By Lisa Anderson
To succeed in the current world dominated by supply chain disruptions and chokepoints, executives must create resiliency and get ahead of the inevitable volatility. The latest, the Francis Scott Key Bridge collapse, has caused massive diversions on the East Coast and in the Baltimore region pointing out the need for backup sources of supply and agility in the supply chain. The level of geopolitical and supply chain risk has remained elevated and should not be ignored in designing supply chain plans.
When the container ship ran into the Francis Scott Key Bridge, causing the bridge to collapse, the regional supply chain came to a screeching halt. The destruction of the bridge cut off the Baltimore port by effectively creating a wall between the port and the Chesapeake Bay. The port is likely to remain closed for a few months and traffic diverted. The Baltimore port is the fifth largest port on the East Coast and the largest port for roll-on/roll-off cargo such as automobiles, light trucks and construction and farm equipment.
The consequences of the bridge collapse are far-reaching, but the most significant industry impact will be the automobile sector. Once the container ships are offloaded at another port, they will need to be transported to the Baltimore region or new sources of supply will be sourced. There are 3,200 sites involved in logistics, distribution and warehousing near the port and bridge. According to the American Trucking Association (AMA), almost 4,900 trucks travel the bridge each day, with $28 billion in goods crossing each year. Severe disruption will remain until the bridge is rebuilt, creating congestion and diversions for the next few months.
The Baltimore bridge collapse is just the latest in a series of disruptions and chokepoints in the global supply chain. The pandemic created a significant chokepoint at the West Coast ports. According to the Journal of Commerce, the West Coast share of imports coming from Asia was down from 61.1 percent in 2021 to 58.8 percent in 2022 while the East Coast and Gulf Coast ports rose. For example, customers started diverting shipments from Northeast Asia destined for the East Coast through the Panama Canal; however, in 2023, the Panama Canal experienced a drought and capacity was reduced by 50 percent over time. This created a chokepoint in that region with congestion, delays and increased prices for expedited travel through the canal. Thus, customers looked for new routes.
One new route was to ship products from Northeast Asia through the Red Sea and Suez Canal to the East Coast ports. This backup plan worked well until the Iran-backed Houthi rebels started attacking container ships in the Suez Canal creating a new supply chain chokepoint. Container ships had to divert around the southern tip of Africa, adding 10 days and 1,000-5000 nautical miles to the trip, thereby delaying shipments and adding cost. Thus, the Baltimore bridge collapse is simply the latest disruption to hit the global supply chain. Each disruption increases inflationary pressure and creates new diversions. Now some customers are rerouting from Northeast Asia to the West Coast ports and will rail or truck products to the East Coast.
A backup plan is no longer sufficient. In fact, a backup to the backup plan is also not sufficient. Instead, companies are creating resiliency in the supply chain. They are using processes such as SIOP (Sales Inventory Operations Planning) to proactively navigate changing conditions to get ahead of disruptions and chokepoints. Moving towards regional supply chains is also gaining in popularity as companies want to gain control over their supply chain. Advanced technologies such as 3D printing also provide additional options for gaining control and creating resiliency. Being vulnerable to disruptions is no longer an option.
Lisa Anderson is the founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth”, an e-book on how to better navigate supply chain chaos and ensure profitable, scalable business growth. A complimentary download can be found at
www.lma-consultinggroup.com/siop-book/.
