Global Supply Chain Risk Exposures Report- Continued Reinforcement for More Risk-Balanced Sourcing Decisions
Within its 5th annual Natural Hazards Risk Atlas, risk analytics and advisory firm Verisk Maplecroft calls attention to high profile risk cities that happen to be today’s growing manufacturing and logistics hubs. This atlas assesses the natural hazard exposure of over 1300 global cities, selected for their economic importance in the coming decade. The analysis is somewhat unique in that it not only identifies regions most prone to natural hazards, but further quantifies the socio-economic resilience within these locations. From our Supply Chain Matters lens, it provides a yet another stark indicator that supply chain disruption and risk criteria were most likely not weighted high in past outsourcing or global based manufacturing and strategic sourcing strategies.
According to Verisk Maplecroft: “natural hazards constitute one of the most severe disruptors of business and supply chain continuity, and also threaten economic output and growth in some of the world’s key cities, especially for those located in emerging markets.” Maplecroft indicates that its annual analysis considers the combined risk posed by tropical storms and cyclones, floods, earthquakes, tsunamis, severe storms, wildfires, storm surges, volcanoes and landslides. This report’s executive summary further notes: “Of the 100 cities with the greatest exposure to natural hazards, 21 are located in the Philippines, 16 in China, 11 in Japan and 8 in Bangladesh.”
If you have been following our Supply Chain Matters commentaries related to global supply chain disruptions and risk, these same regions comes up quite often. This blog alone has amassed over 350 commentaries directly related to either supply chain disruption or risk indicators. The Philippines has emerged a hub for semiconductor assembly, high tech production and customer services while Bangladesh continues as the hub for apparel and clothing manufacturing. China and Japan are both major hubs for multi-industry manufacturing and product development. Yet, natural hazards are a more frequent occurrence within specific emerging global supply chain hubs such as Bangladesh, Thailand, Japan, the Philippines and other regions. Such occurrences not only add to major disruption but added insurance and risk mitigation costs.
The continued reinforcement of such risk indices is another important reminder for strategic sourcing teams to actively foster balanced sourcing decision criteria, weighting landed costs with risk profiles. Where higher supply chain risk and disruption indicators are prevalent within certain regions, there obviously needs to be a corresponding alternative sourcing plan in-place.
This past 24 hours have been incredible and noteworthy for transportation-related incident headlines within the United States. Continued occurrence of severe winter storms and specifically a large and broad snow and ice storm that blanketed the U.S. Midwest, West, South and Northeastern regions created a lot of transportation havoc. Fortunately, no lives were lost and injuries were minimal.
Here’s the unfortunate tally:
Commercial Aircraft Skidding Incident in New York
A Delta Airlines MD-80 commercial aircraft attempting to land on a snow and ice covered runway at New York’s LaGuardia Airport skidded off the runway and eventually struck a retention barrier, just a few feet short of reaching nearby water. Fortunately, all passengers and crew were able to successfully evacuate the aircraft with only minor injuries. News reports indicated that one of the fuel tanks of the aircraft had ruptured and was leaking fuel when rescue official reached the plane, but there was no fire or explosion. The accident resulted in one of the busiest airports in the U.S. having to be closed for all operations for upwards of eight hours. As we pen this posting on the morning after, flight delays at LaGuardia are averaging upwards of two hours or more for arrivals and departures.
Commercial Aircraft Fire and Evacuation in Denver
On Wednesday evening a US Airways Airbus A321 operated by American Airlines was forced to evacuate its passengers after a suspected fire broke out in the aircraft’s cabin at the airport in Denver. This flight originated in Charlotte North Carolina. Thick smoke filled the cabin forcing an emergency evacuation. Social media provided passenger photos of the evacuation. A calm evacuation among passengers avoided any injuries.
Another Crude Oil Train Derailment
A BNSF Railway train hauling over 100 tank cars containing crude oil derailed near Galena Illinois, causing a massive explosion and fire. Initial reports were that 8 cars derailed, six of which rolled over. As has been the case with these accidents, the fire was so intense that safety and fire officials have elected to let the fire burn out, which is expected to take several days. There have been no reports of deaths or major injuries thus far.
There have been little specifics regarding the origin of the crude, nor of the class of tank cars involved, but speculation is obviously that the shipment may have involved Bakken crude from North Dakota, headed for Midwest of Northeast refineries. More specifics will obviously come forward in the next several days.
Last month, a CSX train hauling Bakken crude derailed and precipitated massive explosions and fire near Mount Carbon West Virginia. That accident is obviously fresh in the minds of U.S. regulators and now, there is yet another fiery incident.
Hundreds of Travelers Stranded on Kentucky Highways
Hundreds of travelers and commercial trucking rigs were stranded overnight on Northern Kentucky interstate highways I-24 and I-65 when snow and ice conditions amounting to over 2 feet of cumulative snow deteriorated so quickly that snow plow crews could not keep up. This caused multiple tractor-trailer rigs to lose traction and subsequently block the highway for all motorists, most of which were stranded overnight. The ambient temperatures were reported as 30 degrees below normal and reports indicated that the traffic gridlock extended nearly 26 miles. Kentucky’s governor was forced to activate the state National Guard to assist in aiding and evacuating stranded motorists and haul-out stuck rigs and automobiles. The real-time photos featured on Facebook and Twitter provided an ample sense of the gridlock.
The volume of tractor trailer traffic involved in this gridlock is because I-61 is a major east-west interstate highway that supports logistics traffic supporting many U.S. southern based manufacturing and distribution facilities. The gridlock occurred just south of Louisville, home of UPS World Hub, and Toyota’s largest vehicle manufacturing plant in North America is located in Georgetown Kentucky, just north of Lexington Kentucky. More than likely, manufacturing and logistics teams within these areas have experienced the effects of this winter storm gridlock.
Amtrak Passenger Train Stranded near Providence Rhode Island
An Amtrak Acela high speed train providing northeast corridor service and enroute to Boston was stranded by ice accumulation hampering the train’s electrical system. This train which sopped operation near Providence Rhode Island was subsequently stranded for hours without power or heat until a rescue train could be brought in to haul it to its destination. Passengers were obviously not pleased.
Obviously this has not been a positive 24 hour period in U.S. related transportation and perhaps these incidents are ever more reflections of aging infrastructure and equipment compounded by the cumulative effects of a severe winter.
If any of readers were impacted by these incidents, share your thoughts. In the meantime, Spring cannot come soon enough.
To the obvious relief of many industry supply chains, an announcement that a tentative agreement has been reached among the Pacific Maritime Association and longshoremen has finally come. The announcement came late Friday night, Pacific Time after nearly nine months of ongoing contract talks and rancor.
According to reports, dockworkers are expected to conduct normal port operations beginning this evening. This tentative agreement averts what could have been an even more disruptive scenario of a total shutdown of ports.
This five year contract agreement still needs the approval of longshoremen union members as well as individual employers. There may also be some local port issues needing resolution. Thus far, no details of the new contract have been disclosed including the reported final contentious issue related to the selection or elimination of certain arbitrators for work rule disputes. According to published reports, U.S. Secretary of Labor Thomas Perez, while declining to reveal any details, indicated that employers and the union have agreed to a new arbitration system.
As Supply Chain Matters opined in yesterday’s update commentary, when contract talks were eventually resolved, it will take months before any U.S. west coast port operations return to a state of normalcy, if at all. The underlying issues of the structural impacts of unloading and loading far larger container ships, the notion of proper scheduling of now outsourced trailer carriages and the consequences of trucking lines classifying truck drivers as casual, independent contractors remain ongoing challenges to be addressed.
Gene Seroka, executive director for the Port of Los Angeles indicated to the Los Angeles Times on Friday: “more than ever, we need labor and management working together.” Those words have special meaning for all U.S. west coast ports.
Remember this date, it will serve as the baseline indicator as to how long before U.S. west coast ports return to operational service levels meeting shipper and industry supply chain expectations. Much work remains, not only from an operations perspective, but also from a shipping lines management planning perspective.
On this Friday, February 20th, Supply Chain Matters provides another reader update and advisory on the all-important and unfortunately, all-consuming disruption occurring at U.S. West coast ports that is impacting multiple industry supply chains.
Various published reports indicate U.S. Secretary of Labor Thomas Perez has set today as a deadline for the Pacific Maritime Association and the west coast dockworkers union to end a long-running labor dispute that has clogged West Coast ports. The sides reportedly negotiated late into the Thursday night in San Francisco, but no agreement was reached.
According to a published report by the Los Angeles Times, City of Oakland Mayor Libby Schaaf, who has participated in a nightly call with Perez and mayors of other West Coast port cities, told the Associated Press that if a deal isn’t reached today, Perez plans to force the parties to Washington, D.C., next week to finish negotiations.
All reports seem to indicate that the one remaining issue of contract talks center on the union’s desire to have a unilateral say on the removal of an arbitrator called in to alleviate work disputes. According to the LA Times, the union is focusing on one specific arbitrator who handles contract grievances at the ports in Los Angeles and Long Beach.
From our lens, most of this week’s reports indicate that the pressure for both parties to resolve this ongoing dispute has become far more intense. We have viewed reports indicating that as of yesterday, 32 container ships were at anchor near the ports of Los Angeles and Long Beach, awaiting an available berth. The repercussions continue to involve other West Coast ports and shipping lines with reports of on-time performance at dismal rates.
It has further become more expensive for industry supply chains to mitigate the current disruption with a new report from Drewry indicating that rates for container ships destined for U.S. East Coast ports are also skyrocketing.
The Journal of Commerce (paid subscription required) reported yesterday that even Wal-Mart is being affected, indicating that shipment delays are hurting its business and threaten its Spring and Easter holiday inventory needs.
The bitter reality for multiple industry supply chains however, remains that even if contract talks are resolved, it will take months before any U.S. west coast port operations return to a state of normalcy, if at all. As we have opined in our previous postings, the underlying issues of the structural impacts of unloading and loading far larger container ships, the notion of proper scheduling of now outsourced trailer carriages and the consequences of trucking lines classifying truck drivers as casual, independent contractors remain challenges to be addressed.
By our lens, the shipping industry is in a state of denial and blindness to customer needs for on-time reliability and effectiveness. Instead, the industry remains focused on individual interests. That unfortunately foretells that 2015 will indeed be a year of continued turbulence for global transportation.
© 2015, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Labor negotiations among the Pacific Maritime Association (PMA) and the International Longshoremen and Warehouse Union (ILWU) have reached a crisis stage and industry supply chains, if not already, must have contingency plans underway. After months of elongated negotiations and near paralysis of operations, the stage appears set for a showdown.
The crisis boiled over yesterday when the PMA, operator of 27 U.S. west coast ports decided to temporarily shut down port unloading operations this weekend, indicating that the ports did not want to compensate overtime to workers it believes have been deliberately slowing down operations.
For its part the PMA has publically indicated earlier last week that it had placed on the table an “all-in” five year proposal that increases pay and pensions by about 5 percent each year for the life of the contract. The ILWU has publically indicated that that there are but a few issues to are resolves and calls the current PMA actions of temporary closing to be irresponsible. There are now growing fears of a potential lockout of union workers beginning next week. Interesting enough, U.S. federal mediators were brought into these negotiations in early January.
Yesterday, the National Retail Federation (NRF) issued a statement regarding the current U.S. west coast port situation which reads:
“Temporarily suspending port operations is just another example of the International Longshore and Warehouse Union and Pacific Maritime Association shooting themselves in the collective bargaining foot. The continuing slowdowns and increasing congestion at West Coast ports are bringing the fears of a port shutdown closer to a reality. The entire the supply chain – from agriculture to manufacturing and retail to transportation – have been dealing with the lack of a West Coast port contract for the last nine months. Enough is enough. The escalating rhetoric, the threats, the dueling press releases and the inability to find common ground between the two sides are simply driving up the cost of products, jeopardizing American jobs and threatening the long term viability of businesses large and small. Our message to the ILWU and PMA: Stop holding the supply chain community hostage. Get back to the negotiating table, work with the federal mediator and agree on a new labor contract.”
Supply Chain Matters applauds NRF for its candor and in stating the obvious, it is time that the two parties quickly resolve their differences and stop impacting global commerce. As we have opined previously, the damage is already been done and the effects will be longstanding.
What happens next is anyone’s guess. A shutdown of all U.S. west coast ports, albeit short in duration would have even more devastating effect. The White House could invoke the Taft-Hartley Act calling for a cooling-off period and forcing the parties to continue to negotiate.
In all scenarios, the port situation continues to worsen and any return to normal operations will take an enormous amount of days. U.S. railroads servicing West Coast ports have already indicated that will be delaying intermodal service to the ports because of the current congestion. Trucking firms continue to feel the impact with longer queuing lines along with times for pickup and unloading.
Industry supply chain and their respective sales and operations planning teams, both large as well as smaller company focused, need to have contingency plans underway to work around this messy situation since the prospects at this point, are not good for normalcy any time soon.
Late yesterday, in response to a joint request, the Federal Mediation and Conciliation Service, a U.S. agency responsible for mediating labor disputes was asked to intervene in contract talks among the Pacific Maritime Association, operator of 29 U.S. West Coast ports, and Longshoremen.
According to various media reports, tensions among the PMA and labor union negotiators escalated substantially on Friday of last week after the PMA announced a move to lower the number of workers unloading cargo ships at both the ports of Long Beach and Los Angeles at night. The PMA indicates that it had to reduce night shift requirements to slow the number of containers filling storage yards.
One report indicates that early this week, nine container ships were waiting for unloading berths at either Long Beach or Los Angeles. That is an indicator that port operations remain backlogged at the same pace as November and December.
This development will fuel added concerns that the west coast port disruption of the past few months may be headed toward more crises if Federal mediators do not help in moving these labor talks forward. Even more important is the resolution of the multiple operational problems that created the “perfect storm” of port dysfunction during these past few months.
The U.S. west coast port crisis continues to bring unoptimistic developments and that should be a continuing concern for multiple industry supply chains.