Volatility and uncertainty in the logistics industry have dominated the news in 2024. So, we’ve written numerous posts about these events to help you make sense of those disruptions. Specifically, we covered the threats, impacts, and mitigation strategies disrupting supply chains.
The ongoing conflict in Yemen has created several shipping risks in the Red Sea. In particular, there is a risk of Houthi rebels laying mines in the shipping lanes. That's a hard-to-prevent risk that could damage or sink ships.
There is also a risk of prolonged attacks on ships by Houthi rebels, who continue to launch unceasing attacks on ships. This has led to increased insurance premiums for ships sailing through the Red Sea, and some shipping companies have avoided the area altogether.
The impact of these risks on shippers has been significant. Shipping delays and increased costs have led to higher prices for goods. Worse yet, some goods have become unavailable altogether.
This has caused disruptive issues for businesses and consumers. Hence, this has led to calls for action to address the situation.
Almost since the start of the Red Se attacks, the U.N. has been working to negotiate a ceasefire in Yemen. But so far, these efforts have been unsuccessful. The U.S. and other countries have also imposed sanctions on Iran and have provided support to the Houthis.
These sanctions have made it more difficult for the Houthis to obtain weapons. But they have also had a negative impact on the Yemeni economy.
Currently, we see hopeful signs of ending this disruption. First, the U.S. and its allies have increased the intensity and scope of its counterattacks. They are doing so with increasingly devastating effects by targeting Houthi military capabilities, from ships to drones to air strikes and speed boats.
One sign of a return to stability comes from CMA CGM. As of late February 2024, CMA CGM is now shipping cargo through the Red Sea trade route. At the same time, Maersk has decided to wait tout the situation before returning to the Red Sea. The situation in the Red Sea will likely remain volatile for the foreseeable future. Shippers should continue to track the situation so they can mitigate the risks.
The Panama Canal is a vital shipping route that connects the Atlantic and Pacific Oceans. In recent years, the canal has been experiencing drought, which has led to delays for ships.
The disruption and congestion is due to a number of factors. They include drought, increased demand for shipping, expansion of the canal, and labor disputes.
Drought and congestion at the Panama Canal have significantly impacted shippers. At present, shipping through the canal has declined by 36%. Delays have led to higher costs for goods. In fact, some goods have become unavailable altogether. This has caused chaos for businesses and consumers. Now, we have growing demands for steps to redress this serious disruption.
The Panama Canal Authority is working to address the congestion. The authority has increased the number of open locks and has also implemented several other measures to improve efficiency. However, it is unclear when the authority will resolve the congestion.
To date, traffic in the Panama Canal has declined a whopping 75%. In the near term, disruption at the Panama Canal will continue. The Canal Authority likely won’t see meaningful relief until the rainy season starts in May 2024. The situation should resolve itself partially in the mid-term.
The rising inflation has had a significant impact on businesses and consumers. Businesses have faced higher costs for raw materials and labor. That has led to higher prices for goods and services. Consumers have seen their purchasing power eroded. And that has led to a decline in consumer spending.
The Federal Reserve is taking steps to address the rising inflation. The Fed has raised interest rates several times in recent months. Rates are likely to stay stable in the near future despite earlier expectations of a decrease. This will help to steady the economy and bring down inflation over the long term.
There are a number of key labor issues that are affecting the logistics industry. One issue is the shortage of truck drivers. The shortage of truck drivers results from a number of factors, including
The shortage has led to higher prices for shipping and delays for goods. And it even has led to shippers switching from UPS to FEDEX. The Teamsters and UPS resolved their dispute in August 2023, the threat of losing accounts due to future strikes looms large.
Labor continues to have a significant impact on the logistics industry. The shortages and disputes are leading to higher costs and delays for goods. More importantly, future strikes or the mere threat of strikes may cause a loss of customers to the competition. Shippers should continue to track the labor issues and take steps to mitigate the risks.
Cybersecurity is a major concern for the logistics industry. In recent years, there have been a number of high-profile cyberattacks on logistics companies. These attacks have led to data breaches, disruptions to operations, and financial losses.
The cybersecurity risks are growing because of the increasing sophistication of cyberattacks. Cybercriminals are using new tools and techniques to target logistics companies. The logistics industry is also becoming more interconnected, making it more vulnerable.
Most recently, on February 21, 2024, cyber criminals attacked Cencora, a drug distributor in Pennsylvania. At this time, Cencora is assessing the financial and operational effects of the attack.
Re-shoring, near-shoring, and offshoring are all terms used to describe the movement of manufacturing or production from one country to another.
Re-shoring involves moving manufacturing or production back to a country from which it was previously outsourced.
Near-shoring is the process of moving manufacturing or production to a country that is geographically close to the country where it was previously located.
Off-shoring is the process of moving manufacturing or production to a country that is geographically distant from the country where it was previously located.
In recent years, there has been a trend towards re-shoring and near-shoring. This is due to many factors. They include rising Chinese labor costs, the pandemic, and the need for supply chain resilience. They include rising Chinese labor costs, the pandemic, and the need for supply chain resilience.
Re-shoring and near-shoring can offer a number of benefits, including:
However, re-shoring and near-shoring can also be challenging. Some challenges include:
Shipping capacity is the amount of cargo that ships can transport. In recent years, shipping capacity has been under pressure. Some factors that affected shipping capacity include:
The shortage of shipping capacity has led to higher shipping rates and delays for goods. Shippers also have to pay higher prices for shipping. And shippers experience delays in receiving their goods.
Experts expect the shipping capacity shortage to continue in the near future. Shippers should continue to monitor the situation and take steps to mitigate the risks.
Shipping rates are the prices that shippers pay to have their goods transported by ships. In recent years, shipping rates have been rising due to the same factors affecting shipping capacity.
The rising shipping rates have had a significant impact on businesses and consumers. Businesses have faced higher costs for shipping, which has led to higher prices for goods and services. Consumers have seen their purchasing power eroded, which has led to a decline in consumer spending.
Port/intermodal disruptive issues are problems that occur at ports or intermodal terminals. These problems can include:
Port/intermodal issues can significantly impact the flow of goods. Delays at ports can lead to shortages of goods. Equipment shortages can lead to delays in the movement of goods. Finally, labor disputes can also lead to delays and disruptions.
Shippers should know the potential for port/intermodal issues to mitigate the risks. This may include working with their logistics providers to develop contingency plans in case of delays or disruptions.
The SCRC aims to improve supply chain resilience through collaboration between businesses and government organizations. The council was formed in response to the COVID-19 pandemic, which highlighted the vulnerabilities of the global supply chain.
The council is currently working on several initiatives, including:
At present, the SCRC is proceeding slowly as its task is massive. According to Dr. Vitasek, University of Tennessee: “When you consider Biden’s first Executive Order on improving U.S. supply chains was nearly two years ago, it hints at the fact that progress will likely be slow.”
The SCRC is a valuable resource for improving the resilience of global supply chains, do not expect speedy progress.
Challenges to the logistics industry and global supply chains abound and persist. To deal with these risks and disruptions, it’s important to take stock of the situation. From there, shippers can adjust and adapt as needed.
At American Global Logistics (AGL), we do just that. We track changes, disruptions and assess their impacts to supply chains. That allows us to successfully manage our customers’ supply chains despite the challenges.
We make every effort to prevent, mitigate, or avoid disruptions to your supply chain. That’s AGL’s mission.
We provide reliable shipping services so you can focus on growing your business. You can trust us to deliver your valuable goods as promised.
Contact us if you want us to deal with the volatility and uncertainty of your supply chain.
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On March 26, 2024, the Francis Scott Key Bridge, a major transportation artery connecting Maryland and Virginia, collapsed. The collapse caused significant traffic disruptions and raised concerns about the fragility of our nation's infrastructure and its impact on supply chains. This blog post will examine the supply chain disruptions caused by the collapse. We will […]
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