Tuesday, April 23, 2024

Industry News
CST News
Tester FAQs
Industry News

How automakers can navigate Port of Baltimore disruptions

Monday, April 1, 2024

Disruptions at the Port of Baltimore pose risks for auto supply chains after the tragic collapse of the Francis Scott Key Bridge halted vessel traffic, prompting delays and threatening the flow of goods.

Assembled vehicles make up a majority of the cargo moving through the Chesapeake. In 2023, the port handled nearly 850,000 cars and light trucks from companies like General Motors, Ford, Nissan, Toyota, Volkswagen and Honda, said Mirko Woitzik, global director of intelligence at Everstream Analytics, in an email.

“[Baltimore is] a large port, with a lot of flow through it, so it’s going to have an impact,” Ford CFO John Lawler said during a Tuesday interview with Bloomberg Television. “We’ll have to divert parts to other ports along the East Coast or elsewhere in the country, and it’ll probably lengthen the supply chain a bit.”

Like Ford, other automakers and manufacturers in the area have rerouted shipments following the bridge collapse, with East Coast ports like the Port of Virginia and the Port of New York and New Jersey readying for diverted volumes. Railroads like CSX and Norfolk Southern have also been working to ensure reliable service.

“Any disruption to Baltimore will pose a risk to the automotive industry and a full stop of operations will increase [the] severity of that impact,” Eric Fullerton, senior director of product marketing at project44, told Supply Chain Dive in an email. “The automobile industry is notoriously lean, meaning any disruption is likely to have some ripple effects throughout the manufacturing process.”

Delays may pose short- and long-term risks

While it is too early to tell whether the bridge collapse will disrupt vessel traffic in the short- or long-term, disruptions could put the auto supply chain at risk.

“The early expectation is that some degree of disruptions to manufacturing in the automobile market will occur until companies can establish dray networks through neighboring ports, depending on how carriers plan to discharge goods destined for Baltimore at other East Coast ports,” Fullerton said.

Extended delivery times for shipments also pose a short-term risk as imports are diverted to other East Coast ports, assuming that the destinations are closer to the Baltimore area than the alternative ports, Woitzik said.

Given the just-in-time nature of automotive production, re-routing cargo volumes can delay component shipments needed to keep supply chains moving, Nick Ellis, supply chain attorney with Foley & Lardner LLP’s automotive industry team, told Supply Chain Dive in an email.

“Companies likely will be able to adjust and route future shipments through other ports without significant disruptions to timing until the wreckage can be cleared and shipping lanes reopened,” he added. “However, longer shipping times may require longer lead times. It may also result in delays and increased costs as other ports (many of which are already strained) have to absorb the additional capacity.”

But if the diversions are prolonged, the auto industry may see longer and less-predictable cargo delivery delays, according to Woitzik. Currently, there have been conflicting reports regarding the duration of the disaster. The U.S. Coast Guard has indicated that the closure may last about two weeks, while shipping experts anticipate the possibility of months-long disruptions and delays.

“A lot will depend on what the investigations uncover and what the ramifications of those findings will be,” Woitzik said. “There will be an investigation into port infrastructure and into environmental damage resulting from the accident; both could delay the resumption of operations.”

While the ongoing impact of the bridge collapse has yet to be determined, Fullerton shared that the potential dollar amount of impacted goods will be significant. He noted that the average vessel holds 5,000 TEUs with an average inventory value of roughly $80,000 per TEU. According to project44’s estimates, this means that approximately $1 billion in goods per week will be affected by the Baltimore incident.

How auto supply chain managers can mitigate prolonged disruption

Mitigation plans for supply chain managers depend on how their operations are impacted, Ellis said. For instance, companies whose goods are being directly impacted should consult with their legal counsel to review contracts and obligations.

“In particular, if they are unable to meet any obligations to their own customers due to this event, they should review any provisions of their contract concerning force majeure and excusable delay to understand whether they apply, and what notices they may need to provide,” Ellis explained.

For others, alternative ports should be assessed with the end-market destination in mind, but supply chain managers should consider port capacity and existing congestion levels in case there are prolonged diversions, Woitzik said. “Companies should be thinking about transportation planning changes as a mid-term strategy.” The impact on lead times, shipping times and costs should also be considered.

Available data and insights can also be helpful for supply chain managers to determine whether their containers and shipments are stuck in the Port of Baltimore or the vessel Dali, and what orders are routed for Baltimore in the next two to four weeks, Fullerton said.

Supply chain managers should “evaluate their existing inventory and safety stock levels for these goods and determine if expedites are required to limit halting of production lines,” he added. Fullerton noted that supply chain managers should also communicate with the vessel carriers to determine how goods intended to discharge from Baltimore will be handled.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved

CST Inc. Memory Tester DDR Tester
Copyright © 1994 - 2023 CST, Inc. All Rights Reserved