This week’s supply chain risk news
Here’s what we know so far about the impacts of Hurricane Melissa
The year’s most intense tropical system globally, and the strongest hurricane ever to hit Jamaica, Hurricane Melissa continued its path of destruction northward, making a second landfall in southeastern Cuba. The deadly Category 5 storm’s 185 mph winds have slowed. However, flooding and landslides will remain hazards in affected countries for days. Many thousands of people have had to evacuate.
The full extent of the damage is uncertain, partly due to broad power and network outages. Some 77 percent of Jamaica lost power during the storm, and internet connectivity fell by more than half. Among the known impacts: flooded roads, impassable bridges, and damage to critical infrastructure. Both Jamaica and Cuba have also reported operational shutdowns affecting air and sea freight hubs.
Jamaican officials will need weeks to assess the impact on crops. Sugar, bananas, coffee, cocoa, allspice, and ginger could all face considerable damage. The storm and its aftermath may also pose disruptions to Jamaica’s production of alumina and bauxite, key to aluminum smelters in North America.
We have more details in our Risk Center and will continue monitoring the situation.
In Asia, President Donald Trump secures deals on tariffs
After months of trade negotiations, U.S. officials say they’ve struck a deal in South Korea and have a framework for another with China.
The agreement with South Korea follows a proposed framework from July to lower the tariff on imports to the U.S. from 25 to 15 percent. Additionally, Seoul has agreed to sizable U.S. investments, including $150 billion in American shipbuilding.
“As one of the most advanced shipbuilding countries, South Korea is at the forefront of Mr. Trump’s initiative to leverage foreign investment to turn around the U.S. industry, which has fallen behind China’s. South Korea has seemed to embrace its role, coining the slogan ‘MASGA,’ or Make American Shipbuilding Great Again,” the New York Times reports.
As for the deal with China, some are suggesting it could restore the previous status quo.
Early reports indicate that a one-year ‘trade truce’ was agreed to by leaders of both countries. Under the deal, China agreed to defer its planned export controls on rare earths, while the U.S. will drop its threatened 100% additional tariff on Chinese goods.
Trump said he would also lower the 20% fentanyl-related tariff to 10% and will suspend plans to extend the U.S. blacklist of firms prohibited from doing business with U.S. companies and individuals to subsidiaries. Finaly, both sides will pause the reciprocal port fees that have been threatened in the ongoing trade negotiations.
Trump announced that China will purchase ‘tremendous’ amounts of U.S. soybeans each year, but this remains the part of the deal that has not yet been further clarified.
Still, it must also be noted that Mr. Trump’s tariff policies can shift abruptly—as when he recently responded to an anti-tariff TV ad by raising levies on Canada.
It’s hard to make cars when you’re short on aluminum and semiconductors
Complex international supply chains with thousands of moving parts are easy and nothing ever goes wrong, said no one in the auto manufacturing industry ever. In fact, two pretty big things have gone amiss for carmakers in recent weeks.
One, as we noted last week in our Risk Center, is that semiconductors are suddenly in short supply amid awkward maneuvering between the Dutch and Chinese governments. That’s unwelcome news for carmakers in both Europe and the U.S. Several have flagged that the shortage could seriously affect production.
Another ongoing problem stems from a fire last month at an aluminum plant in Oswego, New York. The resulting lack of materials—and challenges sourcing alternatives, partly due to U.S. tariffs—has led to rolling layoffs at some plants and cancelled production days at others.
Other car factories in the U.S. have been roiled in recent days by everything from layoffs owing to sluggish demand for electric vehicles to a strike authorization. It’s enough, perhaps, to make you want to go take a few deep breaths while sitting in your car.
U.S. aviation slowdowns due to the shutdown: an update
This week marked the first time since the U.S. government shutdown began in early October that air traffic controllers officially missed a full paycheck. Even so, they’re still required to go to work, as are tens of thousands of transportation security agents. Staffing shortages, and with them, delays, have been an ongoing concern.
Some 60 thousand aviation safety workers are reportedly seeking financial help amid uncertainty as to when they’ll next get paid. A growing number may choose to stay home or change jobs, potentially driving significant disruptions for the aviation industry.
The impacts in recent days have included two full ground stops at Houston’s George Bush Intercontinental Airport. Plus, New York’s LaGuardia Airport saw average flight delays of over an hour. Continued ground delays have also been an issue, for instance at Houston’s William P. Hobby Airport and Newark Liberty International Airport.
And with agents who screen cargo also being asked to keep working without pay, the potential for disruptions is mounting. We’re keeping an eye on what that might mean for perishable imports like food and pharmaceuticals with updates in our Risk Center.
Options, speed, intelligence: the three keys to supply chain resilience
There are three ways to bolster a supply chain’s ability to bounce back from disruptions: add more options for responses; speed up those responses; and monitor and mitigate risks. These comprise the building blocks of supply chain resilience.
At the outset, having multiple options can help you maneuver around potential problems proactively. You could ship parts earlier to avoid a storm, for instance, or change transportation modes. If parts or raw materials are running short, you might adjust your production plans or swap in other materials. There are other strategies for disruptions that are harder to avoid, but they all hinge on context. Crucially, the more options you have, the more your supply chain can handle.
Speed is crucial here because disruptions affecting whole regions or industries can send companies scrambling for limited resources, with slow response proving especially costly. This, in turn, underscores the importance of knowing when disruptions might be looming. Technology can help you monitor relevant threats and assess when and how to respond.
Taken together, these factors can improve supply chain resilience—and thus safeguard business continuity, reputations, relationships, and profitability—as we detail on our blog.
Other stories we’ve been reading and monitoring:
Food is pretty important to most people and keeping it sustainable in the coming years will take some $4.5 trillion, one CEO contends. Right now, we’re nowhere close.
Executives at Mattel say tariffs are to blame for smaller margins as the toymaker has been forced to eat more import and warehousing costs.
McCormick says to deal with the impact of tariffs on its spice business, it’s looking to cut costs, change its sourcing, and—you could’ve guessed—raise prices.
