A 17,000-ton container ship loaded with food and relief supplies might seem an unlikely setting for high drama on the open seas. But that's precisely what the cargo ship Maersk Alabama became last April when four heavily armed Somali pirates boarded the vessel using ropes and grappling hooks. The story that unfolded over the next five days is well known: Within hours of the attack, the crew took back control of the vessel, but the pirates escaped, taking the ship's captain hostage. For four tense days, the captain and his captors bobbed about the Indian Ocean in an orange lifeboat, until U.S. Navy SEAL marksmen ended the standoff and rescued the captain.
Seven months later, the incident may have faded from the headlines, but pirate attacks along Somalia's coast haven't abated. In fact, they appear to have escalated. According to the latest quarterly report from the International Maritime Bureau, 147 incidents were reported off the Somali coast (including the busy Gulf of Aden) in the first nine months of this year, compared with 63 in the same period the previous year. And the threat is unlikely to subside anytime soon.
Piracy, and the threat of piracy, has serious implications for maritime commerce—and for a maritime nation like the United States that depends on oceangoing vessels to deliver everything from oil and petroleum to low-cost Asian-made goods. And it's not just about the potential to snarl global supply chains and drive up costs. What's at stake here is nothing less than freedom of the seas.
Millions in ransom
Although piracy isn't limited to Africa's East Coast, the escalating activity around the Gulf of Aden is a particular concern because it's part of one of the world's most vital sea lanes—the channel connecting Asia to Europe and the United States via the Suez Canal. If a ship transits the Suez Canal, it must transit the Gulf of Aden. In total, 20,000 vessels sail through the Gulf of Aden each year, according to Reuters. That includes approximately 12 percent of the world's petroleum traffic as well as large quantities of bulk and containerized dry cargo, the International Maritime Organization told the U.N. Security Council in a November 2008 appeal for help combating Somali pirates.
Last year, pirates attacked well over 100 vessels in the region, capturing 42 of them, according to press reports. Ransoms paid out to obtain the release of crews, passengers, vessels, and cargo totaled $30 million. In response, marine insurance brokers have added $20,000 per voyage through the Gulf of Aden, according to underwriter Hiscox. To no one's surprise, ocean carriers are passing those costs right through to shippers. As of the middle of 2009, Maersk Line had raised charges for customers whose cargo is handled by East African ports by $50 or $100 per container. For cargo on vessels that merely travel through the Gulf of Aden to another destination, Maersk added "war risk charges" of $25 for each 20-foot container and $50 for each 40-foot container.
Some shipping companies have decided to avoid the Gulf of Aden altogether, rerouting their vessels around the Cape of Good Hope on Africa's southern tip rather than sail through the Suez Canal. Even before the Alabama incident, Maersk had rerouted certain vulnerable ships, mostly petroleum tankers, away from the area.
That traffic diversion is reflected in the Suez Canal's activity reports. Traffic moving through the Suez Canal in January 2009 (1,313 transits) was down 22 percent from January 2008 levels (1,690 transits). Tonnage represented by the January 2009 transits was the lowest in 30 months. Although the maritime journal Lloyd's List notes that worldwide economic conditions contributed to the decline, the rerouting of ships is widely considered to be a significant factor in the drop-off.
But rerouting comes with costs of its own. Sailing around the southern tip of Africa adds 5,000 miles and three weeks or more to a voyage—and serious dollars to the trip's cost. Longer transit times have implications for fuel consumption and inventory as well.
The pirate attacks haven't gone unnoticed by world governments. In response to the rising piracy threat in Somalia's waters, a consortium of naval powers, including India, China, Great Britain, Japan, France, Sweden, and the United States, have stepped up patrols in the Gulf of Aden and the East African Coast.
But surveillance is difficult and patrols are widely spaced, even with increased numbers of combatant vessels augmented by airborne and (presumably) space-based assets. According to the United Kingdom's Ministry of Defence, the area to be patrolled and protected measures over 1 million square miles—an area four times the size of Texas.
As of late spring 2009, the multinational consortium's gunboat flotilla numbered only about 30 ships. Think about it: On any given day, 30 patrol vessels are trying to find five guys in a Zodiac with some grappling hooks, automatic rifles, and maybe rocket-propelled grenades in a vast expanse of ocean. Even when the warships concentrate on the principal sea lanes, it's not always possible for them to respond quickly enough to thwart a pirate attack. Spread 30 patrol cars across an area four times the size of Texas, and you don't have much of a deterrent …and a patrol car is a lot faster than a warship.
Furthermore, even though more than 16 nations have joined in the naval counter-piracy operation, there is one important player missing: Somalia. Somalia, in diplomats' language, is a "failed state"—one without a functioning government—which means there simply isn't a Somali national authority to appeal to. Piracy, at its core, is a land-based problem because the pirates' bases are located on shore. As long as there's no government to crack down on their activities, the pirates will have a safe haven in Somalia, and they will continue to operate with impunity.
With little hope of a political solution anytime soon, commercial shipping lines are taking added steps to protect their vessels, like installing barbed wire around the deck's edges and, in some cases, deploying armed guards. In addition, the multinational naval consortium has established a special sea lane for commercial ships, which allows it to keep a closer protective watch over vessels transiting the area. These measures appear to be having some effect. The Associated Press reports that they've cut down on the number of successful Somali pirate attacks. In 2008, 42 successful pirate attacks were reported; as of August 2009, the total was only 28.
It's all in a day's planning
As sensational as it may be, piracy, when looked at purely from a supply chain perspective, is but another form of disruption. And disruption is something logistics professionals deal with—and plan for—on a routine basis, identifying threats, quantifying and ranking them, and then coming up with ways to mitigate the damage.
In this regard, piracy is no different from any other risk—say, a hurricane, port congestion, or a business failure by a supplier. It's a threat that can be rationally evaluated and addressed as part of the contingency planning process (risk mitigation measures might include upping insurance coverage, identifying alternative suppliers, and creating contingency freight routing plans with associated decision triggers).
But the question remains, have you done so?