Managing Your Business Through the Oil Crisis EP.2

Series: Managing Your Business Through the Oil Crisis — EP.1 Costs Are Surging | EP.2 Supply Chain Disrupted | EP.3 Keep Cash Flow Moving | EP.4 Strategic Planning

The Current Supply Chain Situation — How Bad Is the Disruption?

The Strait of Hormuz handles 20% of the world's oil supply, but it is not just oil — general cargo ships, chemicals, LNG, and industrial raw materials also pass through this route. When ships must reroute via the Cape of Good Hope, the impact ripples across the entire supply chain:

Impact	Actual Figures (Mar 2026)	Impact on Thai Businesses
Increased Lead Time	+2 to 4 weeks (from the original 4–6 weeks)	Goods arrive late, production lines may stall
Freight Costs Surge	+50–140% (Freightos Baltic Index)	Import costs surge, goods become more expensive
Shipping Insurance Costs Rise	War Risk Premium increases by 0.5–1.0% of cargo value	A hidden cost many people overlook
Shipping Reroute	Reroute via Cape of Good Hope adds 6,000–10,000 km	More fuel consumed = additional shipping costs
Container Shortage	Containers are tied up longer on rerouted voyages	Unable to book containers, must wait in queue = further delivery delays

For businesses importing raw materials from Europe, the Middle East, or Africa, this situation means all existing production plans may need to be revised — materials that once arrived on time could be delayed by 2–4 weeks, and previously agreed prices may require renegotiation.

5 Things You Must Do Immediately — Do Not Wait Until Stock Runs Out

In a supply chain crisis, the worst thing is "reacting too late." Businesses that prepare in advance will have backup Suppliers, sufficient Stock, and timely communication with customers. Here are 5 things you must do immediately:

1. Review All Suppliers — Who Relies on the Hormuz Route?

Open your complete Supplier list and ask these questions:

• Does this Supplier ship goods through the Strait of Hormuz?
• Does this Supplier have factories or material sources in at-risk areas?
• How many days has this Supplier's Lead Time changed from the original?
• Are there backup Suppliers that do not depend on the same route?

This is directly related to sound risk management principles — you must identify where the risks lie before you can address them.

2. Check Safety Stock — How Many Days of Coverage?

Ask the warehouse team how many days of stock remain for each key raw material. If current Safety Stock was designed for normal Lead Times (e.g., 4 weeks) but Lead Times have now extended to 6–8 weeks, it means your existing Safety Stock is insufficient.

3. Contact Backup Suppliers — Dual/Multi-sourcing

Do not wait until stock runs out to find new Suppliers. Start contacting backup Suppliers today — even if you do not need to order yet, at least gather information on pricing, Lead Times, and MOQ. This is the cornerstone of a sound procurement process.

4. Review Lead Times — Adjust Reorder Points

Increased Lead Times mean the Reorder Point must be moved up — order earlier. If you still use the old Reorder Point, you may encounter stock discrepancies or run into Stock Outs mid-production.

5. Communicate with Customers — Notify New Delivery Timelines

If you already know deliveries will be delayed, inform customers proactively — do not wait for them to ask. Most customers will understand if notified in advance, but they will be dissatisfied if they only find out when the goods fail to arrive.

Supplier Diversification Strategy — Spreading the Risk

One of the most important lessons from every supply chain crisis is "never rely on a single Supplier." This table compares three sourcing strategies:

Strategy	Single Source	Dual Source	Multi-Source (3+)
Advantages	Good pricing (Volume Discount), strong relationship	Has Backup, can compare prices, lower risk	Lowest risk, many options available
Disadvantages	Very high risk — if the Supplier has problems, everything stops	More complex to manage, may not get full Volume Discount	Most complex to manage, requires significant resources
Risk During Crisis	Very High — if the Supplier is affected, production stops	Low — can switch to Supplier 2 immediately	Lowest — best risk diversification
Best For	Specialized materials with no alternatives	Key materials of high importance	Commodity materials with many Suppliers

Criteria for Selecting Backup Suppliers

When searching for backup Suppliers under urgent conditions, consider the following criteria:

1. Shipping route — must not rely on the same route as the primary Supplier
2. Lead Time — the shorter the better. During a crisis, avoid Suppliers with longer Lead Times
3. MOQ (Minimum Order Quantity) — backup Suppliers with lower MOQ offer greater flexibility
4. Quality — must meet the same standards. Do not compromise quality to solve supply issues
5. Payment Terms — Cash Flow is critical during a crisis (read more in EP.3)

Safety Stock & Reorder Point — Time to Recalculate

Safety Stock is the quantity of raw materials kept in reserve for situations where Lead Time is longer than usual or Demand suddenly increases. It should be stored systematically following the FIFO principle to prevent old stock from accumulating. The basic formula:

Calculation Example: Before vs After the Crisis

Suppose raw material A has an average usage of 100 units/day, a standard deviation of 20 units/day, and a Service Level of 95% (Z = 1.65):

Items	Before Crisis	After Crisis	Change
Lead Time	28 days (4 weeks)	49 days (7 weeks)	+21 days (+75%)
Safety Stock	1.65 × 20 × √28 = 175 units	1.65 × 20 × √49 = 231 units	+56 units (+32%)
Reorder Point	(100 × 28) + 175 = 2,975 units	(100 × 49) + 231 = 5,131 units	+2,156 units (+72%)

This means if Lead Time increases from 4 weeks to 7 weeks, you need to hold 32% more Safety Stock and must place orders when Stock reaches 5,131 units (instead of waiting until 2,975 units as before).

Recommended Safety Stock Increases by Risk Level

LevelRisk	Lead Time Increase	Recommended Safety Stock Increase	Scenario
Low	+1 week	+15–20%	Supplier does not pass through Hormuz directly, but freight costs increase
Medium	+2–3 weeks	+25–40%	Supplier passes through Hormuz, must reroute via Cape of Good Hope
High	+4 weeks or more	+50–80%	Supplier is in a conflict zone, or Supplier change is required

Emergency Procurement Plan — Short, Medium, and Long Term

Managing the supply chain during a crisis requires action across 3 phases — not just solving immediate problems:

Timeframe	Action Plan	Objective
Short Term (1–2 Weeks)	Check stock of all key raw materials Contact Suppliers to inquire about latest Lead Times Place additional orders for critical raw materials immediately Notify customers if Delivery will be delayed Hold daily meetings with Procurement + Production teams	Prevent Stock Out to keep production lines running
Medium Term (1–3 Months)	Negotiate with 2–3 backup Suppliers Adjust Safety Stock + Reorder Point to new levels Conduct Supplier Risk Assessment Renegotiate contracts with primary Suppliers Review BOM to determine if substitute materials can be used	Build a sustainable Backup Plan
Long Term (3+ Months)	Establish a permanent Dual/Multi-sourcing Strategy Invest in an ERP system for automated Supply Chain management Build a Supplier Database + Performance Tracking system Develop domestic Suppliers to reduce import dependency Conduct regular Supply Chain Stress Tests	A Resilient Supply Chain ready for any crisis

How Does ERP Help Manage Supply Chains?

In a crisis, what enables businesses to respond effectively is accurate, complete, and instantly accessible data — not opening 10 Excel files and trying to piece things together. Here is how an ERP system helps:

ERP Modules	What It Helps With	Example in Crisis
Procurement Module	Manage Suppliers, POs, and price comparisons	Instantly compare prices between primary and backup Suppliers
Inventory Module	View real-time Stock with Safety Stock Alerts	Alerts when Stock falls below the new Reorder Point
Supplier Management	Supplier history, Lead Time Tracking, Performance	See which Suppliers deliver late or incomplete for informed switching decisions
MRP (Material Requirements Planning)	Calculate what to order, when, and how much	Update Lead Times and MRP automatically recalculates Reorder Points

Excel vs ERP for Managing Supply Chains in a Crisis

Action Required	Excel	ERP
View Real-time Stock	Must ask warehouse staff, wait for summary, data may be inaccurate	Open the system and see instantly, 100% accurate
Adjust Reorder Point	Edit one item at a time in a Spreadsheet	Adjust Lead Time and the system recalculates everything
Compare Suppliers	Dig through multiple files, time-consuming	View history, pricing, and Lead Times for all Suppliers on one screen
MRP Calculation	Manual calculations, error-prone, especially with complex BOMs	Automatic calculations from BOM + Stock + Lead Time
Low Stock Alerts	None — must check manually	Automatic Alerts sent to the Procurement team instantly

What Else Should Executives Monitor?

Supply Chain is just one dimension of the crisis. Executives must see the full picture:

Context to Monitor	Key Question	Read More In
Costs	Increased costs from freight + materials — how much should prices be raised?	EP.1 Costs Are Surging
Cash Flow	Buying more, increasing Safety Stock — but is there enough cash?	EP.3 Cash Flow
Long-term Strategy	How long will this crisis last? What strategies need to change?	EP.4 Strategy

Summary — Checklist for Executives

Can Do Immediately (Today)	Possible with ERP
Check key raw material stock — how many days remaining?	View real-time Stock for all items with automatic Alerts
Call Suppliers to ask if Lead Times have changed	View Lead Time history for every Supplier in the system
Find 2–3 backup Suppliers	Record in Supplier Database + automatic comparison
Recalculate Safety Stock using the formula above	Adjust Lead Time and MRP calculates Safety Stock for everything
Notify customers about the new Delivery Timeline	System calculates Available-to-Promise (ATP), notify customers instantly

A strong supply chain is not the cheapest one — it is the most resilient. When one route is cut off, there must be a backup route ready to go immediately.

— Saeree ERP Team

Read EP.3: Keep Cash Flow Moving — Managing Cash Flow During a Crisis

References

• Al Jazeera — Iran war threatens prolonged impact on energy markets
• Freightos — Freightos Baltic Index — Global Container Freight Index
• InfoQuest — Minister of Industry Orders 4 Urgent Measures to Address Oil Crisis Impact
• spacebar.th — 60-Day Oil Reserves: The Hormuz Crisis in the Shadow of War
• Ministry of Industry — Measures to Mitigate Supply Chain Impact from the Middle East Crisis