Sunday, June 16, 2024
Impact of Baltimore Bridge collapse lingers over supply chains

Impact of Baltimore Bridge collapse lingers over supply chains

The recent collapse of the Baltimore Bridge undeniably sent shockwaves through both American and global supply chains. 

The incident was a significant disaster that posed a threat to the $80 billion cargo traffic to and from one of America’s busiest ports. The port serves as a crucial hub for various commodities, including forestry materials, farm equipment, and sugar. Moreover, its deeper water channel allows for the accommodation of larger ships compared to other ports along the East Coast. 

The collapsed bridge is hindering vessel access to the Port of Baltimore, the country’s 15th largest container port, per the US Bureau of Transportation Statistics. Maryland Ports Authority data shows its public terminals handled 11.7 million tonnes of general cargo and 52.3 million tonnes of international cargo last year.

While trucks continued to operate at the port after the incident, the absence of maritime traffic is projected to result in a daily loss of US$9 million. The broader economic impact is anticipated to be even greater, as billions of dollars worth of goods are rerouted, potentially causing supply chain disruptions for months.

The industry has swiftly adapted by rerouting affected shipments, leveraging alternate transportation where feasible, and communicating closely with clients to manage expectations and minimise disruptions.

Ocean and air adjustments

The incident has led to adjustments in both ocean and airfreight rates due to altered demand dynamics and the immediate need for route diversification.

The collapse coincides with negotiations between major retailers and shipping companies for their annual overseas cargo shipping contracts. Retailers have already faced cost hikes due to Red Sea attacks by Houthi groups. Any disruption provides leverage for ocean carriers to push for higher rates, making the timing of this accident particularly unfavourable for ocean pricing negotiations.

There can be a noticeable, albeit temporary, shift towards airfreight from ocean freight among clients with time-sensitive shipments or the ones seeking to bypass the immediate logistical challenges posed by the bridge collapse.

The collapse of the Francis Scott Key Bridge underscores the fragility of supply chains and highlights the need for more robust and flexible logistics strategies. It serves as a wake-up call for the industry to reassess its reliance on JIT models and to explore more resilient supply chain practices to withstand such unforeseen disruptions.

While some changes may be temporary, incidents like this highlight the importance of agile and flexible supply chain strategies, potentially leading to more enduring shifts in logistics operations.

Addressing America’s infrastructure

The incident highlights the fragility of ageing US infrastructure, emphasising the necessity for immediate and robust intervention. The bridge collapse disrupts not only local but national supply chains, posing risks to safety and economic stability, which can have cascading effects on the US economy. (According to a report from Sky News, the estimated cost of rebuilding the bridge exceeds US$600 million.)

Disruptions from such collapses can cause significant economic setbacks, ranging from increased costs in detours and delays to lost revenue in commerce and tourism. It emphasises the need for immediate governmental intervention to address these vulnerabilities.

The Baltimore Bridge collapse is more than a temporary logistical hurdle; it’s a clarion call for strategic foresight, operational flexibility, and significant infrastructure investments to future-proof America’s supply chains.

Robert Khachatryan
Founder and CEO of Freight Right Global Logistics

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