The Role of Transportation in Supply Chain Management in Israel During Wartime

In this blog post we will explore the historical context of transportation in supply chains during crises caused by military actions, discuss the current state of affairs, and examine how economies are influenced. We will also provide some insights into what could be done to improve the transportation supply chain in Israel during wartime.

In times of war, the transportation supply chain grapples with challenges, including the toll on infrastructure and limited resources. Heavy vehicles, which are an integral part of the logistics chain, are diverted to military service, while the indispensable truck drivers find themselves called for military duty, facing the tragedies of war. For example, the ongoing war between Ukraine and Russia exemplifies these challenges, with repercussions including damaged roads and bridges, perilous routes, unpredictable corridors, and a simultaneous humanitarian crisis. This echoes historical parallels, like the logistical hurdles confronted by the British Army during World War I in ensuring the supply of essential goods to troops.

In the Black Sea region, the Russian-Ukrainian conflict led to port closures, raising shipping costs by nearly 60% for dry bulk goods, such as grains, between February and May 2022. The need to shift from trains to ships, spurred by sanctions on Russia, strained the hard-hit post-pandemic container supply, contributing to significant price increases. This surge in grain prices and freight rates is predicted to have resulted in a 3.7% global increase in consumer food prices.

The current war in Israel, with HAMAS/ISIS, is a complex and evolving scenario. It’s essential to recognize that the challenges faced in the transportation supply chain did not materialize overnight but have developed over an extended period. The war events have has led to heightened security measures and increased scrutiny at ports, including the central Ben Gurion airport, causing delays and disruptions. For security and safety reasons, the Ashdod Port in southern Israel has been closed, requiring the rerouting of all shipments to the northern Haifa Port. This has led to significant disruptions in logistics and supply chain operations and we are currently witnessing the first signs of a price rise for car delivery.

As the situation continues, the transportation system is operating in a high-stress mode. The cumulative effect of ongoing tensions and security issues has the potential to impact various aspects of logistics. For instance, air freight services through the Ben Gurion Tel Aviv airport may experience disturbances, and Israeli ports are already contending with additional security checks and labor shortages. This gradual escalation of challenges can lead to a point in which delays become more pronounced, and the costs associated with transportation, including delivery, will probably increase.

The ongoing war in Israel is impacting the transportation of the supply chain:

Air cargo and marine gateways for trade are functioning under signs of strain due to the war. Ocean shipping rates for goods shipped to Israel from Asia and Western Europe fell over the past few weeks. However, this may change as insurance costs increase and carriers pass along war risk premiums. The need for extra security checks during a time of labor shortages poses a burden on Israeli ports. Companies are still taking cargo bookings, though there “appear to be some indicators of some congestion”. MSC, the world’s largest container line, noted last week that there have been increased waiting times for terminals in Ashdod and new restrictions on hazardous freight. Israel’s commercial port of Ashdod and the Ashkelon port and oil terminal in southern Israel are the most vulnerable to rockets launched by Hamas and the Islamic Jihad from Gaza.

In addition to the evident causes of supply chain disruptions, the onset of military conflicts often prompts widespread participation in war efforts, as exemplified by Tzav 8 (an emergency call up of reserves outside of the framework of regular reserve duty). Approximately a third of transportation personnel have temporarily left their positions to engage in army reserve duty. This has led to a significant shift in the operations of numerous transportation companies, as they are now heavily involved in fulfilling the prerequisites of the armed forces.

The importance/necessity of optimizing supply chain transportation has never been more pronounced. While we may not be facing an actual crisis, there now is an opportunity to avert one. Emphasizing the exchange of economic ideas, every supplier must converge onto a unified platform to leverage resources in the most efficient manner possible. Before the onset of war, approximately 30% of trucks in the country were found to be operating empty, underscoring the urgent need for a more streamlined and coordinated approach. Recognizing this urgency, the Ministries of Economy and Transportation are encouraged to take proactive steps to incentivize and support the integration of businesses onto a centralized transportation platform. Whether it’s import, export, agriculture, or food supply, it is imperative to consolidate all aspects of supply chain management within a single platform.

Disruptions in the transportation supply chain during wartime can have a significant impact on the Israeli economy. To mitigate these disruptions, companies  could consider taking the following steps:

Sharing economy model data: Embracing the sharing economy model involves uniting everyone on a single platform to enhance optimization throughout the entire supply chain process. This interconnectedness creates digital transparency with heightened visibility, ensuring improved security and a deeper understanding of the overall process. In this model, particular emphasis is placed on the critical first and last miles, recognized as the most costly segments in the process. Thoughtful planning and optimization of these stages prove invaluable, conserving not only financial and environmental resources but also human resources. This holistic approach contributes to a more efficient and sustainable supply chain.

Expand supplier networks: Diversifying sources of supply reduces reliance on individual suppliers, guarding against disruptions stemming from conflicts in specific regions.

Forge alliances and localize supply chains: Establishing partnerships and regionalizing supply chains enables sourcing from local suppliers, minimizing import from other countries.

Boost inventory levels: Increasing inventories ensures an adequate supply reserve to sustain operations during potential disruptions, even if essential goods and services experience delivery delays.

Utilize logistics partner resources: Collaborating with logistics partners helps fortify networks for effective implementation of contingency strategies.

Maintain open communication with customers: Regular and transparent communication with customers during disruptions facilitates effective supply management, enabling businesses to continue operations as smoothly as possible.

By establishing a robust control mechanism, with the potential backing of the Ministry of Economy, we could steer ourselves away from potential crises and mitigate as necessary. Let us take charge of the situation before it gains the upper hand. While we acknowledge the challenging and draining nature of the current circumstances for all industries, it’s vital to leverage this situation for innovation and optimization.