Theo Theodoulou
Chair of Kreston Global Audit Group and Audit and Assurance Director at Kreston Ioannou and Theodoulou, Cyprus
Theo is a non-executive board member of the Cyprus Securities and Exchange Commission (CySEC), and leads the Audit Committee of CySEC. In 2018, he was appointed as the Finance Director of one of the biggest football clubs in Cyprus, Anorthosis Famagusta (Football) Public Limited.
Theo’s portfolio covers M&A due diligence, investment appraisals, forensic audit, internal audit and risk management advice, as well as corporate governance best practice.
Shipping disruptions affecting global supply chains
April 12, 2024
The recent unrest in the Red Sea has exacerbated the shipping disruptions affecting global supply chains. Recurrent attacks on container ships have escalated pressures on global trade, affecting crucial trade routes between Asia and Europe, which handle 12% of the world’s commerce.
Theo Theodoulou, Kreston Global Audit Group Chair, explores the ramifications of these disruptions on businesses with AAT Magazine. Read the summary of the published article below.
Legal and operational challenges
As Maersk recently indicated, the necessity for vessel diversions could extend well into the year, leading to cancelled or suspended shipments. This disruption compounds existing supply chain issues from post-Brexit and Covid realities, with some deliveries of raw materials now taking months and costing significantly more than usual.
Strategic responses to disruption
Businesses are finding themselves forced to halt operations temporarily, like Tesla, or pass on rising costs to consumers. The impact is especially pronounced for small enterprises, as highlighted by Karen Feltham, MAAT, who points out the severe effects on automotive and retail sectors. Companies are now seeking alternative suppliers and shipping routes, though the costs associated can only be absorbed to a certain extent before impacting pricing strategies.
Impact on businesses
Theo Theodoulou shares that businesses are experiencing significant operational challenges due to these disruptions. The delay in receiving inventories on time is causing frustration among end clients and disrupting planned orders and deliveries. This situation mirrors challenges faced in the post-Covid era, with unexpected increases in shipping costs impacting profit margins.
Most businesses are now stockpiling inventory in advance and considering air freight where feasible, although this often comes at a higher price. The intent to pass on increased costs to customers is prevalent, likely contributing to sustained high inflation rates through 2024.
Lessons and long-term strategies
Learning from past disruptions, such as the Suez Canal delays, companies like Todd Doors are maintaining smart inventories to mitigate the impact on customers. Businesses are recalibrating their supply chain strategies, diversifying transportation modes, and revising demand forecasting models to better cope with such uncertainties.
Conclusion
While the trade and shipping disruptions present a dire situation for many businesses, efforts to minimize the impact through strategic adjustments are crucial. For further details on how companies are navigating these challenges.
For professional advice on managing these disruptions, please get in touch.
