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Port of Baltimore calamity shows supply chain’s vulnerabilities
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Companies continue to make their supply chains more resilient to respond very quickly to supply chain disruptions. Some disruptions can be modeled or even predicted in some cases. But others are hard to predict and show that even with all the technology and process improvements in the world, supply chains remain vulnerable.
We’ve seen this over the winter period with the heavy floods in California and more recently this week with the accident at the Port of Baltimore. On Tuesday, a ship named the Dali hit a support column of the Francis Scott Key Bridge in the early hours of the morning, causing the bridge to collapse. The bridge spanned the entrance to the Port of Baltimore, the busiest port in the U.S. for car exports and the ninth-busiest for foreign cargo. Not only was this a tragedy that claimed several lives, but it also showed that even as we’re building up a more resilient supply chain, these networks remain fragile and can be hit at any point.
This event will have a ripple effect in the supply chain as Baltimore is the busiest U.S. port for car shipments and the largest U.S. port by volume for handling farm and construction machinery. It is also the second-biggest port for U.S. coal exports.
The event leaves the port very quiet and is “the port’s version of the global pandemic,” according to Maryland Senate President Bill Ferguson. Besides the flow of goods, many people’s lives will be affected as the Port of Baltimore is responsible for some 15,000 jobs and supports an estimated 140,000 more. Small business supporting the port expect to have to lay off workers in the coming weeks.
Could new regulations be introduced for vessel operators after this event? This was not the Dali’s first incident. The ship suffered damages in July 2016 when it hit the stone wall of the quay at the Port of Antwerp in Belgium while unmooring, according to shipping traffic website Vesselfinder. Separately, an inspection of the Dali in San Antonio, Chile, in June last year found propulsion and auxiliary machinery deficiencies, NBC News reported Tuesday.
The impacts on the supply chain will be big and long-lasting, especially for those industries that have large container volumes going through the Port of Baltimore. The automotive industry is one of those, with major automakers including, but not limited to, Nissan, Toyota, General Motors and Volvo being affected. According to project44, disruptions to manufacturing are expected in the automobile market until companies can establish dray networks through neighboring ports. The automobile industry is notoriously lean, meaning any disruptions will have ripple effects throughout the manufacturing process. While the automobile industry might be the most impacted, the port is one of the 15 largest in the U.S. and handled over $80 billion in freight in 2023. This freight will likely have to bypass the Port of Baltimore until the area is cleared. Generally, vessels that call at the port also continue to call at ports up and down the East Coast of the United States. It is likely that these containers will be discharged at the nearest port. Customers will likely have the option to choose to dray containers from the port of discharge to their final locations, or the ocean carriers will be responsible for getting these containers to the Port of Baltimore for customers to pick up at the planned location.
Project44 indicated that in addition to the already mentioned impacts on the automobile industry specifically, there will be a general increase in transit time for truckloads in the area. This bridge is part of a major highway in the Baltimore area, and with the closure, routes will be less direct and more congested. The Francis Scott Key Bridge was the bridge completing the Interstate 695 loop around Baltimore, so both cars and trucks will need to detour or be directed to neighboring bridges on Interstates 895 and 95. Project44 is monitoring impacts on truckload transit times for shipments into and out of Baltimore to understand the full scope of the impact.
This event definitely is testing supply chains and where high velocity is a key requirement to pivot based on the impacts of the supply chain network by diverting movements of goods to other locations and making sure inventory flows are minimally disrupted. But even with the best technology, including AI, these events cannot be forecast, which leaves supply chains vulnerable.
Should companies start simulating all the possible impacts on U.S. infrastructure? Besides the impacts from damage to infrastructure like the Port of Baltimore event or last year’s vehicle fire forcing I-95 to shut down, we also see cost impacts. In Europe, more specifically in Germany, companies are being charged for the use of the infrastructure. It is called the German Maut, officially known as the Infrastructure Usage Charge or Infrastructure Levy. It was introduced to finance and maintain Germany’s extensive road and highway infrastructure. On July 1, the German Maut system will be expanded to include vehicles with a technically permissible total weight of 3.5 tons or more and will cost up to 35 euro cents per kilometer.
Major infrastructure incidents act as real-world stress tests for the supply chain, exposing vulnerabilities and highlighting areas for improvement. An incident at a critical infrastructure point, like a major canal blockage, a bridge or highway breakdown, or a cyberattack on a key port, exposes the dangers of overreliance on single routes or transportation hubs. These incidents highlight the need for diversified transportation routes, carrier networks and even production facilities to minimize disruptions caused by a single event.
A seemingly isolated incident can have cascading effects across the entire supply chain. Delays in one region can lead to stockouts in another, impacting production and ultimately consumers. These events showcase the need for a global perspective on risk management. Companies need to consider potential disruptions not just in their own backyards but across the entire supply chain network. These incidents require us to improve our communication and collaboration. Effective communication and information sharing between different players in the supply chain, from manufacturers to retailers, are crucial during disruptions. This allows for coordinated efforts to mitigate the impact. Stronger collaboration among governments, logistics companies and manufacturers can lead to more resilient supply chains with better contingency plans in place.
Technology plays an important role to manage in case of disruptive events. The ability to track goods in real time throughout the supply chain allows for quicker identification of disruptions and faster response times. Leveraging data analytics can help companies predict potential bottlenecks and make informed decisions to optimize their operations during disruptions.
Look for more articles from me every week on FreightWaves.com.
About the author
Bart De Muynck is an industry thought leader with over 30 years of supply chain and logistics experience. He has worked for major international companies, including EY, GE Capital, Penske Logistics and PepsiCo, as well as several tech companies. He also spent eight years as a vice president of research at Gartner and, most recently, served as chief industry officer at project44. He is a member of the Forbes Technology Council and CSCMP’s Executive Inner Circle.
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