ports such as Jebel Ali, Khalifa Port, Dammam and Haifa face increased pressure, with some having already faced service interruptions. Contingency planning for alternative ports is essential.
- Eurasian Rail Freight: Demand for rail freight between Asia and Europe has surged, leading to congestion and longer booking times. Organizations should trial rail options where feasible, weighing higher costs against faster transit.
At the same time, ongoing disruptions in the Middle East are driving up supply chain costs across energy, transportation, insurance, inventory, and technology. CSCOs must proactively engage CFOs to assess budget impacts and prepare for increased spending.
As a result, the conflict is putting previous supply chain resilience strategies to the test. CSCOs must identify risks to critical raw materials, ensure the continued flow of finished goods, and conduct cost-benefit analyses of mitigation actions in partnership with finance leaders. This includes evaluating potential impacts on margins and reviewing the product portfolio for vulnerabilities.
“Regardless of the status of the conflict, CSCOs should continue engaging with their ecosystem of partners to identify alternative routes, assess the viability of shifting volume to less impacted regional ports, and consider multimodal transportation options for some goods after conducting a cost-benefit analysis,” said Gonzalez. “This conflict should serve as a catalyst for improving organizations’ supply chain resiliency plans over the long-term.”
