Painful Power Outage
In the last edition of the Roundup, we discussed how the supply chain is beginning to resemble pre-pandemic 2020. With the crisis in the Red Sea, drought in the Panama Canal, and other factors, the world’s supply chain is undergoing a stress test. Nonetheless, lessons learned from our Covid experience has made us better prepared for the worst, and resilience is commonplace. Then came a wake-up call. A software update from cybersecurity firm CrowdStrike, working with Microsoft Cloud, caused one of the world’s biggest IT blackouts, causing havoc in industries from air freight to banking. As we go to print, airlines, ports, and trucking companies are digging out from the backlog caused by the outage. While the supply chain once again avoided a complete crisis, the vulnerabilities to our digital capabilities have been exposed.
The Outage - What We Know
Many shipping companies have been hit by the outage to Microsoft, one of the biggest IT outages recorded. Multiple global businesses have reported failures of their Windows PCs today caused by a failed software update from antivirus company CrowdStrike. Shippers FedEx and UPS said the Microsoft outage caused by the software glitch could lead to delayed package deliveries.
FedEx acknowledged the interruption in a statement on its website. Contingency plans have been activated to mitigate impacts but potential delays are possible for package deliveries. UPS also said the software outage was affecting some of the company’s systems, leading to potential delivery delays. The outage had varying levels of impact across Union Pacific’s freight network, but most major rails in the U.S. were operating normally, and UP returned to full operations by Friday afternoon. Ports from New York to Houston and Los Angeles reported temporary container terminals shut down overnight but were mostly operational by early morning. FedEx said that its network was now operating across the globe.
The global IT outage is a stark reminder of how a single point of failure can cause systemic disruptions to worldwide commerce. Although Microsoft itself was not directly responsible for the outage, the worldwide reliance on a single common operating system and a major cybersecurity company, while useful when everything is running smoothly, creates the potential for a single point of failure to take down the entire planet, experts say.
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Freight update
Federal regulators are summoning executives from the major freight railroads to a rare public hearing to explain how their companies plan to invest in and grow their business amid concern over recent negative volume trends. BNSF Railway Co. and J.B. Hunt Transport Inc. crafted a domestic intermodal service that offers the necessary consistency and speed to move service-sensitive freight by rail and priority drayage that typically is transported solely by trucks.
Mexico’s government-funded Isthmus of Tehuantepec Railroad completed its first cargo shipment, with officials heralding the transaction as the start of a new trade corridor that will promote investments across the country’s long-underdeveloped southern region. Retailers Walmart, Target, and Shein kicked off back-to-school sales early to stop Amazon.com’s Prime Day event from siphoning U.S. sales of backpacks and laptops, helping advance the peak ocean shipping season by two months and boost already-high freight rates.
Data from Motive, which tracks trucking visits to North American distribution facilities for the top five retailers, shows freight volume is up 30% year-over-year in June. Reduction in trucking capacity coupled with an increase in orders has logistics executives saying that the long freight recession is finally ending, and rates will increase in the back end of the third quarter. eBay advised sellers that the US Postal Service is no longer supporting receipt of any FedEx Ground Economy shipments – the service formerly known as FedEx SmartPost. Effective July 14, 2024, sellers should not drop off their FedEx shipment to a USPS location – otherwise, FedEx will not forward it and the package will be seized, eBay warned.
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Shipping News
The U.S. is facing potential disruptions at major seaports for the second time in as many years. The International Longshoremen’s Association, which represents about 45,000 workers at ports from Maine to Texas, abruptly withdrew from talks set for June just as they were to begin, citing a dispute over the use of automation. No new negotiations have been set. With the current contract set to expire on September 30, 2024, the pressure is mounting on employers represented by the United States Maritime Alliance to negotiate a new contract and avoid a coastwide strike on October 1.
Container lines are becoming increasingly selective about the commodities they want to carry, targeting “more for less, in size” during the peak season rush. The cost to ship a standard 40-foot container of toys, auto parts or other goods from Shanghai to New York has jumped to nearly $10,000, fueling frustration among importers and prompting some experts to say the market is in a bubble. Maersk says disruption to its container shipping via the Red Sea had extended beyond trade routes in the far east of Europe to its entire global network. Shipping groups have diverted vessels around Africa’s Cape of Good Hope since December to avoid attacks by Iran-aligned Houthi militants in the Red Sea, with the longer voyage times pushing freight rates higher.
CMA CGM and Google have announced a strategic partnership to integrate artificial intelligence across CMA CGM’s operations worldwide. The Ports of Indiana is set to build a sea container terminal on Lake Michigan, making it the first all-water route for ocean vessels via the Great Lakes to serve the Chicago metro area.
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- Falling online prices boost eCommerce sales
- Retail sales were up 3.3% in June
- The Fed sees 2% inflation on the horizon
In Other News
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- Inflation Can Slow Down Rate Cuts
- Treasury Secretary Yellen Says U.S. Economy Strong
- The Trade Deficit Widened
- Big Union Win: VW Workers Join UAW
- FTC Bans Non-Compete Clauses
- Business Groups Sue To Block Ban
