The Francis Scott Key Bridge Collapse

Horribly, a container ship collided with the Francis Scott Key Bridge, and much of the bridge collapsed. Cars went into the water, and it has become a deadly disaster. Our thoughts go out to the families impacted.

As we commented in Inc., from a supply chain point of view, it has caused significant near-term impacts and extended disruptions in the region. Transportation bottlenecks immediately emerged. Container ships, trucks, and rail were all impacted.

Port Impacts

It just so happens that the collapse of the bridge cut off the Baltimore port by in essence setting up a wall between the port and the Chesapeake Bay. The bridge’s collapse means that for the foreseeable future, it won’t be feasible to get to the container terminals. The port is likely to remain closed for several months and traffic diverted. This port is the 5th largest container port on the U.S. East Coast and the busiest port in the region for handling roll-on/ roll-off cargo such as cars, light trucks, construction and farm equipment, and more. The port also handled sugar, furniture, home appliances, coal, and other items.

Near-term, container ships will be diverted to nearby ports such as New Jersey, Pennsylvania, and Virginia ports. There will be delays, congestion, and diversions. Most likely, these delays will be relatively short-term as they are absorbed to nearby ports; however, it is another disruption in the global supply chain with short-term and long-term implications. As we communicated in a recent article on the impacts of the drought conditions in the Panama Canal and container ship attacks in the Suez Canal (both impacting shipments from Northeast Asia to the East Coast), this is an additional disruption at the East Coast ports. Thus, some shippers are likely to divert to the West Coast ports and rail or truck product to the East Coast.

Regional Logistics Impacts

There are 3,200 sites involved in logistics, distribution and warehousing nearby the port and bridge. Thus, there will be severe near-term disruption in the region. The timing will be heavily dependent on how quickly the debris can be cleared to restore safe passage in the area. Some experts believe this task could be accomplished in the next 1-2 weeks whereas others say it could take months. With that said, with the ports closed and diversions underway, it will take time for the supply chain to level out.

Trucking Impacts

According to the American Trucking Associations (AMA), almost 4,900 trucks travel the bridge each day, with $28 billion in goods crossing each year. There are alternate routes; however, there are issues associated with several of the options. For example, the two tunnel options to cross Baltimore harbor cannot carry hazardous materials, and there are height and width restrictions on the tunnels. Thus, trucks will be diverted on I-695 on the western side of the city. These diversions will cause additional delays, diversions, and cost.

Industry Impacts

The auto industry will experience the most significant impacts because the Baltimore port is the top American port for the import and export of cars. BMW, Volkswagen and Mercedes-Benz have facilities close to the port to handle vehicle shipments, and Mazda is had the highest dollar value of imports. The auto industry supply chain will be resilient but it will be another disruption after finally returning inventory to pre-pandemic levels.

The energy industry might experience disruption as well. There could be a disruption in coal supplies, gasoline and ethanol. The oil industry will have to find alternate routes for barge deliveries and/or pursue alternate modes of transportation (trucking). CSX transports imported coal and is communicating expected delays.

SIOP & Backups

It is quite clear that a single backup is no longer sufficient. You must proactively plan for likely risks and think 3 steps ahead of your competition to succeed in today’s global supply chain. SIOP (Sales Inventory Operations Planning) is a process to align demand with supply. It provides visibility across the supply chain so that companies can take proactive actions to mitigate risks, source backup sources of supply, and pivot with changing circumstances. For example, there is significant regional manufacturing, reshoring, and nearshoring occurring. To learn more about these strategies, download our complimentary book, SIOP: Creating Predictable Revenue and EBITDA Growth.

If you are interested in reading more on this topic:
How Do You Rate in Your Supply Chain?

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The Baltimore disaster is expected to further compound the stress already placed on the global freight system. “Container shipping traffic has already been quite disrupted, because of the drought going on in the Panama Canal–ships from there [are] going through the Suez Canal to come to the east coast of the U.S. from Northeast Asia,” says Lisa Anderson, a supply chain expert and president of California-based LMA Consulting Group.

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Baltimore’s Business Community Grapples With Impact of Francis Scott Key Bridge Collapse

For founders in the city, the loss of a Baltimore landmark is about more than missed income.

Early Tuesday morning, a cargo ship collided with Francis Scott Key Bridge in Baltimore, immediately collapsing the structure and sending cars plunging into the Patapsco River.

The incident sparked waves of alarm throughout the country. In speeches, Transportation Secretary Pete Buttigieg and President Joe Biden pledged federal assistance in rebuilding efforts. There is no indication that foul play was the cause of the accident, according to the Baltimore’s FBI field office.

Rescue crews continued to search the area for six construction workers who were on the bridge when the Dali, a 948-foot cargo ship bound for Colombo, Sri Lanka, collided with a bridge pylon around 1:30am, according to multiple reports. Two additional construction workers had been rescued from the water, and one was taken to the hospital. No fatalities had been confirmed by Tuesday afternoon, officials said. The Dali, a Singapore-registered vessel, dropped anchor prior to impact after the ship lost propulsion, CNN reported. The Maritime Port Authority of Singapore, which confirmed the loss of propulsion to CNN, says it is in contact with the US Coast Guard and cooperating with investigations.

The National Transportation Safety Administration announced an investigation into the incident on Tuesday afternoon, noting it would probe whether the ship did in fact drop anchor prior to impact.

In addition to the psychological toll inflicted by a disaster, the bridge’s collapse has massive economic ramifications: Submerged in the river, the remnants of the bridge now block access to the Port of Baltimore, the ninth largest port in the United States. The detritus will cause a massive re-routing of all traffic heading to the Port of Baltimore to nearby ports on the northeastern seaboard, Lisa Anderson, a supply chain expert and founder of the LMA consulting group, explains to Inc.

Read the full article at Inc.

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Lisa Anderson was quoted in IE Business Daily recently on the state of the Inland Empire as a new year starts – will it be boom or bust? What’s in store for the industrial market in 2024? Anderson says you could be in for a bumpy ride.

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The days of a perpetually red-hot industrial market in the Inland Empire – record sales and leases, high vacancy rates, plenty of speculative development, and an endless absorption of open space – may be a thing of the past.

At the very least, with the start of a new year less than one month away, growth of the logistics manufacturing sector in Riverside and San Bernardino counties has been put on hold, and it might stay that way for a while.

The Inland Empire’s industrial market won’t be at full strength as it heads into 2024 if the most recent data is any indication.

To read the full article, click here.

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Sustainability remains in the news; however, the technology doesn’t always keep up. For example, Lego has abandoned its most high-profile effort to ditch oil-based plastics from its bricks after finding that its new material led to higher carbon emissions, according to the Financial Times. After two years of development and testing to make a brick from recycled plastic bottles rather than oil-based ABS, Lego decided that it didn’t make sense. This highlights the complexities that arise when conflicts exist in achieving goals. For example, in the Lego situation, eliminating the use of fossil fuels and reducing carbon emissions came into conflict.

Logistics Experts Staying Up at Night

In Southern California, there are several regulations going into effect where the technology is simply not ready and will not be ready on time. Thus, Logistics executives say this topic keeps them up at night. For example, there are several trucking regulations that cannot be met with the technologies available, the lack of charging stations, and lack of power. To hear more about manufacturing and supply chain geopolitical and regulatory issues, watch our recent webinar.

Yet Significant Progress Abounds

On the other hand, significant progress abounds. The goods movement industry has invested significantly and was focused on sustainability long before regulations came into the picture. When industry is unencumbered and engaged, dramatic results will follow. For example, according to the PMSA, the ports and supporting transportation community has achieved landmark progress in reducing emissions.

In their press release, PMSA reported that the San Pedro Bay Ports together saw steep and dramatic reductions in 2022; combined numbers reveal drops of 90% for diesel particulate matter (DPM), 97% for sulfur oxides (SOx), 63% for nitrogen oxides (NOx) and equally remarkable declines for other emission categories, compared to the baseline year of 2005.

On the manufacturing front, sustainability has gained momentum. The triple bottom line is abundant for those manufacturers following common sense good manufacturing processes. For example, read our Adhesives & Sealants article, “Common Sense Manufacturing Processes Drive Sustainability Improvements“.

The Bottom Line

Use common sense, take smart risks with good potential to yield sustainability results, positively impacting the triple bottom line, and chalk R&D and trials up to part of the process. On the other hand, don’t throw money down the drain in the name of sustainability when what you are positively impacting in the US will be more than offset in China (as an example). After all, that is not common sense!

If you are interested in reading more on this topic:
https://www.lma-consultinggroup.com/how-packaging-can-contribute-to-the-triple-bottom-line/

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A UPS strike was averted on the last day of the quarter, but it still hangs in the balance as the two sides are not on the same page! A potential UPS strike could have significant negative impacts on the supply chain and customer service. The head of the union said an imminent strike was likely when a counterproposal fell flat. Now that a new counterproposal was submitted, the imminent strike was called off with a new date set within a wee

The West Coast ports have been negotiating with the unions for months with no agreement in place. Recently they came to a tentative agreement after rising tensions resulting in delays in vessel servicing, congestion at the ports etc. A widespread strike along the West Coast could cost $1 billion a day! This agreement will take months to ratify. Unfortunately, details are scarce as to what is in the agreement and how that will impact competitiveness of the ports.

The threat of a port strike in Canada remains high. They voted in a landslide to authorize a strike. Vancouver and Price Rupert ports were seen as relief valves for shippers during the West Coast negotiations. Trade issues have been exacerbated since the Panama Canal has struggled due to low water levels which limits the weight of vessels in the canal.

This follows the rail strike that was averted at the last minute by Congress. A rail strike could result in $2 billion a day in lost economic output.

A UPS Strike’s Supply Chain Impacts 

Clearly, the economic impact is substantial at $1 billion a day for UPS! This doesn’t even tackle the hoards of supply chain issues caused by strikes of the transportation / goods movement systems. A few of the HUGE impacts include:

• Lack of deliveries of raw materials, components & supplies: This can bring production to a halt. Best case, schedules are changed, materials are expedited and supply chain chaos follows.
• Shipments delayed: In today’s complex supply chain, if one node stops or slows down, the entire end-to-end supply chain is impacted. For example, there can be several manufacturers, suppliers, distributors, transportation partners, and customers negatively impacted and scrambling.
• Customer & consumers negatively impacted: Delays throughout the system similar to the pandemic could result.
• Critical supplies impacted: Beyond nice-to-have purchases, supplies impacting healthcare, national security and food will be impacted.

Listen to my interview on FOX5 about the potential UPS strike.

What to Do?

The answer is not to rely on hope!

Instead, you should follow a few uncommon common sense best practices to mitigate the supply chain impacts:

• Backup partners: Ensure you have backup suppliers/ transportation partners. Remember, you cannot have a backup supplier in name only. To be successful, you must be working with your backup suppliers on a continual basis and giving them at least 20% of your volume.
• Backup modes of transportation: Instead of air freight, you should be reviewing backup modes of transportation. This won’t make sense for piece shipping (e-commerce) although you should explore and be aware of your options.
• Reevaluate your supply chain network: It is time to take a fresh look at your complete supply chain network, simply due to the exacerbated risk factors in the global supply chain. Make short term tweaks and build a resilient supply chain for your long-term competitive success. There are countless ways you can mitigate these types of risks while creating a resilient network.
• Be a partner of choice: Simply looking at price will no longer cut it. It never did but companies were able to get by. You must find collaborative win-win relationships to succeed in the modern supply chain.

Please contact us with stories, issues, and opportunities on what you’re doing to free up the mind and create a culture of innovation. And, please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Learn more about these topics in our blog and download your complimentary copy of our recently released special report: The Road Ahead: Business, Supply Chain & The World Order.

Do you like this article? Keep reading on this topic.                                                                                                                                Rail strike could bring immediate impacts to some industries, supply chain consultant says

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Originally published in Brushware, March-April, 2023

According to Insider Intelligence, the US B2B e-commerce sales will be over $2 trillion by 2024. Digital Commerce 360 said that manufacturers’ B2B e-commerce sales have been growing at an annual rate of 16% since 2016 which is almost 1.5 times faster than total manufacturing sales. The opportunity is vast to grow even faster than the averages as not all manufacturers are willing to jump into the mix. Those with value-added B2B e-commerce

As customers see the advantage in gaining the “and” of improved support and greater collaboration with lower costs of going direct to manufacturers, sales will continue to increase for manufacturers that invest in B2B e-commerce. It is not for the faint of heart in that you’ll have to upgrade your systems infrastructure to accept online orders, provide inventory visibility, and tie it with your ERP system. Additionally, manufacturers will have to proactively address changes to their ability to pick, pack and ship smaller orders on a more frequent basis. On the other hand, those that offer this capability will grow faster than the competition, and, more importantly, they will develop a closer relationship with their customers.

For example, a bike helmet manufacturer wanted to take advantage of potential e-commerce sales; however, their greater near-term opportunity was in B2B e-commerce. In order to provide greater capabilities for their B2B partners, they upgraded their B2B capabilities with system upgrades. Since their customers gained a superior customer interface with value-added reports and capabilities, the company was able to leverage this advantage in the marketplace.

Additionally, by virtue of having B2B e-commerce capabilities, their B2C e-commerce capabilities and related customer opportunities grew as well. In concert with these upgrades, they also upgraded their ERP system, warehousing process capabilities and warehouse automation so that they could increase their efficiency, accuracy, and responsiveness simultaneously to meet these increased demands without negatively impacting operations.

Similarly, a hand tools manufacturer saw a significant opportunity in e-commerce sales during the pandemic. From a sales perspective, they could take orders from B2B customers as well as consumers to support aggressive and rapid sales growth; however, there were challenges in meeting customers expectations from a distribution perspective. Since their strength was in support B2B customers and their ability to pivot in manufacturing to changing needs and incorporate product changes rapidly, they wanted to focus on how to best serve these priority customers.

Thus, they performed an internal analysis as well as a 3PL analysis to determine the requirements and costs to pick, kit as needed, package, pack, and ship pallets (typically required for B2B) as well as pieces (typically required for B2C) while supporting a quick delivery window for their customers. Although they could scale up internal operations, space was limited, and so they decided to focus the 3PL experts on the B2B e-commerce customers to drive improved performance for the customers while looking for opportunities for efficiency and cost improvements in warehousing and freight. They kept the rest internally while focusing efforts on the 3PL pilot for quick scalability and dedicated expertise.

E-commerce trends will continue to increase as customer personalization and customization differentiate from the competition. It is not one size fits all but taking steps forward will open up opportunities. The proactive companies will thrive whereas the stodgy will see their competition race by.

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There has been a lot of conversation about railroads lately. Why should we be concerned about keeping the railroads moving?

• $2 Billion a DAY: If the railroad strike occurred, it would cause $2 Billion dollars a DAY of economic damage. In the first half of 2022, 75,000 rail shipments started their journey each day, and they would sit idle.
• 467,000 long haul-trucks per DAY to offset: There simply aren’t the trucks or truck drivers to supply 467,000 long-haul trucks per day.
• 40% of US freight: The railroads haul about 40% of the nation’s freight.
• Impacts on chemical manufacturing & refineries: A chemical industry trade group estimated that if a strike continued on for a month, 700,000 manufacturing jobs would be lost as they would have to idle capacity and shut down operations.
• Shortages related to chemical manufacturing: Purified water, anything made from plastic (thousands of items…..), gas, carbonate soda and beer, and the list goes on.
• Stranded train passengers: At least 50% of the commuter rail systems rely at least in part on tracks that are owned by the railroads.
• Fertilizer: Fertilizer has been scarce since the Russia-Ukraine war since a lot of fertilizer was sourced from that region to supply the world. One of the largest producers in the US was near the eye of the Florida hurricane, and fertilizer is transported by rail. Fertilizer is already of grave concern and inflated prices.
• Food shortages: 30% of packaged food is moved by rail. Also, certain products’ operations are built around raw material deliveries by rail (grain, barley, peanuts).
• Impacts on meat production: Herds rely on rail to deliver their feed via rail.
• Retail impacts: UPS and FedEx also use rail to transport goods. Additionally, UPS uses rail to keep its Chicago area consolidation hub on schedule.

Automobiles: 75% of new cars move via rail.

Strike Averted

A strike would have been economically devastating, and so Congress passed legislation requiring the railroad workers to live by a tentative agreement that the union leaders worked out with the railroad companies. 4 unions had rejected the deal because of the lack of sick days and flexibility; however, the law will now require employees to work. A rail strike was averted, but will there by lasting implications?

But Issues Remain….

Rail is the current bottleneck in the supply chain. The railroads have been reducing the number of employees over the last several years as they have become more efficient. CSX implemented an improved process called Precision Scheduled Railroading in 2017, and most railroads have followed their lead or implemented other changes that have led to reduced costs. Since this timeframe, 22% of the jobs at Union Pacific, CSX, and Norfolk Southern have been reduced.

Precision Scheduled Railroading is in essence a lean scheduling system for the railroads. Instead of waiting for full trains (ideally with the same type of product in all cars), the system focuses on moving cars. It is a first-in, first-out model that keeps rail cars – and supply chains – moving. Also instead of waiting on long runs (long trains), rail cars will be picked up as scheduled, thus improving service. Similar to JIT (just-in-time), companies took JIT literally (even though that isn’t the true intention of JIT), Precision Scheduled Railroading makes sense to improve efficiencies and service, but the staff reductions don’t have to be in full alignment with the improvements.

Then, as the pandemic started, similar to most businesses, the railroads furloughed workers. However, as spikes in demand occurred as business increased, it hasn’t been as easy to get workers back. Also, because of the nature of the business, the railroads must run 24/7. Thus, the conflict with sick time and flexible time.

Thus, rail is the current bottleneck.

• 26,000+ containers sitting on the docks waiting for rail: This is around 3 times as many as there were prior to the pandemic.
• Rail delays/ extended lead times: A survey by Benedict’s trade group shows that all of its members had rail shipments delayed for 3 days or longer.
• Retail theft: There has been a dramatic increase in retail theft at the railyards in L.A. and it is a recurring issue. Unfortunately, according to the L.A. Times, Union Pacific said that the county’s approach to low-level offenders has exacerbated the problem.
• Dramatic increase in embargos: Union Pacific and BNSF Railway have issued more embargos, restrictions placed on the amount of cargo that can be transported, in 2022. Between January and November, they had 1500 embargos which is between 60% and 130% greater than 2020 and 2021.

The Railroad Labor Deal Passed by Congress

The Congress deal provides 24% pay increases over five years, immediate payouts averaging $11,000 upon ratification, and an extra paid day off. It will certainly contribute to inflation. On the other hand, once the workers get the payout, will they stay? There are some concerns over a worsening situation. Of course, as compared to the railroad strike scenario, it was a tradeoff Congress chose to take.

What’s Next?

Unfortunately, the railways are having the same issues as everyone else in hiring workers to fill key roles. Undoubtedly, the railroads will work through the bottlenecks eventually as they realize the service complaints are getting louder and louder. However, since the supply chain is a system of systems, the bottleneck will move to the next link in the supply chain. Are you preparing for the current issue or thinking ahead?

Also, since the unions gained headway, the question is whether this issue will impact other unions such as the port labor negotiations. Concerning times…..

The only path forward to take control over your success is to take control over your supply chain. Know your partners, choose wisely, insource where it makes sense, think ahead, innovate, and be the disruptor instead of the disrupted.
Please keep us in the loop of your situation and how we can help your organization thrive during these times of volatility and disruption. There will be more winners created than at any other time than since emerging from the Great Depression. To gain additional ideas and insights on how to best navigate these volatile times and thrive, read our new eBook Thriving in 2022. Learning from Supply Chain Chaos. Download your complimentary copy.

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Originally posted by JILLIAN SMITH | The National Desk, Wednesday, November 30th 2022

House Speaker Nancy Pelosi said she’s putting everything on track for an early vote to quickly send the bill to the Senate and have the legislation approved before the Dec. 9 strike deadline.

If the more than 100,000 affected rail workers walk off the job with no deal, the U.S. economy could face another devastating blow.

Supply chain consultant Lisa Anderson says many manufacturers are concerned that the strike could cause further disruptions to their manufacturing operations.

“You know, there are concerns about all the food that moves by rail and in the automotive industry, there are concerns about what moves you know, the cars and the parts,” Anderson said. “So, there are concerns across the board about further supply chain disruptions.”

She says she is advising many companies to be prepared in case a deal isn’t reached by the deadline.

FILE – Surveyors work next to Canadian Pacific Rail trains which are parked on the train tracks in Toronto on Wednesday, May 23, 2012. Approximately 3,000 Canadian Pacific Railway conductors, engineers, train and yard workers represented by the Teamsters Canada Rail Conference will be returning to work on Tuesday, March 22, 2022, after an agreement was reached between the railroad operator and union. (Nathan Denette/The Canadian Press via AP, File)

“Definitely advising them to take proactive action with anything critical like let’s say materials that they are counting on to keep manufacturing operations going,” said Anderson. “If it’s critical, if it’s the only source of supply and advising them to, you know, send it by truck or send it by plane.”

The major challenge with the potential strike concerns products, materials and components that keep manufacturers running. It’s not yet known when Americans could be dealing with any supply chain disruptions but Anderson says it’s possible that the impacts could be seen within a week following the strike, if not sooner.

“In some industries, we’re going to start to feel supply chain disruptions immediately because folks are stopping their transport via rail in advance because they know that they’re not going to be, you know, available potentially available at the right time,” Anderson said.

She says if rail shipping stops, it would hit across the board.

“Unfortunately, the products that are transported by rail go into countless products,” Anderson said. “Certainly in the food industry, there’s going to be, you know, grain and some of the other food items that are transported via rail it’s going to show up immediately.”

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Lisa Anderson provides industry expertise to the Bloomberg Chief Future Officer Interview with Deutsche Post DHL Group Interview Melanie Kreis.

Chief Financial Officers now play a critical role in shaping corporate strategy and positioning organizations to meet future challenges. Bloomberg’s monthly program, Chief Future Officer, profiles these leaders and explores the impact they’re making on their companies and industries. In this episode, Deutsche Post DHL Group CFO Melanie Kreis tells Tom Mackenzie how the the logistics giant has built capital and diversified its portfolio while accelerating growth during the Covid pandemic. (Source: Bloomberg)

Click here to watch

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