Managing Your Supply Chain In Turbulent Times

Posted by Land Link Traffic Systems on Aug 31, 2021 12:58:04 PM

As if things weren’t challenging enough along comes hurricane Ida causing all manner of disruption to the Gulf states. One million without power for quite a while, hospitals limping along on generators and commerce in the region is at a standstill.

Hurricane Ida forced the Kansas City Southern rail network to shut its main line in Louisiana and halt exchanges between railroads in New Orleans, which may worsen delays in a US shipping industry that is already stretched thin.

Kansas City Southern said it doesn't know when service will resume on its main Louisiana rail route because crews must wait for flood water to recede before beginning repairs. The railroad operator also shut a line in Mississippi from Gulfport to Hattiesburg, according to a statement on its website.

Almost all the major railroads, including Union Pacific, CSX and BNSF Railway, have lines that run to New Orleans. The service disruption could spread across the US rail network as freight cars have to be rerouted, which would exacerbate an already tight supply chain. It typically takes weeks and even months for railroads to fully recover from an extended shutdown of main lines.

At New Orleans, which is a major rail gateway, there's no interchange of freight cars between western and eastern railroads, Union Pacific said in a statement. This lack of railcar transfers adds another obstacle to cross-country shipping. The railroad is also grappling with road closures and power outages as it begins to inspect tracks and repair damage.

Along with the slowdown of rail service, the cost to hire a truck will rise as demand increases in the Gulf Coast region for trucks to haul in supplies for the relief and rebuilding of the area, said Adam Roszkowski, an analyst with Bloomberg Intelligence.

International Container Service Costs Increase Dramatically

Pandemic-related product shortages from computer chips to construction materials were supposed to be resolved by now. Instead, the world has gained a lesson in the ripple effects of disruption. Delays, product shortages and rising costs continue to bedevil businesses large and small. And consumers are confronted with an experience once rare in modern times: no stock available, and no idea when it will come in.

Just as the health crisis has proved stubborn and unpredictable, the turmoil in international commerce has gone on longer than many expected because shortages and delays in some products have made it impossible to make others. At the same time, many companies had slashed their inventories in recent years, embracing lean production to cut costs and boost profits. That left minimal margin for error.

In the face of an enduring shortage of computer chips, Toyota announced this month that it would slash its global production of cars by 40 percent. Factories around the world are limiting operations despite powerful demand for their wares because they cannot buy metal parts, plastics and raw materials. Construction companies are paying more for paint, lumber and hardware, while waiting weeks and sometimes months to receive what they need.

Before the pandemic, shipping a 40-foot container from Shanghai to the U.S. cost $6,000 to $7,000. September containers will cost as much as $26,000. The price could rise to as much as $35,000, because of rail and trucking difficulties in the United States.

Cheap and reliable sea transport has long been a foundational part of international trade, allowing manufacturers to shift production far and wide in search of low-wage labor and cheap materials. In the 12 to 24 months, it will take to rebalance the system, supply and demand will dictate the cost. Now, more than ever, expert guidance from a qualified 3 PL may be necessary for survival.  We're here to help @

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Michael Gaughan
Technology Officer
Land Link Traffic Systems


Topics: Supply Chain Management, Third Party Logistics, Freight Bill Auditing, Transportation News, Reducing Freight Rates, Logistics Business, Maximizing Routing Efficiencies, Industry Trends