Red Sea, Black Box: Retail Supply Chains Stumble in the Fog of Chaos

The retail supply chain is a battlefield, scarred by Red Sea disruptions, tariff whiplash, and technology that’s often more hype than help. Retailers are scrambling to navigate a landscape where delays stack up, costs spiral, and “next-gen” solutions frequently fizzle out. Drawing on insights from Aera Technology and DHL Group, The Supply Chainer News peels back the curtain on an industry caught between reactive fixes and the promise of resilience—a promise that’s proving harder to deliver than slick pitch decks suggest.

Red Sea Disruptions: A Costly Detour

The Red Sea crisis, driven by Houthi attacks tied to the Israel-Hamas conflict, has forced carriers to reroute ships around the Cape of Good Hope, tacking on weeks and dollars to every journey. Amadou Diallo, CEO of DHL Global Forwarding Middle East & Africa, sums up the grim reality: “We are experiencing longer transit times and increased costs as carriers are diverting ships around the Cape of Good Hope. Due to the high volatility in the region, no reliable forecast can currently be provided on when ships will be able to pass through the Red Sea regularly again.” Retailers are feeling the pinch, with some reporting freight cost increases of 20–30% on Asia-Europe routes. Many are stockpiling inventory—boosting safety stocks by 3–5 weeks—or shifting to alternative ports like Ningbo or Hamburg to dodge congestion. But these are bandages, not cures, and smaller retailers, lacking the capital to absorb such hits, are resorting to air freight, burning through margins to keep shelves stocked.

Amadou Diallo, CEO of DHL Global Forwarding Middle East & Africa

The Freightos Weekly Update (June 24, 2025) adds context: transpacific rates have crashed from $5,800/FEU to $3,500/FEU on the West Coast, driven by overcapacity after the May 12 China-US tariff de-escalation. Yet, Asia-Europe and Asia-Mediterranean rates, still stinging from Red Sea rerouting, hover at $3,100/FEU and $4,400/FEU, respectively—30–50% above late May levels. The market’s volatility exposes a harsh truth: retailers are playing catch-up, with little clarity on when stability might return.

Defensive Moves vs. Strategic Shifts

Are retailers adapting strategically or just plugging leaks? The answer leans heavily toward the former. Aera Technology observes, “Supply chain companies are navigating unprecedented tariff volatility and change, and have to assess the impact of tariffs both on their costs and revenues.” Many are reacting defensively—stockpiling inventory, renegotiating contracts, or exploring alternative suppliers to mitigate Red Sea delays and tariff risks. Aera notes that 92% of supply chain leaders, per Gartner, cite tariff-related cost increases as a top concern, pushing firms to pre-build inventory or rethink distribution footprints. But these moves often feel like knee-jerk responses, not long-term strategies. Smaller retailers, in particular, lack the resources to pivot beyond short-term fixes, leaving them vulnerable to the next disruption.

Larger players, however, are showing glimmers of proactive planning. DHL’s Diallo highlights their approach: “DHL uses predictive analytics, AI, and real-time tracking to reroute shipments and avoid chokepoints. Its diversified infrastructure—including bonded warehouses, rail links, and alternative ports—ensures continuity.” This flexibility has helped some clients maintain flow through ports like Gdansk or Rotterdam, cutting delays by up to 15%. Yet, even these efforts are constrained by the unpredictability of geopolitical flashpoints and the limits of legacy systems, which struggle to keep pace with rapid shifts.

Technology: Overpromised, Underdelivered

Technology is the industry’s golden calf, but it’s not parting the Red Sea. Aera Technology champions “decision intelligence” as a way forward, stating, “The supply chains that will pivot the fastest to mitigate impact will lean on their technology, like AI, and, specifically, decision intelligence.” Their Tariff Mitigation Skill, a new feature of Aera’s platform, aims to centralize data, forecast tariff impacts, and automate responses—promising to help retailers “reduce risk and protect margins in a rapidly changing trade environment.” By analyzing 25+ risk dimensions, from cost structures to regulatory changes, it offers tools like dynamic sourcing to identify alternate suppliers when tariffs shift. It sounds impressive, but the reality is messier. Aera admits that companies without real-time analytics or siloed data—common in mid-tier retailers—struggle to leverage such tools effectively, leaving them stuck in reactive mode.

DHL’s tech stack, meanwhile, leans on platforms like myDHLi for “proactive communication, flexible routing, and end-to-end visibility.” This has tangible benefits: one DHL client rerouted 40% of their Asia-Europe shipments to avoid Red Sea bottlenecks, shaving days off transit times. But even advanced systems falter when data is incomplete or disruptions outpace algorithms. AI can crunch millions of data points, but it’s only as good as the inputs—and port congestion, Houthi attacks, or sudden tariff hikes aren’t neatly predictable. Blockchain, another darling of supply chain tech, remains hamstrung by high costs and low adoption. The industry’s tech obsession often feels like chasing a mirage—promising salvation but delivering incremental gains at best.

The Hard Truth: Learning to Live with Chaos

The retail supply chain isn’t just navigating a storm—it’s stuck in a permanent squall. The Red Sea crisis, tariff volatility, and tech’s mixed bag reveal an industry that’s agile but not antifragile. Here’s the original insight: the real failure isn’t in reacting to disruptions but in building systems that thrive on them. Retailers and logistics providers keep betting on stability—stockpiling for today’s crisis, tweaking algorithms for yesterday’s data—while the world throws curveballs like Iran-Israel tensions or Trump’s stalled trade talks. The 20% of global oil supply at risk in the Strait of Hormuz, as noted in Freightos’ update, looms as a reminder: one wrong move could spike fuel costs and upend freight rates overnight.

Aera’s call for decision intelligence and DHL’s diversified infrastructure point to a path forward, but they’re not enough. The industry needs to stop treating disruptions as exceptions and start designing supply chains that bend without breaking—regionalized sourcing, interoperable tech, and contracts that flex with volatility. Until then, retailers will keep stumbling through the black box, bleeding cash and hoping for calmer seas that may never come.