The Next Supply Chain Disruption – Crisis Averted Or Looming Chaos? – Rail, Road & Cycling

Over the past few months, the global supply chain has taken a
collective deep breath. Consumer demand has decreased, ocean and
trucking rates have fallen, congestion is down, and things have
started to look like they are headed toward a sense of normalcy.
Not so fast.

The next U.S. supply chain crisis has been barreling toward
shippers like a… freight train. An ongoing labor dispute
between major railroads and its unionized workforce appeared to have reached a tipping point this
week, with fears of a strike as early as Friday, September
16. A strike would come at great cost: the Association of American Railroads
estimates that the economic impact of a nationwide railroad strike
would be more than $2 billion per day.

Fortunately, as of September 15, a tentative deal appears to
have been reached at the final hour. According to the Wall Street Journal, the White
House reports that they have reached a tentative agreement
between the railroads and labor unions that will keep rail freight
moving. Unfortunately, the looming uncertainty of the situation and
existing actions taken by railroads still present challenges for
shippers.

In anticipation of a stoppage, railroads have already begun to
manage the intake of various cargo types (e.g., security-sensitive
freight, refrigerated freight, and hazardous cargo). Shippers, and
eventually consumers, may suffer the consequences of this
disruption for months to come as alternatives to rail freight rely
on trucking transport, and there is not enough trucking capacity to
go around. Just last evening, Amtrak announced that they preemptively
suspended some long-haul routes in response to the
potential strike. Below is a summary of the current crisis and,
more importantly, levers shippers can pull to mitigate impact to
their business.

What could happen next

• Service goes from bad to worse
  

  • Whether a strike begins on Friday or not, the actions Railroads
    are already taking will have an impact to shipments. Events like
    these create bottlenecks and volume swings, requiring at least 3-4
    weeks of time for railways to “reset their
    networks”.




• Interchange congestion
  

  • As services slowdown or ramp-up, interchange congestion may
    create bottlenecks throughout the rail network. This could create
    large bubbles of congestion at the main interchange points (e.g.
    Chicago, Kansas City, St. Louis, Memphis, etc.).




• Chaos!
  

  • Depending on how this week’s events play out, a series of
    other outcomes may be triggered. If a deal is reached, things may
    return to a state of (relative) normalcy or, if a deal is not
    reached, we will face yet another supply chain disruption.

How shippers can mitigate the impact of the rail crisis

While another wrinkle in the already disrupted supply chain is
less than ideal, there are steps that shippers can take to prepare
for a slowdown and mitigate detrimental impacts.

Shippers should consider:

• Risk Assessment: Assess current networks to
  understand the full impact of a potential strike. Where are goods
  today? What goods are inbound that may need to be re-routed?




• Customer Prioritization: Align on which
  products/shipments are highest priority. In the event of reduced
  shipment capacity, it is critical to have a clear methodology for
  business functions to leverage for load prioritization.




• Mode Optionality: Evaluate which
  goods/shipments may qualify for truckload, hopper trucks, barge, or
  other transportation modes. Begin to secure capacity
  accordingly.




• Load Consolidation: Leverage operational tools
  to maximize load utilization and reduce equipment
  requirements.

Fortunately, there is some good news. Many shippers have become
more agile over the last couple of years. Companies have invested
heavily in freight visibility technologies and equipped their
supply chain teams to handle disruptive events. Unfortunately, the
uncertainty around the situation may prevent some shippers from
taking swift and decisive action now. If a labor slowdown does
occur, the actions (or lack thereof) that rail shippers take this
week will determine their fate for months to come.

Originally Published 15 September 2022

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.