Inventory Lessons From The Red Sea Crisis Disruption of Volvo’s Supply Chain
In January 2024, Volvo’s supply chain hit a hard wall. Houthi attacks on the Red Sea impeded maritime shipping, and alternative routes only lengthened already-thin lead times.
Ultimately, Volvo had to pause production for three days at its Belgium plant, but was able to leverage buffers and recovery plans to protect output. In this article, we will discuss the impact of the Red Sea crisis on Volvo’s supply chain and the lessons for supply chains.
Key Nuggets
- Houthi attacks pushed major ocean carriers away from the Red Sea, and added 10–14 days to Asia–Europe shipping routes.
- Volvo paused production at Ghent, Belgium, for three days (Jan 15–17, 2024) due to delayed gearbox deliveries.
- The pause likely resulted in a loss of 3,500–4,000 vehicles in output during that period.
- Volvo recovered more quickly than Tesla after its 14-day stop in Berlin, so the response appears to be a short-term win with a long-term warning.
- African supply chains can copy the playbook. Buffer the parts that travel through choke points, map lower-tier sources, and plan lead times for delay
Background: The Red Sea Crisis That Threatened European Supply Chain, Including Volvo’s.
After the October 7, 2023, Hamas attack on Israel and the Gaza war that followed, Houthi militants began attacking commercial vessels in the Red Sea and Bab al-Mandab strait, a narrow gate that normally carries about 12% of world seaborne trade.
The scale of the attack forced shipping lines to change their routes.
By late December 2023, many large container carriers had reduced or stopped Red Sea transits. Others sent ships around the Cape of Good Hope instead.
Unfortunately, that detour adds approximately 10–14 days to a standard Asia–Europe voyage and extends ships’ time at sea, reducing effective capacity by approximately 20% even when no ship is lost.
But the route change did not just add time; it also disrupted supply chain planning. For instance, on-time arrival rates fell from about 60% in 2023 to about 50% through 2024, with median delays reaching 13 days at the peak in February 2024.
Even after subsequent improvements, delays remained several days above prior norms.
Costs increased due to the detour, so the pressure affected both time and money. Extra fuel consumption per voyage increased by approximately 800–1,000 tons, with a widely cited additional fuel bill of nearly $1 million per trip.
War risk insurance increased from tens of thousands to hundreds of thousands per trip in many cases, and freight rates on Asia–Europe routes spiked early in the crisis. Volvo’s supply chain was located within the blast zone because European automotive parts flow through the same corridor.
In fact, about 70% of Europe’s automotive components travel through the Red Sea route under normal conditions. When that corridor became risky, the delay shifted from the sea to factories.
Read More: How Nestlé Nigeria Is Leveraging Local Sourcing to Combat the FX Crisis.
Volvo’s Supply Chain Before The Shock
Volvo Cars operated a lean system designed for steady, on-time supply and performance.
Like most automakers, Volvo used just-in-time methods to keep inventories low and deliveries on schedule. Although the model was a cash saver under normal circumstances, it also means that a two-week shipping slip can empty bins fast.
Volvo’s product position shaped its supplier choices.
The company sells premium vehicles, so it leans on a smaller set of trusted suppliers for parts where quality and certification matter. That supplier strategy reduced defects, but it can also slow supplier switching when a single source fails.
Volvo also carried scars from earlier shocks. For example, the Ghent plant had to shut down for a full week in January 2023 due to chip shortages, after more than 40 days of closures in 2022 tied to the semiconductor shortage.
Those events taught Volvo that modern supply lines can break. The company had invested heavily in shortening supply lines after COVID. However, the Red Sea event broke them in a different way.
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In 2020, Volvo reorganized procurement into a centralized global strategic unit and pursued more regional production alignment, aiming to build closer to demand centers.
Although the plan proved effective in the years that followed, by 2024 it remained incomplete because some complex components continued to be sourced from Asia.
Read More: How One Supplier Brought Stellantis Operations to a Halt
The Volvo Ghent Plant Production Pause
Volvo’s supply chain response became public on
On January 12, 2024. Volvo Cars said it would suspend production at its Ghent, Belgium, plant for three days due to “adjusted sea routes” that delayed gearbox deliveries. The stop ran Monday to Wednesday, January 15–17.
The reason was a lack of gearbox supply.
You see, transmissions are complex, long-lead parts with tight fits and strict certification requirements. A plant can often replace a fastener or trim part, but it cannot replace a gearbox source overnight without risking delays in testing and approval.
That is why a single missing part can halt an entire build line.
The Ghent facility employs about 7,000 workers and normally produces more than 5,000 cars per week. A three-day stop implies approximately 3,500–4,000 vehicles that are not built during the pause window.
However, the brief production pause indicated that Volvo was seeking to avoid a chaotic halt. Especially given that the company did not close all its European operations.
The Gothenburg, Sweden, plant continued. Volvo stated that it did not expect any effect on its broader sales or production plans. Such a narrow shutdown suggests that Volvo had a clear view of the binding part at the time of the decision.
Volvo’s three-day suspension at a plant producing over 5,000 cars weekly translates to approximately 3,500-4,000 lost vehicles during the closure.
At Volvo’s average 2024 selling price of €40,000 per vehicle (a rough industry estimate for premium brands), which represents €140- € 160 million ($150- $ 175 million) in forgone revenue.
However, Volvo’s claim of “no impact on global sales or production plans” suggests that the company offset the impact through several mechanisms.
Read More: Lessons From ASOS’s Bet on Warehouse Centralization
Lessons From The Impact of The Red Sea Crisis On Volvo’s Supply Chain
There are four key takeaways from the story that could change how your supply chain navigates international trade:
Lesson 1: Just-in-Time Fails When Routes Become Unstable
Just-in-time still works when parts move through calm, predictable lanes, but it breaks down when those parts cross political chokepoints.
For example, a two-week shipping delay can undermine hours-based inventory plans and halt production lines without warning. For parts that cross conflict zones or narrow sea routes, holding extra stock is no longer optional.
Lesson 2: Political Conflict Now Sits Inside Supply Chain Planning
Wars, trade disputes, and regional tension now interrupt supply flows as often as weather or labor action.
These risks shape lead times, insurance costs, and routing choices long before parts reach a factory. Sourcing decisions must weigh political exposure as seriously as price and build quality.
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Lesson 3: Seeing Only Tier-1 Suppliers Hides Real Failure Points
Most disruptions originate below the first supplier layer and surface too late to prevent damage. But a missing part at Tier 3 or Tier 4 can still shut down a final assembly line within days. That is why mapping deeper supplier layers is necessary to turn hidden exposure into known exposure.
Lesson 4: Nearshoring Reduces Distance Risk
Producing closer to buyers cuts dependence on long sea routes that fail under stress. Shorter supply lines also match government pressure for local content and faster delivery. Countries such as Morocco and Turkey illustrate how proximity reshapes industrial supply maps.
Obinabo Tochukwu Tabansi is a supply chain digital writer (Content writer & Ghostwriter) helping professionals and business owners across Africa learn from real-world supply chain wins and setbacks and apply proven strategies to their own operations. He also crafts social content for logistics and supply chain companies, turning their solutions and insights into engaging posts that drive visibility and trust.
