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Latest Supply Chain Crisis Could Threaten Global Stash Of Food, Energy

Latest Supply Chain Crisis Could Threaten Global Stash Of Food, Energy

You probably do not spend much time thinking about barges. This is something that you ought to change.

The barge industry is quite important. It’s crucial for moving aluminum, petroleum, fertilizer and coal, particularly on the Mississippi River and its tributaries. About 60% of the grain and 54% of the soybeans for U.S. export are moved via the noble barge. Barges touch more than a third of our exported coal as well.

Right now the barge industry — and all of us who depend on its wares — is mired in a crisis. Water levels on the Mississippi River Basin are at its lowest point in more than a decade.

The timing for such a drought is pretty bad. Right now is harvest season, so farmers are looking to move their wares. Ongoing labor strife on the nation’s railways also renders that backup network uncertain.

Halted or slowed barge traffic is worrisome for the world at large too. American exports of coal are key right now as Europe faces a massive energy crisis heading into winter. “Any snags threaten to disrupt trade at a time when coal demand is soaring as Europe weathers an energy crisis exacerbated by Russia’s war in Ukraine,” as Bloomberg reported on Oct. 6.

Exports of grain and soybeans are also important right now, because we’re facing a shortage of those commodities amid the war in Ukraine.

“We’re taking a huge capacity hit,” said Sandor Toth, president of barge market intelligence firm Criton Corp.

The drought caused a 100-boat clog last week

Low water levels and dredging shuttered barge traffic heading north and south on the Mississippi last week. At one point, more than 100 towboats and 2,000 barges were stuck waiting…

…click on the above link to read the rest…

The latest on Ian’s impact on the supply chain

The latest on Ian’s impact on the supply chain

Ports, airports remain closed in wake of hurricane

Floridians are starting to assess the damage created by Hurricane Ian a day after it slammed into the Gulf Coast as a massive Category 4 storm. By Thursday morning, Ian had been downgraded to a tropical storm, but a threat remains as it continues to bring heavy winds and rain to the state.

As of 11:54 a.m. EDT, more than 2.6 million Floridians were without power, with some counties, including Hardee, almost completely in the dark.

Nearly 20% of Tampa gas stations have reported fuel shortage and access issues.

As previously reported, the logistics impacts could last for weeks — or longer.

Here’s the latest as of 11:30 a.m. EDT:

Roads and bridges

In a news conference Thursday morning in Tallahassee, Gov. Ron DeSantis said the Florida Department of Transportation (FDOT) is working to make sure roads and interstate highways are open.

Most of Interstate 75 remains open, according to FDOT, with some interruptions.

“Alligator Alley on I-75 across into Collier and Lee County is open and flowing,” DeSantis said. “I-75 south through Charlotte County is open and flowing. Portions of Lee County they are still looking at.”

Additionally, part of the Sanibel Causeway Bridge, a major bridge that connects Fort Myers to Sanibel Island, has been washed out.

Supply chains are never returning to ‘normal’

Supply chains are never returning to ‘normal’ 

The conventional wisdom at this time is that most of the world has moved on from the pandemic (except for China); therefore, supply chains will return to “normal.” Unfortunately, this is not the case. The world has permanently changed and supply chains are going to face continuing challenges for decades to come. Among those challenges are:

  • Supply chains will remain under constant threat of disruption for the next decade
  • Supply chains operate best when the world is peaceful and stable
  • A smoothly running supply chain requires “buffer stock,” which is challenging with declining population demographics
  • There is a conflict between environmental, social and governance (ESG) goals and supply chains optimized for cost and speed. If we prioritize ESG, we will need to contend with supply chain risks
  • Supply chain technology will become the big venture capital category winner as companies continue to make investments in technologies that can help them mitigate their supply chain challenges

In a world faced with the prospect of tightening supplies, higher energy costs, heightened geopolitical risk, and strained transportation networks, advanced supply chain technologies will become mission-critical for many more companies.

Image of U.S. and Chinese flags, with a rupture between them indicating conflict.
U.S.-China relations have become very tense in recent years as China flexes its new economic muscle in other arenas.
(Image: Shutterstock)

Supply chains benefit from times of peace

Anyone that has been a part of the supply chain industry can attest to the fact that supply chains have always been subject to disruptions. Natural disasters, terrorism, economic cycles, and capacity shortages have created challenges since the beginning of trade.

Since the end of the Cold War, global supply chains have benefited from peaceful trade between developed and developing countries…

…click on the above link to read the rest of the article…

Why every American should care that diesel prices are surging across the country

Why every American should care that diesel prices are surging across the country

Gasoline prices are increasing almost daily, pinching the wallets and pocketbooks of nearly all Americans with cars. However, as bad as that news is, diesel prices are surging even more across the country. Today’s truckstop retail diesel prices hit a new record of $5.32/gallon. Since February 1st, national truckstop diesel prices have increased by $1.57/gallon. For an owner-operator whose truck gets 6.5 miles per gallon, this equates to a cost increase of $0.24 per mile.

A graph showing the price of diesel per gallon.

Diesel’s importance to our economy

To many Americans (including politicians), diesel prices are so removed from their version of reality that they often dismiss the importance of diesel to the U.S. and global economies. However, diesel is the fuel that drives the economy and leaves major industries vulnerable to cost shocks.

Without diesel fuel, the U.S. economy would collapse in a matter of days. Our supply chains would completely shrivel, almost overnight.

Trucks use it to haul our goods across the country. Of all Class 8 trucks (the big ones), 97% use diesel. No, Elon Musk is not going to save us here. When Tesla announced the Semi in 2017, Musk projected that over 100,000 would be produced by 2022. Today there are less than 20, mostly prototypes.

Trains also depend on diesel to transport products across the country. Almost every train in the country depends on diesel for energy.

An orange BNSF train hauls coal
A BNSF train hauls coal. (Photo: Flickr/Aaron Hockley)

Even a large portion of our electricity is indirectly powered by diesel. Over one-fifth (22%) of our electricity in the United States comes from coal. Diesel-powered trains transport coal to power plants across the nation.

Diesel is also critical to our imports and exports, because 80% of the ships that transport products via the ocean are powered by diesel.

…click on the above link to read the rest of the article…

Will the bullwhip do the Fed’s job on inflation?

Will the bullwhip do the Fed’s job on inflation?

The only thing surprising about the freight market slowdown is the speed at which it’s unfolding. The supply chain “bullwhip effect” is both predictable and expected. The surge of inventories and declining freight costs/capacity imbalances will be deflationary.

The trucking market has slowed. Demand for trucks usually surges during the Spring, but this year, demand for truckload freight has broken out of this typical seasonal pattern.

Outbound Tender Volume Index (OTVI) is an index which measures the volume of truckload order requests in the contract truckload market. The OTVI chart shows year over year activity from 2018 to this year.

The bullwhip effect is something every supply chain 101 student learns about – the idea that upstream providers overproduce in reaction to a one-time demand shock.

What is the bullwhip effect? 

According to the Chartered Institute of Procurement and Supply, the bullwhip effect “is defined as the demand distortion that travels upstream in the supply chain from the retailer through to the wholesaler and manufacturer due to the variance of orders which may be larger than that of sales.”

The best way to think of this in terms of COVID is that in the early part of the cycle, the Federal Reserve was pouring trillions of dollars into the economy to ensure that the market didn’t collapse. Consumers went out and spent all of that money on physical goods. At the same time, production in China and the U.S. was shut down or limited. The combination – stimulating consumption but limiting production – caused the American consumer to burn through almost all inventory.

Retailers ordered more goods based on the inflated demand at that time. Upstream to them, wholesalers and manufacturers did the same. Along that chain some even ordered bumper stock.

…click on the above link to read the rest of the article…

The second Cold War is here — and supply chains will be the front lines

The second Cold War is here — and supply chains will be the front lines

Entire supply chains will be rewritten, creating massive volatility and unpredictability

We are witnessing the remaking of the world order in front of our eyes — and this will impact global supply chains in unforeseen ways.

We are about to experience the most dramatic and unpredictable supply chain map we’ve experienced since World War II.

If the Russia-Ukraine conflict’s international ramifications keep spreading, we face a real possibility of a bifurcating global economy, in which geopolitical alliances, energy and food flows, currency systems, and trade lanes could split.

During the first Cold War, the world was anything but flat. There were two worlds — the East and the West. That world is being recreated as we speak, and with it, Western companies will start to shift sourcing away from the East and more toward Western and neutral states. North American economic integration will become a new priority. Surface transportation across the Eurasian continent will become more complex, and possibly contested.

Entire supply chains will be rewritten, with new sources and partners — all in the interest of corporate and national security. This will create massive volatility and unpredictability.

Companies will prioritize vendors that can provide consistent and dependable supplies, likely paying a premium. In the end, those costs will be passed on to consumers in the form of higher prices.

While prices will become an important consideration for consumers, brands that offer a consistently and predictably available set of choices will enjoy pricing power.

The future market winners will be the corporations that make the investments in supply chain infrastructure and reliable, Western-friendly production locations.

Supply chain analyst roles will become the hottest jobs of the next decade, prized by corporations, consulting and even Wall Street for the ability to interpret, analyze and predict disruptions and risks in a new world order…

…click on the above link to read the rest of the article…

What if there were no truck drivers?

What if there were no truck drivers?

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