Retailers Navigating Red Sea Shipping Challenges

RILA Shares Industry Perspective with FMC

By [ Sarah Gilmore ]
02/06/2024

Today Retail Industry Leaders Association (RILA) Director of Supply Chain Policy Sarah Gilmore will provide testimony before the Federal Maritime Commission (FMC) on how conditions in the Red Sea and Gulf of Aden are impacting shippers and global supply chains. Gilmore will share how the disruption in this vital shipping lane has affected retail supply chains, how retailers are navigating it, and how the FMC can help mitigate the long-term impacts..

In written comments submitted ahead of today’s hearing, RILA writes:
“The current Red Sea disruption is a matter of substantial consequence to major retailers and the ongoing uncertainty continues to make it challenging to formulate comprehensive long-term strategies to mitigate supply chain disruptions and cost increases. While shippers and carriers work collaboratively on mitigating the supply chain disruptions it is important the FMC continues to monitor this situation especially, given its increased regulatory powers, to ensure that carrier actions do not unduly penalize retailers and ultimately consumers.
…
“The concerning cost scenario arises from various factors. First, shippers find themselves exposed to elevated costs and heightened demand, while carriers' previous surplus capacity undergoes adjustments to meet the current supply chain dynamics because of the ongoing attacks. Second, as the industry approaches contract season, there is a looming risk that the localized disruption in the Red Sea, along with the immediate responses, could impact longer-term contract rates.
…
“Taken together, if the Red Sea crisis persists for six months, the cumulative effect of surcharges is projected to result in tens of millions of additional costs for retailers.
…
“Enhanced transparency and comprehension regarding the nature and formulation of expedited surcharges are imperative to ensure that these fees accurately align with the real costs associated with diversion. Again, given the nature and cost of these fees the FMC must seek to facilitate greater clarity into the factors comprising the surcharges.”

RILA’s full comments here.

###

RILA is a trade association of the world’s largest, most innovative, and recognizable retail companies and brands. RILA members include more than two hundred retailers, product manufacturers, and service suppliers, who together employ over 42 million Americans and account for $2.7 trillion in annual sales and hundreds of thousands of stores, manufacturing facilities, and distribution centers domestically and abroad.